SAP Thought Leadership

Telecommunications

ONLINE Convergent charging

Software Solutions for a Multiservice World

The majority of consumers are uninterested in technology. They simply want to use services at the time, in the place, and in the manner of their choosing. Thus the common
denominator for any convergent charging system is that service pricing makes sense
for the customer while enabling the service provider to differentiate in line with a sound
customer ownership strategy.

CONTENT

4 Executive Summary
5 Convergent Charging
5 Improved Customer Loyalty
with Service and Payment
Convergence
5 Differentiated Services
with Prepaid and Postpaid
Convergence
5 Business and Systems
Rationalization
6 The Benefits of a Converged
Pre- and Postpaid Solution
8 IMS Market Opportunities
8 Charging Challenges for IMS
Services
8 Standardizing Charging
10 Integration and Business
Benefits
11 The SAP Approach
11 Find Out More

Executive Summary

preparing for the future

As service providers prepare for tough times ahead in a

challenging macroeconomic environment, they are looking
to reduce costs. The smarter providers are looking to go
beyond simple cost cutting; they view the current climate
as an opportunity to spur more innovation and gain market
share.
One area that is coming under scrutiny
as a source of potential cost savings
and as a way to improve competitiveness
is charging and billing. The cumbersome charging and billing applications
that many large providers are currently
stuck with are slow-moving and costly
to maintain. They often suffer from revenue leakage, offer insufficient protection against credit exposure risk, and
hinder business model innovation by
making even moderate changes a long
and expensive process. Greenfield
operators have seen the light and do
not make the same mistake: they have
chosen a different approach for charging and billing, adopting converged
online charging from the beginning.
Now the established service providers
are also mapping out a plan to wean
themselves off their legacy systems
and over to a single, converged online
charging system.
These service providers are recognizing that they can dramatically reduce
their operating costs while improving
their customer intimacy, reducing revenue leakage, and enabling more rapid
change of their business model to get
ahead of the competition.

SAP Thought Leadership Online Convergent Charging

Convergent Charging

Deliver Both Services and Payment Convergence

Improved Customer Loyalty

with Service and Payment
Convergence
The majority of consumers are uninterested in technology. They simply want
to use services at the time, in the
place, and in the manner of their choosing. Thus the common denominator for
any convergent charging system is that
service pricing makes sense for the
customer while enabling the service
provider to differentiate in line with a
sound customer ownership strategy.
Convergent charging systems must
therefore deliver both service and payment convergence:
Service convergence to enable the
bundling of multiple services at the
charging layer, enabling cross-product
discounts and promotions
Payment convergence to offer prepaid, postpaid, and blended payment
mechanisms and capped postpaid
mechanisms for all services
This approach can result in the following advantages:
Centralized rating for all services,
providing flexible pricing and packaging capabilities
Charging layer interacting in real time
in close proximity with applications
and service delivery platforms to
obtain authorization and charging
information for multiple services
Online rating and balance management so that customer balances continuously reflect actual usage with
full protection provided against fraud
and credit risk exposure
Service platforms that can react

immediately when a subscriber allowance is reached or credit is exhausted

interrupting the service and automatically making a relevant suggestion to the subscriber
Significant savings in operating
expenses with a single system and
faster service introduction in some
cases, reducing time to market from
months to days
Differentiated Services with Prepaid
and Postpaid Convergence
Introducing pre- and postpaid convergence is an intelligent strategy toward
customer ownership. If service providers can utilize payment mechanisms as
tools to differentiate their service offerings, rather than be constrained by
them, they can find ways to add value
to new service bundles, differentiate
offerings, and further reduce the likelihood for churn.
Prepayment is the traditional mechanism
for mobile users; prepaid voice represents more than 50% of the worldwide
mobile subscriber base. However, prepayment mechanisms are growing in
importance in both fixed and mobile environments as customers demand increasing control of expenditures. In developing
countries, for example, customers are
expressing preference for prepaid broadband services. The demand is also growing in environments where services are
used concurrently, such as from thirdgeneration (3G) network devices. Online
charging provides up-to-the-minute
charging information for unbilled transactions and opens the door to hybrid preand postpaid plans.

Prepaid functionality can be combined

with postpaid accounts where caps on
spending can be imposed. Postpaid
customers can predefine amounts that
they are prepared to pay per month,
and as they reach their predefined limit,
they can receive notification. Such payment methods are already in practice by
European triple-play providers, for
example, that offer capped postpaid
services. Spending limits can also be
applied to individual services, with wallets being associated with specific highend services such as pay-per-view films
from a broadband or cable service.
Business and Systems Rationalization
Prepaid intelligent networks (IN) are
proficient when delivering high-performance, real-time capabilities for call
control, authorization, rating, and balance management for decrementing
and recharging accounts. However,
these systems were not designed to
support sophisticated multimedia services and thus render new-service
introduction a complex and lengthy process. Most prepaid IN systems today
are in fact focused on voice and just a
few simple data services. These systems tend to be highly restrictive when
introducing discounts and promotions
and in managing hierarchies for corporate groups or family plans.
Postpaid billing systems, on the other
hand, offer extensive possibilities in
terms of the services that can be introduced, the hierarchies that can be managed, and the end-of-month promotions
and discounts that can be applied. Yet
new-service introduction often does

SAP Thought Leadership Online Convergent Charging

entail very lengthy, complex coding and

development lead times, and promotions
and discounts can only be applied at the
end of the month. Further, postpaid billing systems have not been designed for
real-time operations but instead for
mass, offline batch processing.
Subscribers for both types of systems
are usually distinct and managed by
entirely separate databases and, typically, by two different teams with
diverse skill sets. The inevitable result
is huge operational costs for running

these two systems in tandem. The

objective of any new convergent charging architecture must now be to combine the benefits of existing prepaid and
postpaid systems and create one costefficient, next-generation charging system able to ease the rapid deployment
of new services (see Figure 1).
Next-generation convergent charging
systems are designed to rationalize the
architecture for lower total cost of ownership and higher return on investment
by creating a single system to handle

Secure Copy
Call Control
Sessions
Service Logic

Rating

Account
Management
Balances
Wallets
Prepaid IN (real time)

Recharge

Billing (offline batch-processing)

Mediation

Rating

Account Management
Discounts
Promotions
Hierarchies

Invoicing
Payment

CRM and Financials

Network Elements

Legacy Architectures Today:

Collection

Online and Offline

Charging
Call Control
Sessions
Service Logic

Account Balance
Management
Balances, Wallets
Hierarchies
Convergent Rating
Events, Sessions
One-Shot, Recurring
Discounts
Promotions

Recharge

Invoicing
Payment
Collection
Billing

Figure 1: Comparison of Legacy Systems and Convergent Charging Architecture

SAP Thought Leadership Online Convergent Charging

CRM and Financials

Network Elements

Convergent Charging Architecture:

all services. To meet future demands,

charging, rating, and service control
must go online with real-time functionality at the heart of the system. An
online charging layer delivers:
Consolidated real-time rating
Centralized call and session control
Account balance management
Convergent pricing and packaging

The Benefits of a Converged

Pre- and Postpaid Solution
One of the most attractive benefits of a
converged approach is cost control. A
single cost-effective platform enables
providers to manage balances and service wallets for all subscribers and services, independent of their payment method of choice. In addition, this solution
supports service differentiation.
Providers can:
Support subscriber groups with sets
of interrelated pre- and postpaid balances for families or corporate customers, for instance
Enable flexible configuration of
spending caps, allowances, credit
limits, and service-specific wallets
Manage dynamic charging where the
balances to be charged are determined per transaction at runtime
Ensure real-time, online operation
with high performance and high
availability

Service providers can now offer family

or group plans that combine multiple
account balances that interrelate, with
some members of the group on prepaid
plans, some on postpaid, some with
postpaid allowances and spending controls, and other balances shared across
the group (see Figure 2).
They can now even associate specific
wallets to specific services. A parent
could, for example, determine a limit on
the number of movie or music downloads a child is allowed in one month.
Parents could recharge their childs
prepaid account via their own postpaid
account. Increased subscriber controls
are likely to increase customer loyalty
and reduce churn.

Figure 2: Combining
Multiple Account Balances That Interrelate

Postpaid Family Account

Postpaid (limit) - Mother

Data Services

$
$

Prepaid - Father
Prepaid - Child
Music Services

The objective of any new

convergent charging architecture must now be to
combine the benefits of existing prepaid and postpaid
systems, and create one
cost-efficient next-generation charging system able
to ease the rapid deployment of new services.

SAP Thought Leadership Online Convergent Charging

IMS Market Opportunities

IMS as a Driver for Convergent Charging

Convergent charging solutions are a necessary complement to both IMS and

SDP architectures. They ensure that applications are
network independent and
can be introduced quickly,
and that they can be flexibly
priced and packaged
across diverse access
technologies.

The IP Multimedia Subsystem (IMS) is

driving the need for real-time convergent charging systems. IMS was born
out of the needs of mobile operators by
the Third-Generation Partnership Project (3GPP) standards body, and its unified architecture is now being adopted
over a range of fixed technologies in
order to promote the rapid and lowcost introduction of new multimedia
services. On the IT side, vendors are
also offering their own service delivery
platforms (SDPs) with the same objective for simplified and rapid service
deployment.

Charging Challenges for IMS

Services

example, a triple-play customer could

be watching an IPTV movie service,
launching an IM application, and even
chatting away on a voice call to a
friend, all at the same time. These
numerous communication exchanges
inevitably generate a host of simultaneous charging information. A constant
exchange of information is therefore
necessary between the network layer
and the charging layer to manage the
authorization to use each service. This
exchange is also required to initiate
charging requests as a service is consumed to enable the rating procedure.
Finally, an account balance management function may come into play for
providing real-time balance updates,
either for decrements to a prepaid balance or simply for real-time billing
updates for the user to control spend.

The Session Initiation Protocol (SIP) is

the signaling protocol of choice for
IMS, facilitating the use of multiple sessions and applications concurrently. For

Standardizing Charging
As the standardization process for IMS
has evolved, there has been a growing
consensus among various standards

Convergent charging solutions are a

necessary complement to both IMS
and SDP architectures. They ensure
that applications are network independent and can be introduced quickly, and
that they can be flexibly priced and
packaged across diverse access
technologies.

SAP Thought Leadership Online Convergent Charging

An online charging layer applies realtime technology to manage the multiplicity of services. It enables an
exchange of information between the
charging layer and the network element
or applications in real time; the information exchanged can affect the delivery
of service for the end user. The interaction is to handle authorization, rating,
credit control, and subscriber accountbalance management.
An offline charging function is necessary
to handle postpaid subscriptions. The
charging information does not affect the
service rendered in real time, and the
final result of this charging mechanism is
the forwarding of rated call-detail record
files to the billing domain.
Key elements within the 3GPP standard for online charging are the
following:
Independent and centralized rating
engine for all services
Calculating a number of nonmonetary units (service units, data volume, time, and events)

Charging System
...

Network Elements and

Applications Servers

bodies, such as the 3GPP working

groups and the Telemanagement
Forum, that an online charging layer
is required in complement. This new
charging layer will sit close to the network and interact in real time with applications, dynamically gathering charging
information to enable flexible pricing,
rating, charging, and convergent
account balance management. In simple terms, this translates into providing
the customer access to all services
irrespective of payment method, be it
prepaid or postpaid or even a combination of both (see Figure 3).

Ro

Voice
Data

Online
Charging
___
Session
and Events

Account
Balance
Management

Rating
Engine

Messaging
Video
...

Offline
Charging
Rf

Rated
Content
Data
Records

Recharging
Server

Balances
Offers
Promotions
Counters

Charging
Gateway

Postpaid
Billing

Figure 3: Architecture for Convergent Pre- and Postpaid Online Charging

Calculating the amount (price) of

monetary units for a given number
of nonmonetary units
Determining the tariff based on the
subscribers contractual terms and
service being requested
Managing counters applicable for
rating
Account balance management function for prepaid services
Holding the subscriber account
Controlling adding and deducting
monetary amounts from accounts
Performing credit reservations on
the account
Managing counters applicable for
the account
Handling functions such as
requests for session- and eventbased charging via a charging layer

online and Rf for offline charging,

respectively. The online Ro interface is
defined using the Diameter protocol,
which grew out of work in the Internet
Engineering Task Force (IETF) to
expand on the older Radius access,
authorization, and accounting protocol.

According to general industry discussion, the standard most likely to be

adopted soon will be the key networkto-charging layer standards Ro for

SAP Thought Leadership Online Convergent Charging

Integration and Business Benefits

Solutions for New Entrants and Incumbents

A decision to invest in any convergent

charging system will be driven by a
need to gain flexibility and reactivity to
meet transient market needs. The ability to rapidly price, rate, and bundle any
combination of services together and
introduce cross-product discounting
and promotions will determine the ability to differentiate in the marketplace.
As service providers address their new
service pricing and packaging challenges, they are also evaluating solutions
that will address pre- and postpaid convergence in the future.
Incumbents and greenfield service providers come from different perspectives and are each taking different
approaches with regard to convergent
charging. Greenfield providers have the
benefit of a clean slate when deploying
infrastructure and information systems,
whereas incumbents are constrained to
a vast extent by their costly existing

10

legacy systems and investments. However, investment in a new convergent

architecture can be quickly offset by
the cost savings and business opportunities that convergent systems deliver.
Greenfield operators and new entrants
can choose convergent systems and
benefit from lower capital and operating
expenses and a single system for managing all services from day one. They
also have the advantage of being able
to provide value-added service offerings from the beginning, allowing for
greater market differentiation.
Incumbent providers have too often
failed to utilize their legacy prepaid and
postpaid systems to their full potential.
It therefore makes more economic
sense to introduce an adjunct charging
system, allowing the legacy billing system, or the existing prepaid balance
management systems, to remain in

SAP Thought Leadership Online Convergent Charging

A decision to invest in
any convergent charging system will be driven by a need to gain
flexibility and reactivity
to meet transient market needs. The ability
to rapidly price, rate,
and bundle any combination of services together and introduce
cross-product discounting and promotions will determine
the ability to differentiate in the marketplace.
place for existing services. The new
rating and charging systems can manage the sophisticated pricing and
charging requirements for new services. Existing services can then be
migrated gradually over time to the new
system to offer more comprehensive
service bundles, thereby ensuring an
ROI from both old and new systems.

The SAP Approach

SAP Convergent Charging

The SAP Convergent Charging application is a flexible solution, designed

with convergence in mind and meant to
adapt to the potential needs of telecom
service providers. It complements traditional IN architectures by providing
sophisticated pricing and rating functionalities. The application can deliver a
comprehensive convergent charging
solution complete with online and
offline access for both incumbent and
greenfield operations. SAP Convergent
Charging is also aligned with the
emerging standards for online charging,
and SAP developers are closely following developments in this area.

components for making choices,

dynamic table lookups, macros, and
arithmetic computation are assembled
into a decision tree to build a custom
algorithm that will calculate the price of
a service.

Native convergent functionality makes

SAP Convergent Charging ideal for
emerging IP services such as mobile
data and multimedia broadband services. The application is also designed to
meet the needs of demanding service
providers by offering combined preand postpaid services to millions of
mobile and broadband subscribers.
The extensive, standards-based application programming interfaces (APIs)
and integration framework enable SAP
Convergent Charging to be integrated
into a range of charging architectures in
a variety of carrier environments spanning mobile, broadband, and on-demand
services. Key features include the
following.

Advanced rating features Time, date,

geographic, content size, content type,
shared plans for friends and family or
corporate plans, bundled offers, crossproduct promotions, and instant discounts: all of these different types of
rating can be combined within a single
rate plan. Event-based, recurring charges and one-shot charges are also managed as a coherent whole by the rating
engine using the same intuitive GUI.

Unconstrained pricing Designed to

deliver complete pricing flexibility with
high performance and no compromises, SAP Convergent Charging virtually
eliminates functional or technical limitations to developing offers for different
types of services. An intuitive GUI
enables visual programming in which

Subscriber controls Subscriber policies held at the charging layer equip

parents and employers with appropriate
spending controls on a per-service
basis and even according to predefined
times of day.

Pricing and profit simulation SAP

Convergent Charging enables what-if
analysis that allows pricing managers to
get answers to define optimum price
structures and bundles for customer
segments, for example. They can better determine which partners are best
to use and how lowering costs can
improve profit margins.

Modular online balance management

Online balance management provides
convergent pre- and postpaid account
management, delivering full control
over the totality of the pricing of services and bundles.

High performance and scalability

Proven in tier-1 mobile operator environments worldwide, the solution
offers high rating performance in aggregate and per CPU. SAP Convergent
Charging has multiple references in the
challenging environment of real-time
online and prepaid charging, where low
latency, high throughput, scalability, and
five-nines reliability is delivered.
Compatibility with related applications SAP Convergent Charging is
designed to integrate easily with the
SAP Convergent Invoicing for Telecommunications and SAP Customer Relationship Management and Order Management for Telecommunications
packages to form a comprehensive
consume-to-cash solution. Thus, service providers can manage both customers and their accounts with an
integrated solution.

Find Out More

To learn more about SAP Convergent
Charging and the SAP for Telecommunications solution portfolio, please contact your SAP representative today or
visit us online at
www.sap.com/telecommunications.

SAP Thought Leadership Online Convergent Charging

11

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