Revenue Assurance for Third Party Services

A Practical Approach to Curbing Costs and Maximizing Revenue

Copyright 2011 Connectiv Solutions. All Rights Reserved.

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EXECUTIVE SUMMARY .......................................................................................................3 THE INCREASING NEED FOR REVENUE ASSURANCE ......................................................3 Change. Change. Change. ..............................................................................................3 PRACTICAL APPROACH TO REVENUE ASSURANCE ..........................................................4 A CASE FOR RIM REVENUE ASSURANCE..........................................................................5 RIM REVENUE ASSURANCE METHODOLOGY ...................................................................6 KEY CHALLENGES ..............................................................................................................7 CONNECTIV SOLUTIONS CAN HELP ..................................................................................8

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Executive Summary
Todays wireless carrier is not like it was 20 years ago. Gone are the days where carriers can focus only on market launches or cell site builds. Todays carrier is faced with customer saturation, flat voice ARPUs and stiff competition to retain the customers they currently service. These dynamics have forced carriers to expand beyond their core offering and enter in more service broker agreements to systems like brew mp, as well as application stores like BlackBerry App World, the Android market, and the Ovi store. With the rapid customer adoption of smart phones, these revenue opportunities are increasing at an explosive rate. Unfortunately the systems to ensure revenues are captured and costs are minimized always lag behind potentially leaving millions in missed opportunities. This paper will examine some the key components required to establish comprehensive Revenue Assurance controls across the enterprise. The paper also examines one such third party offering, BlackBerry, and how this mature service can still have complexities creating potential errors for the telecom industry.

Do you have effective Revenue Assurance Controls to support carrier billing for third party systems?

The Increasing Need for Revenue Assurance

The one thing from which the wireless industry is not immune is change. And the rate of change is increasing at an amazing pace. First generation services appeared in the early to mid 80s and extended well into the 90s. These analog only services were the early pioneers of wireless communications. The FCC Auctions of Personal Communication Services (PCS) in 1994 introduced us to the 2nd Generation of services. These all digital systems were rooted in GSM, CDMA, TDMA 136, CDPD and IDEN. By 2000 service providers were upgrading their networks to 2.5G and by mid 2000 the 3G networks started to get introduced to the marketplace. As of the writing of this paper, 4G networks based on LTE and WiMAX are already hitting the marketplace. These changes are affecting every facet of the service providers organization, including VOIP backbones, LCR solutions, VOIP peering between carriers, network to network peering rather than switch to switch, radio and cell site technology changes, and, of course, incomprehensibly large growth in data usage.

Change. Change. Change.

All of this is made more challenging given that voice ARPU is flat or declining and we are reaching market saturation. What was once an ever-expanding pool of potential customers is now either a market already being served by your competition or being wooed by them. Because it is so much more difficult to expand the top line with subscriber additions, carriers must focus more on methods to lower costs and increase assurance of collecting the revenue owed them by customers. This process is further complicated by the fact that carriers are not only service providers, but also act as brokers for services and as content providers like brew mp. In addition, with the explosion in deployment of Smartphones, you add RIM services, BlackBerry App World, the Ovi store. How do you know that your brokerage services are breaking even? How do you know that your intended margin is happening in reality?

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A Practical Approach to Revenue Assurance

A comprehensive Revenue Assurance Strategy is a requirement for increasing your bottom line. The triage process starts with Forensics identifying your revenue at risk and equipping you to quantify and prioritize which areas will yield the most return. With your prioritized list, you can turn your attention to Controls Management. In this phase, it is critical to document the business process lifecycle for each revenue stream and identify areas with inadequate controls. New controls may be added and ineffective or outdated controls may be removed. Once implemented, these new controls close your revenue leaks. With the leaks stopped, its time to look at Corrections Management the stage in the process where you make adjustments to systems that have inaccurate information. This involves audits and cleanup of systems. With all of that complete, the focus turns to Compliance Management making sure that your well-defined controls are implemented across the organization. Like painting a bridge, once youve completed the cycle, its time to return to Forensics to quantify new revenue at risk based on changes in the industry.

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A Case for RIM Revenue Assurance

As a specific example, Connectiv Solutions recently applied this methodology to a wireless carrier to address leakage related to deployment of BlackBerry devices. Research in Motion (RIM) is both a handset vendor and a service provider. Carriers purchase RIM services for each handset they deploy. Carriers resell these services to subscribers at a markup. On the surface this is a win for the carrier and a win for RIM. In practice this is not always the case.

Carrier billing for third party systems requires rock-solid business processes.

RIM is different from other service providers in two significant ways: 1. Carriers control of what gets provisioned to the RIM system. The carrier must provision and de-provision accounts accurately because RIM passively provides services and then bills based on what the carriers provisioning system told them. This means when a carrier has a problem in their process, it directly costs hard dollars which may not be recoverable through a dispute process.

2. The bills are more detailed than other service providers going down to the level of service provided by ESN/MEID and prorated based on the number of days the service was active during the billing cycle. Most billing reconciliation tools are not granular enough to allow easy reconciliation with this type of bill, leaving carriers uncertain about the accuracy of the bill they receive.

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Assuring the integrity of the systems supporting customers on third party systems is a real challenge. Even for a mature offering, like RIM, there are often significant dependencies between your internal systems and the RIM system. You need to understand the tools involved in provisioning and deprovisioning as well as develop an understanding of your business processes to perform an audit from disparate systems with varying sources of data. Do you have a handle on your handset inventory? Who has access to make direct updates to the RIM system? Does your timeline for reconciliation line up with the RIM billing cycle? If you dont have the tools to answer the basic questions, you cant implement effective controls. And, unfortunately, most carriers Revenue Assurance groups do not have the tools or people to effectively audit these bills. Without the appropriate resources, carriers surveyed are left estimating whether the bill is about right based on the previous months bill. Without the right tools, the complexity of the invoice and reconciliation process makes it nearly impossible to effectively and precisely audit whether the number of active days by service matches carrier billing systems. Either the data from internal systems isnt readily available or the manual process is too time consuming to do it consistently. In one example, it took multiple business days to collect billing system data compromising the quality of the analysis. Getting to the bottom of your revenue leak takes more than a one time manual audit. Even with some controls in place, one client had just under 20% variance between what they had provisioned in the RIM system and what they provisioned in their internal billing system! Unless carriers implement effective controls, those variances will return, and more revenue will be lost.

$16.7 Million at Risk with a 3%

annual overpayment by a Tier 1 carrier

In order to assure that youre only paying what you owe, carriers need to: Understand the business processes which support the third party services Design and implement controls to guard against errors coming into the billing process Complete automated audits providing a comprehensive and detailed analysis of the invoice details to the printed invoice, followed by a reconciliation of the invoice details to your internal billing system records assuring that when a subscriber is disconnected or suspended youre no longer paying Cleanup remove records from the RIM system that are not tied to current customers Confirm that the controls are being used appropriately

Revenue Assurance Methodology

Connectiv Solutions was recently engaged to assist a client with assessment of revenue assurance related to RIM services. Using the Connectiv Solutions Business Optimization and Assurance Process, we identified discrepancies between the RIM invoice and carrier billing system.

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Tasks performed in the Forensic phase included: Documenting the current process Assessing revenue at risk Assessing the contractual requirements between the carrier and third parties Determining the problem was significant enough to develop appropriate controls

The Controls Management phase included: Identifying potential gaps in the provisioning lifecycle which could lead to exceptions Auditing the third party invoice compared to the invoice detail Determining that a synchronization process was needed between the billing system and the third partys provisioning system Determining a methodology (audit process) for verification that the third party system was in sync with the billing system

The Corrections phase included: Identifying KPIs related to normal services Defining a process to synchronize data between systems Recommending that the carrier identify customer experience scenarios for each exception and develop a remediation plan to minimize negative customer experience when the synchronization occurred

The Compliance Management phase included: Auditing the audit process to confirm that the controls around the business process were still valid and that the audit was being conducted properly.

Key Challenges
The most challenging part of the process is not identification of issues, or development of controls and corrections. The most significant challenges are related to how most carriers are organized to address Revenue Assurance. According to the Global Revenue Assurance Professionals Associations 2009 survey1, (GRAPA) while carriers are putting greater emphasis on Revenue Assurance activities and staffing, between and of all carriers rely on operational groups to identify and address RA problems. The key challenge with this approach is that operational management of a carrier network is typically measured on call completion, and service delivery, so revenue assurance activities fall to the bottom of the priority list for budget and attention. Youll need to assure that there is appropriate commitment within your organization to support the new business processes required to tighten up on cost management issues and revenue leaks.

GRAPA RA Standards 2009, page 26. www.grapatel.org

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Connectiv Solutions can help

Our Management Consulting Services group offers a number of solutions to help tackle your Revenue Assurance problems, including everything from a comprehensive Revenue Assurance Assessment to Basic and Advanced RIM reconciliation options and everything in between. When youre ready, give us a call at 240-2238080.

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