Enabling flexible charging for 3G services

1. Enabling flexible charging for 3G services Identifying Market Trends Convergent Rating&Billing Impact Analysis Dr. Oliver Höft (O2 Germany) IQPC Convert Billing 2005 Frankfurt, November 2005

2. Agenda Key 1: Executive Summary Key 2: Market Trends and Charging Architectures! Key 3: Impacted Systems and Processes! Key 4: Approach - Just an example ! Key 5: Summary and Lessons Learnt ! We actually see an interesting discussion about convergence and 3G charging. It is a revival of a debate we already experienced five to six years ago and addressed the same weaknesses as today. The simple message is that we have had believed in the promises of key suppliers and the normal trend of technology involving. This presentation does not reinvent the wheel (or mobile phone, resp.) It rather gives an overview about and shows capabilities and options for blending your future charging / billing architecture.

3. Executive Summary 1 Mobile operators are suffering from integrating an enormous number of new charging and provisioning requirements. Vendors indicate that their solutions / platforms can fully address the operators need of flexible charging. Actually there is not a single vendor who is fully able to address the highly complex charging requirements of most mobile operators of today.

4. Mobile operators are suffering from integrating an enormous number of new charging and provisioning requirements / services. • Vendors indicate that their solutions / platforms can fully address the operators need of flexible charging. • Unfortunately, statements like this are pretty much wishful thinking. • Actually there is not a single vendor who is able to fully address the highly complex charging requirements of most mobile operators of today. • In the Charging / Billing Systems Market Arena we can spot four different types of suppliers, each of them representing a specific school of thought and industrial background, with specific strengths and weaknesses. • Their approaches are in fact rather complementary than competing. Key Message (1/2)

5. Key Message (2/2) • Carefully blending components out of the four approaches will provide the most appropriate solution. • Different types of operators will benefit from different combinations of solution sets reflecting their approaches to launching new data services. • Integrating these components into existing system stacks remains the core challenge. • Convergence, real-time processing and open systems interfaces are the key areas of concern.

6. Market Trends & Charging Models 2 Four different types of suppliers are well known to compete in the market arena of rating, charging and billing. All of them address core weaknesses of today’s mobile operators ! To which extent do the offered solutions differ from each other ?

7. Core Softwarereplacement (end of life) Better Care & Self-Care Network Elementreplacement(end of life) Growth Potential of Customer Base Actuals vs. Target Current Time to Market Different Types of Enablers are driving the future Charging Architecture Discussion - (Matrix) Requirement Enabler Structural Enablers Marketing driven“Near Realtime”-Requirements True Convergence / “Real Time” Cost Savings(OpEx / CapEx) CurrentEBITDA Prepaid-Postpaid-Split of Customer Base “New Products” (promotions, bundels, packages) Portal Strategy Coverage of targeted Business Areas Current Volume of Innovation / Investment Revenue Split Data - Voice NewBusiness Models Customer ServiceStrategy Organisational Structureand Maturity Customer Satisfaction in terms of service / product delivery Supplier Satisfaction Figure: Matrix of the different drivers for adopting new charging models in a mobile operator - not to be completed [Source: o2 Germany]

8. Core Networkand IN Equipment Manufacturers IT suppliers including vendors of billing / mediationsolutions Suppliersof IP network and platforms ContentManagement and Mobile Commerce Providers Four different Types of Suppliersin the Rating, Charging and Billing Arena - (Matrix) • Different industrial backgroundyears in operating business, software- or hardware-oriented, “layered” solutions vs. “Out-of-the-Box”-Solutions, different licensing models, years in business critical environments, driving standards (PARLAY, SIMPAY, JAIN, 3GP and many others) • Different solutions or platform based solutions(all in one approach to strategic partnerships) • Different areas of core-business(routing-/switching-technology, content-management, billing-technology) • Different market shares (Partner Strategy, Alliances, Spin-off’s, Owners) • Different activity types within the Mobile Operator (Core Network, Billing, Consulting, Integrator) Figure: Matrix of the four Suppliers in the Billing area [Source: o2 Germany]

9. Different Type of Enablersare driving the future Charging Architecture Discussion • Creating a converged view of customers, services and usage • Monitoring usage and interacting in real-time or near real-time with end users • Support for diverse and rapidly changing pricing and business models • Providing a standard way of separating operator charging from 3rd party charging for content and applications • Traditional cost-based charging versus value-based approach • Extending the “stateful” IN model already used in circuit switched networks to the core network using industry standards such as CAMEL III, RADIUS, DIAMETER • Pre- / postpaid convergence • Various standards driven by different parties, alliances(SIMPAY, PARLAY, JAIN, 3GP, IPDR, TeleManagemenForum, ....)

10. IT Vendors Charging Model Approach

11. IP Vendor Charging Architecture Approach

12. Network and IN Equipment Vendor Charging Architecture Approach

13. Content and m-commerce Vendor Charging Architecture Approach

14. Impacted Systems and Processes 3 Well, we have seen something about the different approaches and the different notions of the respective vendors. But Billing / Charging is just a small piece of a larger pie ! How do we get that integrated, what are other areas to consider and what are the key challenges?

15. Restructuring / Introduction of new Charging Modelsneeds to bear many different areas in mind... • The meaning of pre- / postpaid convergence varies from • a single integration of the CRM solution with the prepaid platform to ... • ... a full management of a single rating engine with unified tariffs and pricing models for the prepaid and the postpaid customer segment.. • Assumption: • No operator will implement this as a full blown PPC approach. • Cost and marketing thoughts are going to drive the game furthermore? • Discussion! Single Customer Care and Self Care 1 Single Marketing View 2 Unified Services and Tariffs 3 Integrated Balance Management 4 Integrated Payments and Recharge 5 Common Platform and Technology 6 Figure: Different flavours of Convergence [Source: Schlumberger/Sema Group - White Paper on Convergence 2003]

16. Charging, Rating and Billing – How do they interrelate ? • Payment Management - Key Consideration • Multiple Payment Sources • Security and Audit • Authentication and financial institution interfaces • Revenue Assurance • Multiple Payment Mechanisms • Company Accounting Mechanism • Payment / spending rules based on Product type and customer’s ability to pay / preferences • Funds reservation and use for specific transactions(e-wallet) • Payment Receipts • Customer Trust • Roaming-Partner-Agreements • Service-Provider-/ Partner-Agreements ... • Customer can change between PostPaid/Prepaid in Realtime Prepaid PostPaid Online Charging Offline Charging Near Real-time Charging/Billing Online Charging Charging process where charging information can affect in real-time, the service rendered and therefore directly interacts with the session /service control. Offline Charging Charging process where charging information does not affect in real time, the service rendered. Near Real-Time Charging/Billing Charging process where charging information does not affect in real-time, the service rendered but charging information is passed to rating & billing shortly after ‚use of service‘. Requires ‚online charging‘ capability combined with ‚hot billing‘. [Source: o2 Germany]

17. Legacy Billing Systems Restrict the Ability to Support Emerging Charging and Revenue Models Common Legacy Pre-paid and Post-paid Rating and Billing Architecture Key Constraints • Customers are classified by payment type and provisioned accordingly • Subscriber and tariff information managed in multiple places • Flexible payments instruments by service type unachievable • Real-time view of Account Balance across services not available • Real-time credit risk management restricted to prepaid customers • Simple tariff models only (usage-based with simple measures) and often long lead times to introduce new products and services • Restrictive event and data services • Pricing of simultaneous service usage by customers and real-time cross-product discounting not possible • Restricted opportunity for cross-sell and up-sell to drive-up ARPU Legacy Prepaid System (Service Node) Network Event Collection / Mediation IN Platform Event Collection / Mediation CDR feed(for statementing) Customer & Tariff Database Rating and Billing Legacy Billing System Transaction Database Customer & Tariff Database Figure: Key Components in the legacy world [Source: o2 Germany and Internet research]

18. IN-based real-time billing Billing-based real-time billing IN-hosted real-time billing Interfaces for Rating / Charging – a challenge ! Billing (batch) Billing (batch) Billing (batch) Mediation Rating & balance(real-time) Rating & balance Rating & balance IN IN Content control Content control Content control Call control Call control IN Call control Figure: Different approaches for adopting new charging models in a mobile operator - not to be completed/as of today [Source: o2 Germany]

19. Approach - Just an example 4 Oops, there are lots of confusing facts. There is much interaction and it needs a careful ordering and evaluation scheme. That’s life. When there are many options, one has to choose between them – and may have to accept blending ! So, is there a general answer...... for the right way forward ?

20. Technical Infrastructure Information Systems Customer Segmentation Product Segmentation Operator Classification Possible Options Description & Evaluation A closer look: how could an implementation of PPC look like – (the solution depends pretty much on the company targets) IN-hosted real-time billing A • IN is expanded to keep balance and rates for all products and customers • The Billing Rate Component is put to the IN • Billing gets the CDRs to produce the monthly bill the postpaid cus and the wholesale bill to potential partners • Tariffs are flat or discounted • Not many bundles between servives • Integration effort for the Rate Component to the IN is high Billing (batch) Rating & balance IN Content control Call control • IN is expanded to keep balance and rates for all products and customers • The Rate Component comes from the IN vendor directly • Billing gets the CDRs to produce the monthly bill the postpaid cus and the wholesale bill to potential partners • Tariffs are flat or discounted • Not many bundles between servives • Via Mediation the usage can be double checked • Less integration effort to Billing • Customer Segmentation • Retail Customer • Normal Customer, mid range ARPU • Mostly voice, SMS, few data business • 60-40 Pre-Postpaid Ratio • Product Segmentation • Pre- and Postpaid products • Moderate number of simple tariffs • Between 5-10 products • Technical Infrastructure • NW Infrastructure (Core and Access) • IS Infrastructure (CRM, Billing) • IN infrastructure experience IN-based real-time billing B Billing (batch) Mediation Rating & balance IN Content control Call control

21. 10 “golden” stepsif you’d like to follow them ... STEP 1: Look at your current situation and use slide 7! STEP 2: Look at the tools/systems/vendors you have. Please use slide 8! STEP 3: Look at the portions of applications of the “new” architectures you have already in place! (slide 10/11/12 and 13) STEP 4: Look at slide 15 and the level you going to modify or change! STEP 5: Consider the mixture from all of that! STEP 6: Investigate on the Type of Convergence! (slide 16) STEP 7: Please have a closer look again at the right hand side of slide 16! STEP 8: Address slide 17 to your management (Marketing, IS, Network, Procurement, Member of Board)! STEP 9: Discuss slide 18 in your organisation and please starting your own thinking and conclusion! STEP 10: From here it is your party!

22. at last... • Given the various emerging charging architectures, their strengths and weaknesses: the idea of one vendor solution fulfilling the prophecy is unrealistic. • A crucial input to major decisions on critical topics such as • Pre-Postpaid- Convergence, • selection and placement of rating engines, • product catalog etc. is to jointly conduct detailed studies about the emerging architectural models

23. Summary and Lessons learnt! 5 Your project isn’t just a billing or IT project at all –it requires a lot of involvement of other parties. We will see new alliances between suppliersfrom different areas! We don’t really see an industrial driven common approach for the Mobile Operator. We have to work hard to implement true 3G charging – it’s a bit like relaunching your entire business!

24. Questions, please ! Thanks to the IQPC and for all the lovely people I have met here in Frankfurt throughout my time here! Have an nice way home and take care!

25. This slide set doesn’t reinvent the wheel. A lot of public material was be used. • Thanks to my colleagues in the Architecture Department at O2 Germany and O2 plc. ! Sources • “Emerging Charging Architectures for New Mobile Services” report from Analysys Research • “Billing for Content” report from Ovum • “White Paper on Convergence” Schlumberger/Sema Group • Presentations made by Logan-Orviss et al. at the Pre-Post Convergence meeting hosted by O2 Ireland in Dec 2003 • Other Intellact sources e.g. Yankee, Informa, Total Telecom • O2 Internet Research • Results of vital discussions with many colleagues coming from various departments within the entire O2 Group

26. IQPC - Convert BillingDr. Oliver Höft, O2 GermanyHead of IS ArchitectureNovember 2005 oliver.hoeft@o2.com land line: +49 (89) 2442 1302 mobile line: +49 (179) 823 8344