By David McNierney
Now with smart meters, powerline communications, FTTP projects and green initiatives like time of day charging, the world has become a very different place – one that places a premium on charging flexibility. The result: new challenges for utilities operating outdated and inflexible billing/CIS systems.
Over the past two decades, utility billing systems have evolved into the end-to-end solutions of today. Although they were initially focused on billing, customer care was quickly added to the scope, thanks in no small part to the number of billing inquiries. Ordering was also added, soon followed by scheduling to manage truck rolls, inventory, provisioning and other operational business functions. What began with billing soon became an end-to-end operational system designed to meet the needs of the utility’s business model. Vendor strategies often resulted in ‘jack of all trades, master of none’ solutions that, due to their broad scope, exerted extraordinary control over their customers.
In a recent poll, 42% of respondents identified ‘Time and cost to implement changes’ as their primary billing challenge. Providers often feel as if their hands are tied when they try to implement changes, especially changes associated with new services or business models. “It will cost $1 million and require 12-18 months lead time” is a familiar response when marketing asks for billing changes. Responses like this may have been acceptable in the old world, but are clearly unacceptable in a deregulated, multiservice world.
Like other industries, billing/CIS systems accommodated the traditional utility pricing models. In the cable industry, by contrast, it was monthly subscriptions for TV-based ‘tiers’. As a customer, you could select between the silver, gold or platinum packages and then add-on pay-per-view events. In utilities, it was simple pay per use consumption (price x quantity). Now, a utility considering the introduction of time of day charging or, further still, the ‘triple play’ of voice, video and data services over powerline or FTTP, has a real billing challenge.
NEW BUSINESS CHALLENGES
In a recent poll, a staggering 56% of respondents were unsure of their billing systems’ ability to support their ongoing business needs. While the legacy systems perform their intended functions well – invoices get out the door, customer inquires are answered – non-traditional requirements can be painful.
Today’s utility provider faces new business complexity – much of it originating outside the regulated utility world – that was never envisioned by the billing/CIS vendors. Smart meters can now transmit usage information in real-time across many dimensions, including time of day, which can now be used as a basis for charging.
Consider the challenge with introducing triple-play services. Telecom companies have invested billions of dollars over the years in their billing infrastructure, as telecom billing is no easy problem to solve. Huge volumes of transactions from disparate network sources present a transaction management challenge that can increase operating overhead exponentially.
Consider the bundling of many diverse services, including home security, pay-per-view TV and broadband service and diverse cross-product discounts and promotions. In the multiservice world, pricing and packaging flexibility is a premium.
Some utilities serving SMBs and corporate customers will find addressing broader service-level agreements to be a key challenge with PLC and FTTP services. Others will find integrating bandwidth controls to be a challenge with existing infrastructure. As the vast majority of bandwidth is consumed by ‘bandwidth hogs’, managing this segment of the customer base presents tricky challenges with net neutrality that require robust business infrastructures and market agility.
CHARGING, NOT BILLING
Billing, as defined, is not a difficult process: To present a statement of costs or charges. Legacy billing systems were designed, built and engineered to address a relatively simple set of services and pricing mechanisms. Historically, utilities have been billing on a simple usage basis. In ‘billing speak’, PxQ, or simple price times quantity was all that was required, using quantities like kilowatt hours or gallons used. The introduction of new, non-utility services or, more simply, the introduction of new variables into utilities pricing (like time of day) brings significant complexity into the equation.
Further complicating the traditional process is the introduction of ‘always on’ broadband connections. If a customer can connect to the Internet at any time of the day or night, why shouldn’t they be able to manage their account, choose new services or view their charges? Other broadband providers are moving to online charging systems that not only charge in real-time, but also enable innovative options for customers. For example, customers can create selfimposed budgets that alert them, through a message or email, when they are approaching or have exceeded a threshold. Customers can chose to be notified when their electric usage reaches a weekly budget, or when their usage within a specific time period exceeds a limit. Waiting for a paper invoice at the end of the month is quickly becoming a relic of the past.
NEW PRICING MODELS
Successfully changing pricing structures when introducing new services requires an understanding of customer behaviour as well as industry practices. The trade-offs between simple, allyou- can-eat subscriptions should be balanced with pure payas- you-go or usage-based models. The wireless industry has been successful balancing these trade-offs with hybrid models that provide the predictability of subscriptions with the inherent fairness of pay-per-use. There are no absolutes with pricing flexibility – the right pricing models are the ones that maximise revenue stream and profitability.
With the continued convergence of utilities, telecom, media and technology, customers are becoming accustomed to pricing choice. Long gone are the days of one price fits all. In the multiservice world, customers want to define not only how they consume services, but also how they pay for their services. Chris Anderson, editor of Wired Magazine, coined the term ‘The Long Tail’ in 2004. Today, we are seeing the premise of the Long Tail, which is most easily stated as targeting millions of markets of dozens rather than dozens of markets of millions, manifest itself in service pricing. While perhaps not a short-term priority, the logical end-point of this world view is personalised pricing.
Peer industries such as M2M and telematics have also faced the challenge of establishing pricing models where there is no legacy model to follow. By managing the marketing ‘knobs and dials’ in the various pricing mechanisms, providers can find the appropriate marketing mix that resonates with their target markets.
Not only have meters and networks become smarter, information technology has grown up since the first generation of billing/CIS products. While most billing/CIS systems were built on technology now long outdated, like COBOL, CICS and flat files, new business and operational applications leverage reusable components, platformindependent languages like Java, and service-oriented architectures (SOA). These technologies enable orders of magnitude greater business flexibility and seamless integration with existing legacy systems. While the time and cost to implement changes are the problem with billing/CIS systems, next-generation solutions often solve this problem elegantly by leveraging advanced technologies.
These new information technologies enable the following:
- Customer self-service
- Charging flexibility
- Service bundling
- Real-time transaction processing
- Greater ease-of-use and maintenance
- Seamless integration
- Cost-effective scalability.
Utilities companies not considering an SOA architecture may find themselves unable to adapt to the new challenges of the emerging multiservice world.
STRATEGIES FOR MOVING FORWARD
Throw away the billing/CIS system? While some readers may like to entertain the idea, it is rarely practical. Millions of dollars have been spent on billing/CIS platforms and they manage their original requirements – managing utilities operations – relatively well. Assuming for a moment that the core billing/CIS system is fixed, then two ‘evolution’ strategies present themselves.
First, utilities can seek to enhance this infrastructure with complementary solutions that extend existing capabilities. This could include shortcomings anywhere in the billing/CIS scope, from work orders to service definition. For example, it is possible to implement a solution that calculates time of day charges while feeding the core billing engine with minimal disruption to the existing infrastructure.
As a second strategy, utilities could operate shadow systems for new lines of business, for example. If the billing/CIS system is incapable of handling telecom services, then you could maintain a satellite billing system that uses the legacy billing/CIS system as the customer master. Even the most closed billing/CIS systems are capable of simple asynchronous integration. More advanced systems provide more real-time integration capabilities and utilities leveraging middleware technology will already have components necessary to facilitate synchronous integration.
In an increasingly complex and interconnected world, don’t look solely to your existing billing/CIS vendor to solve all of your company’s business problems. To address the myriad needs resulting from advances in networks, metering technology, and IT, first understand your business priorities and then look to enhance your existing infrastructure with applications that will seamlessly interoperate with your legacy billing/CIS systems.