Note 40: Rate Periods

Posted: 28 October 2007

Rate Periods

Rate periods are descriptive labels used to describe blocks of time. Not all rate plans use rate periods, but if appropriate, a transaction's rate period can be used as a determinant to select the appropriate rating approach (including algorithm). Rate period labels ease both the marketing and understanding of a biller's offerings, and improves the biller's configuration accuracy and simplifies maintenance of product offerings.

Rate periods can describe:

Time bands within a day (e.g. evening peak hour)
Days within a week (e.g. weekend, business day)
Specific days within a calendar (e.g. public holidays, Christmas, New Years Day)
Blocks of days within a year (e.g. Summer, Winter, Chinese New Year).

Rate periods can also overlap. A specific date can be a member of a 'weekend' rate period as well as fall within a 'Winter' rate period. Time-of-day based rate periods can also vary by day of week. For example, a 'peak hour' rate period may apply from 9am to 6pm on Mondays through Fridays, with all other times included in an 'off-peak' rate period.

A product offering's rate plan will be specific about the rate periods that apply to it. A variety of rate period labels may be defined and reused as descriptive labels across multiple product offerings. The rate periods applied may vary by customer, customer segment or product offering. For example, a telecommunications company might offer reduced calling rates to specific destinations during a 'Chinese New Year' rate period, with all other destination remaining unchanged. The priority, eligibility and applicability of such a short-term offering over the customer's existing rate plan(s) would need to be assessed as part of the rating process.

Rating across rate period boundaries

Network use can occur across rate period boundaries. The impact to rating will vary depending on how time is used within the rating calculation:

Duration independent, but time sensitive: A tollway journey may be rated based on when a vehicle 'enters' the tollway rather than based on its exit or journey time. Under this approach, journeys initiated just before a rate period boundary (e.g. peak to off-peak) will be measured only on the rate applicable at the start of their journey. The biller needs to decide which rate period applies, and could just as easily base the rate on when the driver left the tollway (though this might encourage speeding!).
Duration dependent, and time sensitive: A phone call initiated in one rate period (e.g. peak) and completing in another (e.g. off-peak) may have its duration broken into smaller time periods that are rated separately based on each rate period's applicable rate before being aggregated to form a total price. If the phone call's rate was 'duration independent' (as per the previous category), it could be rated based on the rate period at the start of the call, or the rate period applying when the call completed.
Rated using non-time dimensions: A quarterly water measurement that does not contain details of the consumption by date, but covering consumption across rate periods of 'Winter' and 'Spring', cannot be broken up into rate period segments. Such consumption can only be rated based on the total water volume consumed. In such circumstances, rate periods can be used by 'assuming' uniform consumption over time and prorata rating the water consumption (with the appropriate rate period rates) based on the proportional number of days present in each rate period. e.g. 30 of 90 days in Winter, 60 of 90 days in Spring.

Rating across rate version changes

Rate plans applied to customers' charges will change over time, reflecting the biller's changing choice of price points and pricing approaches. Versioning is the mechanism used to support such changes. Rate version changes can be introduced using effective dates to segment old and new rates, and mark the introduction of new products into the rate plan. Older charges (e.g. delayed usage) can use this effective dating to apply the rates valid when the transaction was performed (rather than the rates applying when the transaction was received). Billers may also need to perform changes due to configuration errors, competitive pressures, or regulatory rate declarations.

Changes can occur at any level of the rate plan. Conceptually all aspects are modifiable (depending on the billing system) including the algorithms employed in calculation and the rate plan's product scope. The need to support these necessary changes adds an additional layer of complexity when rating customer's transactions.

Rate plan versions mean that not only must the correct rating approach be determined, including any rate changes across a period of network use, but the rates selected may themselves change. For example, an international phone call performed across midnight may involve different 'night' rates before and after midnight due to an effective-dated rate version change. Whilst the call might be entirely with the 'night' rate period, its per-minute rate could be different for the call's component performed pre- (i.e. old rate) and post-midnight (i.e. new rate).

Another example is a water utility's meter reading that crosses a rate change that increases the amount charged per megalitre. The customer's water consumption could be segmented and rated on a prorata basis using the number of days before and after the rate plan change. In both examples, the processing is similar to that performed across a rate period boundary.

Tags: Billing, Rate Period, Rating