Note 2: What is a Network?

Posted: 27 August 2005

What is a network?

The establishment and maintenance of a network's billing system can best be understood by first reviewing characteristics typically found in networks.

A 'network' typically has the following characteristics:

A specific infrastructure or a finite geography across which the network business is conducted
The ability to permit or refuse access or service to customers based on pre-payment or a promise to pay
The ability to measure a customer's access or consumption if required
An ongoing relationship across time with its customers
A charge is made for use of the network

Specific Infrastructure or Geography - A network has a finite, though possibly large, boundary within which its business takes place. Examples include the national phone network, pipes of a water distribution network, roadway associated with a tollway, and the geographic limits of a city that levies rates for local government services and waste collection.

Permit or refuse access or service - A threshold associated with 'signing up' to access or use the network is placed upon the customer. This can be quite low, as in the case of a prepaid calling card, or substantial, such as a requirement that the customer pass a credit check. By signing up, the customer's details becomes known to the business and access can be granted to the network. Even in the case of a pre-paid calling card, despite the customer remaining anonymous (whilst making phone calls), there is still some measure of 'enabling' the card before commencing its use.

Measure a customer's access or consumption - Complementing 'permission of access', measurement allows the network business to provide a specific quantity of access or service, or if not limited, measure the amount consumed and later bill for it. Examples include tollway journeys billed later or a preset number of domestic phone call minutes on a calling-card. Alternatively, a customer who purchases an all-day tollway pass is billed based on a measured period of access (time) rather than the quantity of journeys made (use).

An ongoing relationship - Access and use of a network are associated to the same customer across a measure of time and can be 'billed' or 'charged for' collectively. Examples include calls deducted from a single (even if anonymous) calling card balance, and international calls collected and charged to a home phone bill.

A charge is made for use - The charge drives the need for billing, but does not necessarily mean that a paper bill needs to be generated. Indeed, there is a definite trend away from paper-based billing towards online (internet) based presentation of the bill's details.

The degree and manner to which each characteristic is employed in a particular network will be specific to each individual business, will be industry specific and will be influenced by the regulatory framework within which it operates. For example, tollways usually cannot refuse access to specific vehicles (absent weight, etc. restrictions). However, the owner of a vehicle that uses a tollway without payment may be subject to fines and penalties.

Two additional points about network characteristics are worth noting:

Ownership of the network assets - A network business need not own the network assets it uses. It can rent the assets of another business at one rate and on-sell to end users at a higher rate. For example in the telecommunication industry, the wires into the home are rented from the local incumbent, or in the power industry electricity may be purchased wholesale from a generation business, carried over the wires of a transmission business, and sold at retail into the home. In each of these cases the retail relationship with the end customer is separate from the ownership of the end-to-end network assets.

Networks need not be physical - An example of a network asset that is not physical (in the sense of being able to touch it) is an electromagnetic spectrum (e.g. radio frequency). Access to a wireless network for phone or other services can be supplied by the spectrum owner in the same manner as access to a home's phone line can be rented from an incumbent telecommunications company.

Non-network commercial situations

Not all commercial transactions need a sophisticated billing system. Some examples are:

Retail shops - Here the purchased goods are totaled at the register and immediate payment is requested. There are usually few options to decline service, often the customer remains 'anonymous' and there is little or no ongoing relationship with the customers once they have left the shop.

A 'billing' requirement could be generated for shops where (say) there was a specialised 'trade' component to their sales. Examples include interior decoration shops with a professional decorator clientele alongside their retail sales, or a large plumbing store that sold products to professional plumbers as well as the weekend DIY population. In these cases the shops could perform anonymous retail sales, and ask for monthly payment of their 'trade' accounts based on special 'trade' pricing, with an expectation that non-payment would force these professionals to pay the same rates as the public.

Cash transport tickets - Tickets are obtained from a station, retail shop or vending machine and used for anything from a single trip to (say) a week's travel. There is little ongoing customer relationship, no differentiated charging and usually no scope to decline access. This, despite the transport being performed over a rail or bus network.

Transport tickets could generate a 'billing' requirement if a customer had an ongoing relationship via a 'transport-pass'. The pass could allow details of the travel performed to be collected for later billing or deduction from a customer's specific pre-paid balance. There could be bonus rebates / credits based on the traveler's use of the transport network over time.

Tollways that only take cash payments - Many tollways charge for their use only by collecting cash from their customers. Customers pay for each use of the tollway. Some tollways use billing to great effect by using electronic tags to capture details of trips taken. These trip details are then passed to the tollway's billing systems.

Tags: Billing, Network