Note 12: Common Network Businesses

Posted: 05 March 2006

The descriptions outlined here are stylised models of these businesses, and not full descriptions of how particular businesses are constructed. Descriptions in network-neutral terms can be done because billing operations are similar even where the operating networks have little else in common.

It is also worth noting that a single physical infrastructure (e.g. cable) can be used to support several network businesses (i.e. Cable TV, Broadband ISP, and 'landline' phone lines).

Business functions that are included in the descriptions include:

Collection: Network use is measured within the 'network' domain before being passed to the billing domain. Different methods are used to measure and pass the network transactions to billing and these influence the economics of existing networks. Some network measurements are dispersed around the network (e.g. Mobile phone call segments), and must be collected together and mediated into one transaction before billing is performed.
Rating / Pricing: The information collected from the network and made available in billing to differentiate one charge from another influences the sophistication of a biller's pricing models.
Network Provisioning: The network's physical infrastructure influences the ease with which new services and changes can be provisioned.
Credit Management: How customers connect to the network influences the biller's choices when customers do not pay their bills / debts. Some networks are harder to disconnect customers from, and the penalties applied can differ.
Wholesale / Roaming: Billers may operate their own network, but the ability to 'borrow' another operator's network can be a beneficial marketing point in broadening the appeal of the biller's network over their competitors'.

Utility Billing

Examples of utility billing include reticulated gas, water, electricity, steam (e.g. Edcon in New York), and district heating / cooling. Observations common across utility billing include:

Dispersed geography: The network's points of measurement are dispersed at the edge of the network. Traditionally, this has meant that billers had to visited each network termination point (meter) separately and eyeball its measurement manually. This approach is changing as mechanical utility meters are replaced with electronically enabled meters (smart meters) that can be read remotely. The change to remote metering lowers operational costs, and allows more frequent measurements to be made.
Limited usage measurements: Traditionally, utility meters have calculated consumption based on the increase over a previous reading. Some meter types (e.g. electricity) could separate consumption into fixed time bands associated with peak and off-peak. Smart meters can measure more than just 'consumption to date', with intra-day measurements per quarter hour and peak demand available as additional data points.
Undifferentiated supply: There is little scope for differentiated pricing when the only measurement available is the quantity consumed over a one to three month period. The richer information available from smart meters makes pricing for peak / off-peak (time-of-day), weekday / weekend (day-of-week) and intensity (peak-demand) available to billers.
New network services: Utility meters are physical services connected to their networks through high-cost, manual processes. When property ownership / renters change, the utility can reuse the established meters, but the final / initial meter readings will depend on the meter technologies deployed at the property. Smart meters allow low-cost remote measurement on 'change of financial responsibility', whilst older physical meters necessitate a manual meter reading.
Limited non-payment penalties available: When customers do not pay their bills the penalties available are generally limited to the disconnection of supply. Since these are 'basic services' regulators may only allow this action as a last resort once all other attempts to collect the debt have been exhausted. Since the 'network connections' are located physically at customers' locations, disconnection is a high-cost action that involves physically visiting customers' properties.

Utility billing includes elements of 'wholesale' billing where the utilities' commodity sold to retail customers must first be obtained from another business. For example, water piped from another catchment area may be 'purchased' wholesale for subsequent retail distribution and sale by the water (network) provider. Electricity may be purchased 'wholesale' on the open market from generators, transmitted via long-distance, high-voltage network businesses, before being allocated at the street level over local (distribution) networks of power poles and underground cables, eventually ending up at the retail customers' locations.

Tags: Billing, Utility, Collection, Provision, Pricing