Mediation's support of differentiated charging

Summary

Determinants provide the raw information that rating uses to provide customised rates for different customers and customer segments. Each product offering can use different determinants to influence how its rating will be performed, and the determinants used can change over time.

Mediation, aside from modifying and correcting transactions, can also supplement the determinants provided by the network. The preservation of network determinants and the supply of additional derived fields allows rating the widest opportunity to differentiate a customer's charges.

Actions

Preserve network fields through mediation to provide the widest choice in billing
Derive additional network fields in mediation or billing to provide additional determinants
Examine the historical trends in your industry and contrast them to your business' approach
Consider what your business' response would be if a competitor changed their strategic pricing approach

Differentiating Charges

The ability to charge different amounts for different customers and their transactions relies on the quantity and complexity of the information available to make each charge distinct. The specific fields and their values that provide the basis for individual charge amounts to be differentiated are called determinants. That is, they support the ability to choose one rate or price over another. A biller's scope for offering unique offerings to their customers increases with the number of determinants available.

Four sources of charge determinants are network transactions (i.e. usage), network elements (i.e. details about the network), customer details (e.g. demographics) and marketing (rate) information. The more sources available to determine a charge's price, the greater the scope to charge one customer differently from another.

For example, a measurement of electricity consumption can only have a generic rate applied unless there is some information that allows a distinction between this measurement and any other measurement for this or other customers. The distinction might be a field on the measurement that indicates that it was off-peak electricity, a meter number allowing derivation that the measurement was from an off-peak meter, customer information from the billing system indicating it was from a business premise, or the measurement date indicating that the winter rate applies. Each additional piece of information (determinant) provides the capability of, but does not mandate, differentiated charging.

Customised product offerings provisioned to a customer can provide pricing differentiation. For example, a biller may offer two pricing plans for mobile phone calls. The 'High-use' plan offers cheap phone calls but charges a high monthly network access fee, whilst the 'Low-use' plan has high call charges, but charges only a modest monthly network access fee. Two customers with the same network connections and making exactly the same phone calls will generate quite different monthly invoices based solely on the different marketing determinants provided by their pricing plans.

Examples of differentiation include:

Peak / Off-peak: A field may provide charging differentiation. This field may be provided from the network, or derived based on information known about the customer or service location. e.g. an electricity meter measurement may indicate that a measurement is for off-peak consumption, or the consumption's nature may be derived based on the meter number.
Date: The transaction date can derive additional differentiation properties such as day-of-week, day-of-year (e.g. Christmas Day), and membership in other date classes (e.g. weekend, summer, school holidays).
Time: Like date, the time of a transaction can derive additional distinctions including measures of peak and off-peak periods (which may differ based on the day of the week, or day of the year), and the appropriate rate when transactions span different periods (calculated using the start and end times).
Location: Charges performed in a remote location may attract a premium, or a mobile phone call performed overseas may be charged differently to one performed at the customer's home location. A calling card may call from a location away from home. Location may also drive tax calculations since these may vary based on jurisdiction.
Source / Destination: For phone networks, each destination country attracts a different chargeable rate. Reverse-charge calls to your home will be judged as being local, long distance or international depending on their source. A tollway biller may use the source/destination combination to determine a vehicle's journey on their road network.
Channel / Media: Where the same tasks can be performed in different ways then that choice can be a determinant. For example, phone rates can be different for fixed and mobile networks, a regular phone line versus a high-quality fax line, or regular video quality versus high-definition TV.
Response time: A non-network, intangible quality used to distinguish between product offerings sold to customers. For example, customers may pay more for faster service restoration, reduced delivery times, or help-desk response times. The information used to differentiate these charges would be stored against the product-offering or customer, be extracted when required to support the customer, and used when the charge's price is determined.
Customer service: Like response time, customers may purchase market offerings that customise customer service (and the amount charged for it). This may involve the use of special contact phone numbers, individual customer service manager, and priority problem resolution.
Market segment: It is common for consumers and businesses to be charged at different rates for similar products. This can be due to government regulations that places limits on consumer pricing, the volume of business that a corporation may bring to the biller, or market pressures (or lack of them) that influence how the biller generates revenue from his network.
Device: Tollways may differentiate their journeys based on whether they were performed by car or truck. These distinctions would be based on information supplied from the network, or captured ahead of time and derived for billing (e.g. from the licence plate or electronic tag).
Bundled rates: The product offerings a customer has purchased or negotiated can provide details of how a charge should be handled.
Historical information: Details about the customer's previous network use may be used to calculate a differentiated price for a current charge. For example, details of last year's water usage may be used when calculating this year's prices.
Quality: Measures of the quality of the network, or network can be used. For example line quality for phone calls, and the heating value of natural gas
Network Options: Fields may be used to indicate where optional features were employed. An example might be where the call price is provided back to the caller (i.e. call back). This option, if available, can be used (if required) by the rating process.

The actual list available to a particular biller in an industry is constrained by their networks' and billing systems' ability to provide the information, and the customer's desire or willingness to be billed based on the different distinctions. Market pressures, industry regulations and customer preferences drive the use of only a small selection of the available determinants.

There is also an operational cost that accompanies each additional level of differentiation. There are more details to be administered, monitored and explained (to both customers and staff) as you move from (say) charging just by date, to date and/or time, to date and/or time and/or customer segment, to date and/or time and/or customer segment and/or monthly spending level. Even when many determinants are available, usually only a few are used in any particular product offering.

Mediation

The data manipulations performed in mediation are limited only by the biller's creativity, the information supplied by the network and the demands of the downstream systems (including billing). Manipulations may be applied individually or in combination. A selection of different data manipulation steps includes:

Classification: Mediation can use business rules to classify transactions into standard categories allowing downstream systems to treat transactions consistently. For example, phone calls can be classified as being local, long-distance, or international.
Standardisation: A network can consist of different vendors' equipment that supplies the same transactions in different formats. Mediation can standardise the information passed downstream hiding the exact nature of the transaction's source. For example, fixed phone exchanges are provided by multiple vendors, but provide the same service to customers. Mediation allows phone call details to be supplied to billing in a consistent, vendor-neutral form.
Correlation: A dispersed network can record different parts of a single transaction in multiple locations. For example, tollways and mobile phone networks record a transaction in multiple places as a journey or mobile phone call is made. The tollway biller must correlate segments of a journey such as the entry/exit points (e.g. New Jersey Turnpike), or derive the journey based on which measurement points were passed (e.g. CityLink in Melbourne, Australia). The mobile phone biller must collect all the fragments of a phone call and correlate them into one billable transaction passed downstream to billing.
Correction: Network information can contain known systemic errors that are cheaper to correct in mediation than through a network software release. Examples of such errors include transposed phone number digits, time formats or record layouts.
Enhancement: The raw network information can be supplemented with additional fixed or derived information for downstream systems (including billing). These additional fields can be derived from keyed information available within the network transaction. For example, the phone exchange identified in the phone call record could be used in isolation, or in combination with other fields, to derive additional fields such as geographic location (e.g. state), technology type, time zone, or point-to-point distance.
Modification: Fields in a transaction can be modified in a known and repeatable manner for later processing. One example is time zone standardisation. This modification allows downstream systems to operate to a standard time zone without each having to calculate the standard time correctly.
Filtering - The network may produce records that are useful for some downstream systems (e.g. monitoring network load) but not for others (e.g. billing). Mediation can remove records completely, or filter specific records from specific downstream interfaces.
Summarisation: Networks producing interim usage measurements can have those measurements summarised into a consolidated record. For example, interim accounting records measuring data downloaded from the internet may be summarised into one record before it is passed to an ISP's billing system.
Duplicate checking: The biller may choose to validate current network usage against historical usage to check whether it has been processed before. Duplicates can occur due to a network fault or another system resending information accidentally. Duplicate checking can also be performed in the billing system, but can be performed more beneficially in mediation before transactions are sent to multiple downstream systems. A key factor in duplicate checking is the length of time against which transactions are compared. The longer the history, the more transaction data must be held. Duplicate checking slows mediation's throughput. This can be moderated by only checking specific transaction types.
Sorting: Downstream systems may require or desire transactions in a specific order. To avoid delaying all transactions whilst sorts are performed, post-mediation processing should be considered if only some downstream systems require their data sorted, or different systems require different sort orders.
Duplication: Each transaction may be passed to multiple downstream systems. Each system may need different processing. Mediation can provide each downstream interface with the specific information and format it requires.
Redirection: Mediation may supply records from one network to multiple billing systems based on their customer segmentation (e.g. consumer, corporate, wholesale). Alternatively, transactions may be redirected as part of a migration from a legacy application to its replacement.
Formatting: Outbound interfaces may require fields be supplied in different coding schemes such as EBCDIC, ASCII, CSV, or XML. Mediation can take the same source field value and output it in the appropriate coding scheme.

The correction and standardisation performed centrally in mediation reduces the maintenance effort expended downstream, and the integration effort required when new transactions (and networks) are introduced. The standardised transaction format(s) generated by the mediation function can be reused by other business functions without them needing to understand the idiosyncrasies of the network. e.g. fraud detection, regulator reporting, network load analysis

Different Pricing Approaches

In Andrew Odlyzko's transportation paper (linked to above), richer information about a network's transactions supports price discrimination and more complicated pricing. The ability of the network and mediation to capture information provides billing (i.e. rating) with pricing options to support a biller's marketing and revenue plans.

The biller's network must be able to identify, capture and process detailed information about transactions occurring on the network if price discrimination is to be performed. If the detailed information cannot be obtained from the network, then it cannot be used in billing.

An alternative pricing path is that of simplicity. Andrew Odlyzko's paper on the history of communication technologies (also linked to above) outlines how customers have found simple pricing attractive. This approach is in tension with the more complicated pricing favoured by billers.

The approach taken will vary and may depend on a biller's (or industry's) pricing experiments and the competition to win customers. Once customers are enjoying flat rate pricing, they may have little enthusiasm for changes involving a more complicated pricing approach.

Customers and the nature of the networks will influence pricing outcomes. Customers appreciate simple pricing, but this limits the ability of billers to price discriminate and increase revenues. Utility networks (i.e. water, gas, electricity) charge for physical goods rather than information products (i.e. communications), and the originators of these goods must be paid. Simple pricing may provide a utility's customer with limited disincentive to reduce their consumption of water, or peak-period electricity. Richer network information could allow billers to charge a higher rate for summer water during a drought, or for expensive peak-load summer electricity used to run air-conditioners.

Tags: Billing, Mediation, Charging, Pricing