Interconnect billing: a required competency for new entrants?

Summary

New telecom entrants are taking advantage of the move from capital intensive, existing legacy networks to IP-based 'virtual' networks to establish 'physically' smaller and geographically independent businesses.

However customers on the new entrant's 'virtual' network still require the ability to communicate with their friends on existing legacy networks. This ongoing customer requirement to connect between networks means that aside from their retail billing systems, each new virtual network entrant must also address how they will bill and reconcile their wholesale inter-network transactions.

A phone call - connecting disparate networks...

VoIP 'networks' are growing out from their 'free' roots to interconnect with existing legacy networks.

A prominent example of this is Skype which began as a 'free' PC-to-PC 'network' before adding, amongst other products, inbound (SkypeIn) and outbound (SkypeOut) connectivity to external legacy phone networks. Skype users can call amongst themselves at no charge, or make calls with external networks for a small charge.

Vonage provides a phone network end-point across a customer's broadband connection (wherever it is connected worldwide), allowing phone calls to be 'originated' from a point geographically different to the customer's current location. Phone calls can appear to be received under a 'local' number whilst being answered at a point some distance away.

Other VoIP network solutions acts as an interconnect platform between different legacy networks - e.g. Jajah and Rebtel. Under these alternative solutions, nominated end-points on legacy networks are connected via a VoIP connection.

In all these cases there is a retail billing solution required at each network operator to collect the appropriate charges from the retail customer for originating calls, no-voice transactions and recurring fees. This retail billing is performed regardless of a transaction's terminating network to capture the biller's retail revenue stream.

Whether a phone call terminates internally on the biller's network, or externally on another legacy network or VoIP network, is less of an issue for billing retail customers (though on-network transactions may be charged at a lower rate), and more an issue for the biller's wholesale billing processes.

Revenue Sharing: Wholesale Interconnect

For each call made between two networks (including between a legacy network and a VoIP network), a revenue sharing / cost-allocation calculation (interconnect settlement) will be performed to compensate the terminating network for completing the call.

A (small) charge will be paid by the biller when an outgoing call terminates on an external network. Conversely a (small) charge will be levied by the biller when an inbound call terminates on the biller's own network. There is also the 'transit' category when a call passes across a network without terminating (e.g. connecting two mobile phone networks operating without connected infrastructure).

Interconnect billing typically generates a small number of bills per month (e.g. one per interconnected network) that can be very high value (millions of dollars) representing a high volume (millions or billions) of low value transactions (cents per connection).

For a VoIP operator, billing must generate an invoice when an external network terminated calls on the VoIP network and hence owes money. Alternatively, invoice reconciliation / confirmation is required when an external network presents their bill for calls terminated on their network. Revenue assurance is another business area required to validate the core interconnect billing and reconciliation processes.

VoIP operators seeking to connect their 'network' with legacy networks and allow inbound and outbound calls must therefore obtain the necessary business capability to generate 'termination' revenue for inbound calls, and to validate (and possibly contest) wholesale bills ('costs') received for outbound calls.

Since the margins for VoIP are slim and likely to drop, each interconnect function (billing, reconciliation and revenue assurance) must be performed efficiently and accurately to minimise the costs associated with operations and an external reconciliation / review (if performed / required by a customer or auditor).

Data capture to support interconnect settlement

To support interconnect billing and reconciliation, VoIP operators must capture the necessary details to settle with their network partners. If a partner disputes a bill or line item, the biller will be in a better position to collect payment for inbound calls if they can detail how the billed amount was calculated. Conversely, a reconciliation of a bill received by a VoIP operator for outbound calls will be in a stronger negotiating position if an outline can be provided of how an expected bill amount was calculated versus the billed amount actually presented.

When the biller signs their interconnect contracts, some consideration must be given to how charges will be billed and the supportability of a future reconciliation. If the data logged from a biller's own network cannot be reconciled with the contracts (e.g. units of measure, transaction definitions, dates and times), then dispute resolution and bill reconciliation will become undesirable 'core competencies'. By working through the reconciliation processes ahead of time, any disputes can be quickly and efficiently addressed.

Tags: Billing, Interconnect, Revenue, Costs, Settlement, Reconciliation, Core Competency, Revenue Assurance