As mobile broadband becomes more sophisticated, so too will tiered pricing, which will evolve to offer more than just variations on "x megabytes for y dollars." Different customers want different things, and operators will learn how to use tiered pricing as a means to create sustainable business models, where networks are relieved of traffic burdens, and intelligent and lucrative consumption of services will replace the current unabated consumption allowed to attract users.
Tiered pricing will also be a way to encourage the consumption of more third-party content, which can help operators go deeper into the long tail, either directly or indirectly. That will help them transcend their role as merely "pipes" as they will become trusted providers or "enablers" in the delivery of innovative, customized services in two-sided business models.
It is clear that Asia has already leap-frogged its Western counterparts when it comes to tiered pricing, with operators in China, Malaysia, Singapore, Korea, Japan and India already moving ahead quickly. As Asian operators continue to move toward 3G, and ultimately 4G, products and services, the pricing around volumes, speeds and even applications will continue to grow in sophistication. As that happens, they will ultimately hit a point where major investments in billing functions will have to be made.
"Much of what the Asian operators achieve is done with billing systems, which are sufficient today for handling different prices for different volumes," notes Randy Fuller, director of business planning at Tekelec, which is known for signaling, and metering and controls for broadband services via its Blueslice acquisition.
But that won't always be the case, as operators will inevitably face a capacity crunch if they activate too many customers without adequate policy control to support tiers of service.
Though billing is "hanging in there for now," said Fuller, it won't be able to handle dynamic bandwidth services or "throttling." If operators are to influence revenues and customer behavior through tiered services, they have to be able to reach into the network. But billing is simply not suited for that, as it cannot pull metrics about performance and latency from networks, as most systems have been built around metrics for voice.
To gain visibility into complex data services operators will have to invest in databases that will reside in networks.
"Operators have to consider what goes into real-time charging and billing and what is needed for future policy management before making major investments," said Peter Mottishaw, principal analyst with Analysis Research. "At the same time, they need to figure out how the two complement each other so that once bandwidth demands overwhelm networks, they have a plan."
He notes that operators will reach a point where they need to understand individual subscribers and their preferences, their demands and expectations. "You want to make sure the quality of experience is truly better for those who paid a premium as compared to those who didn't," Mottishaw added.
For that to happen, there has to be mechanisms that sit in the network, not only for real-time bandwidth management, but also for enforcement of rules or policies relating to each tier of customer.Unified platform
The need for more control and intelligence seems to have already triggered a change in the competitive landscape, as talk is already surfacing about the integration of real-time billing and policy management in a unified platform. Most of this talk is coming from billing vendors, which are keen to enable operators to leverage the overlap between the real-time charging, rating and billing solutions they offer, and the policy enforcement capabilities often associated with the network vendors or policy management vendors.
Indeed, there is overlap, as both realms require detailed subscriber profiles, as well as dynamic responses to customer behavior that help operators build offers and bundles that cater to specific subscriber usage habits or preferences.
Convergent billing still seems to be a long way off judging by the number of separate prepaid and postpaid billing systems in existence. But that might not be as big of an issue for Asian operators that offer primarily prepaid. What's more of an issue is the impending need for policy servers, which Infonetics predicts is about a year away, as the majority of broadband operators implementing tiered services will need PCRF (policy and charging rules function from 3GPP releases 8 and 9) capabilities and network databases within that time frame.
"In Asia we see significant uptake of services, and as bandwidth demand increases, the need to implement PCRF and network databases will grow," said Tekelec's Fuller. He noted that in places where ARPU is lower, the idea of offering lots of services cheaply will bring usage up quickly.
"Perhaps that will mean India and other emerging markets will adopt more broadly defined tiered pricing at a much faster rate than will the mature markets," he said.
The speed at which Asian markets are growing has some billing vendors believing that a smoother transition to more sophisticated tiers and policy controls can be achieved by converging specialized policy management with real-time billing platforms.
It doesn't take much imagination to see how policy management solutions from players like Bridgewater, Tekelec/Camiant, Openet, Huawei, Ericsson and Nokia Siemens have some synergies with capabilities from convergent billers with real-time charging platforms such as Amdocs, Comarch, Comverse, Convergys, Highdeal, Intec, LHS and Redknee.
"Operators need infrastructure capable of receiving orders from charging systems and other elements, which in turn should trigger reductions or increases in bandwidth according to pre-established rules," explained Guy Hilton, manager or product marketing for Amdocs' revenue management practice, which offers convergent charging that includes a policy server for policy management capabilities.
Orga Systems' Eva Heumann also talks of offering a converged billing/policy management solution. "We want our customers to have the choice of a real-time convergent billing solution that puts all subscribers in one database - prepaid and postpaid - to determine qualified tariffs. We can also provide a dedicated policy solution that is integrated with the billing solution for dedicated policy management and control."
Some are now offering what they call the "full stack." It is obvious that some billing players believe operators in emerging markets will want to avoid working with too many vendors and too many components. In Asia, where prepaid dominates, it might be natural to think operators would turn to network players. But in more mature markets like Hong Kong and Singapore or Australia, the billing vendors might prove sophisticated enough to have an opportunity to fight back the network-oriented vendors.
"It's easier for established real-time rating and charging players to add policy management and rules-based capabilities into their solutions. There's inherently more complexity in charging than in adding advanced sets of rules, where rules are activated when certain 'states' are reached," contends Hilton.
But some would counter that policy management specialists are better prepared for more complicated DPI capabilities once more sophisticated and dynamic policy management is needed.
"Policies should be related to how customers are charged; having them together will make sense," said Olivier Suard from Comptel. Though he agrees there's room for integration, he thinks policy control integration with charging will be the domain of online charging mediation suppliers.
That doesn't come as a surprise, since Comptel is known for policy control, online charging, offline charging, online and offline mediation - all essential elements to sophisticated policy management.
He said experience integrating with IT and BSS solutions as well as legacy systems will be important to that integration. "That expertise will help operators build business intelligence for real-time decisions about policies, charging and offering new services on the fly."
Tough choices
There's no doubt each side will argue it has the opportunity to partner to close gaps in functionality and expertise where needed. Amdocs, for one, is already working on interoperability with various DPI vendors for just that reason.
Operators will have to consider the risks in how they want to approach their vendors, or whether they will custom build something. While they won't want to tie themselves to one vendor, they also won't want to waste a lot of time and resources customizing.
"I would advise operators to look closely at their longer-term strategies for how they are going to move to convergent billing, and what that will mean for their prepaid and postpaid systems and for their existing policy management systems," said Mottishaw from Analysis Research. He noted that short-term point solutions that address immediate and urgent needs may not be the best choice when migrating to a global policy management architecture intended to prevent "stove pipes."
He thinks it could be a few years before operators really seek out any type of broad scale, integrated policy management/real-time charging solutions.
In the mean time, operators must decide what is urgent and what is long term in terms of their approaches to tiered pricing.
"This will get interesting when operators start looking for truly dynamic capabilities to respond to customer behaviors and to encourage more consumption - all in a profitable manner. For example, giving customers the flexibility to order services in a more on-demand, ad-hoc way, where operators pull in content from third-party providers in real time and make payments to content providers or resellers or advertisers according to what is consumed," says Mottishaw
More efficient apps
Enrico Lanzavecchia, a director at Value Partners, says explicit tiered pricing likely will soon become the norm in Asia (implicitly, it already when taking into consideration the detailed contact clauses). This will affect the development of new mobile applications, which will have to become more bandwidth efficient if they are to be mass-marketed. It also will put pressure on operators to accelerate the upgrading of their traffic monitoring and billing systems.
According to some OSS and BSS suppliers, he said many Asian players are lagging behind in the deployment of traffic monitoring technologies and, therefore, have limited knowledge of the consumption patterns of their customers' data usage.
He notes the trends toward efficiency and better reporting will probably increase the demands for transparency and service quality for subscribers, who outside Japan and Korea, are not enjoying very good customer management.
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