BSS (inc. billing, revenue assurance)

LTE Could Add to Leakage Woes

Mobile operators hoping that an investment in Long Term Evolution (LTE) networks might help them boost their top and bottom lines might need to think again unless they also invest in Service Provider Information Technology (SPIT) systems that will help minimize their revenue leakage (not a term to use just before lunch…). (See The SPIT Manifesto 2.0.)

That's the overall conclusion of a number of revenue assurance and fraud management reports and white papers issued recently, though the angles and conclusions of the various studies vary quite considerably.

Losses could escalate
Juniper Research Ltd. jumps into the fray with some alarming numbers. It estimates that mobile operators let US$56 billion of billable sales (equivalent to 6 percent of collected revenues) slip away in 2011 because their billing, revenue assurance and fraud management systems and strategies weren't up to scratch. (See Report: Mobile Operators Losing Billions.)

What's more, the firm warns that without action -- namely, sustained investment in "automated system solutions that provide end-to-end visibility of the revenue chain" -- the losses "could rise five-fold by 2016" to $296 billion. "As the industry moves more aggressively into a 4G/LTE environment, telcos risk undermining any revenue actually earned from value-added services by continuing to not invest in appropriate business support systems," states the firm.

But by taking the appropriate remedial action, operators could cut their revenue leakage rate to about 4 percent of total revenues.

The Juniper Research team believes that, despite the cost of deploying and using revenue assurance and fraud management systems, they "demonstrate a strong case for return on investment."

mCommerce complications
The folks at the U.K. operation of KPMG International have a slightly different angle on the revenue assurance issues facing mobile operators as data connectivity improves and smartphone penetration increases. (See KPMG Issues mCommerce Alert .)

They've found that 20 percent of operators believe they are "leaking" up to 10 percent of their revenues and that 94 percent of operators expect their losses to increase in the coming years, with "complex network systems, the rise of mCommerce, converged service offerings, multiple third party partners and a rise in outsourcing," identified as key factors that "create the potential for inaccurate data capture and billing, and increased fraud."

An important point made by KPMG, which interviewed 137 executives for its report, is that the "Revenue Assurance function (responsible for detecting and recovering leaked revenue) has surprisingly little influence in many telecom companies." The consultancy notes that only 40 percent of respondents said their company has a dedicated fraud management operation, while just 21 percent of respondents said the revenue assurance function reports to the board.

KPMG believes operators need to prioritize the development of a revenue assurance strategy that enables them to reduce revenue leakage and enhance their customer experience management (CEM) capabilities. "Through data analytics and modelling, [revenue assurance] professionals also gain a unique understanding of customer behaviour and could make an important contribution to marketing and improving the overall customer experience -- a big area of focus for the sector." (See Key Attributes of Next-Gen SPIT Systems and Time for a New Experience.)

Less could be more
So should operators be planning for increasing year-on-year revenue assurance-related investments to deal with these challenges?

Well, ramping up the capacity and capability of an operator's revenue assurance systems might not be the way forward, notes revenue assurance specialist WeDo Technologies .

WeDo's consulting division, Praesidium, believes the volume of data that will be created by mobile data operations will be too overwhelming, so an alternative approach needs to be considered.

In a white paper, "The unstoppable LTE and its impact on CSPs operations," Praesidium notes:

    Due to the volume of low financial value records and the increased volume of information generated in the networks, there will be a need to be selective in the records chosen for processing when identifying and detecting issues, revenue loss, fraud or security abuse. This 'selection process' will be required as the cost and hardware size to process all events may exceed the effective cost of processing.

    The sampling approach proposed must be able to detect issues, but be dynamically sized so that the optimum trade-off in data collected can be made dependent on the issues detected. In the case of fraud, detection of issues should be able to trigger a full detection and processing of relevant records from initial fraud indicators identified to ensure all relevant subscriber accounts can be covered.

The WeDo outfit also notes, in relation to LTE network architecture, that "The future dominance of all-IP networks and new more powerful access technologies means there will be considerably fewer network elements than we see in traditional 2G/3G networks. However, the number of technical connections and interfaces will increase. In short, previously closed communications networks are now more open to the risks associated with the Internet."

It seems, then, that operators (as ever) can benefit greatly from paying more attention (and allocating investment) to their revenue assurance activities and systems, both from cutting their losses and enhancing their CEM capabilities by having greater insight into customer behavior. But, as WeDo notes, simply bulking up systems capacity to process ever-increasing volumes of data is not the only way to deal with the issue from an operational perspective.

— Ray Le Maistre, International Managing Editor, Light Reading

digits 12/5/2012 | 5:37:19 PM
re: LTE Could Add to Leakage Woes

Years ago (7-10 years) a company called Azure, which was bought by Subex, often did an annual report estimating the leakage losses of telcos (fixed and mobiel) and came up with equally staggering numbers -- see



so this is not a new problem and one that doesn't appear to have been addressed to any great extent.

Wil the mobile operators suddenly decide this is the time for action?

Despite the large numbers involved, I wonder whether inertia will continue to rule. 

Telco 12/5/2012 | 5:37:14 PM
re: LTE Could Add to Leakage Woes

As the easy to fix and on the surface consumer facing benefitting features become less available, the hard and expensive areas become cost effective to fix.  The first areas will be DPI areas bringing new revenue streams.  The loss leakage areas in unbillable will then become the next area to fix.  Fraud and Bad Debt are still remarkably a calculated loss.  Expecting 1.5 % Each as the goal and experiencying 2.5% each, these are still somewhat expensive to fix.

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