Features

Billing Systems - the mobile industry trying to stay afloat?

The time of judgement is nearly here: the mobile networks which have been bewitching their investors with Saruman-like charms of being "leaders in mobile data" are going to face reality this year, or next. Can they get their billing systems to make money on it?

The Billing Systems show, Olympia today and tomorrow, looks - on the surface - as serene and massive as the swan, king of birds, gliding along a placid lake. And, like the swan, under the surface, it is all mud, snapping turtles, and frantic paddling.

"We simply don't know..." is a phrase to be overheard behind the backs of hands.

The fact is, there is no similarity between voice and data. The systems designed to monitor voice calls, work on the assumption that if the call connects, and stays connected, then it's just a question of working out what rate to charge, and making sure the customer pays.

Mobile data, however, involves things going wrong on heroic scales, without any hope of finding out what went wrong.

To quote one (anonymous!) network billing expert: "We pay our content providers on a basis of expectation."

Which means: "We have literally no idea how many downloads our subscribers have started, or how many of them completed successfully. So we send a cheque to our movie industry friends based on what we think probably happened. If the movie download manager in Florida doesn't complain, we know we've over-estimated the number, and paid them too much."

And if things go wrong?

"We simply don't know."

A newly launched company, Olista - well, it will be launched next month! - will come into this market, offering the ability to see what is going wrong. All the features of Olista's product are things that any outsider would assume (wrongly) are standard features of a mobile billing system.

We have no idea...

For example Olista will be able to tell the operator whether someone who didn't download a tune, actually tried to. "What!" you cry... "of course they can tell failed downloads!" Well, you'd think. In fact, no.

"It's like a supermarket manager who judges commercial success by the number of items on the shelves," offered Olista president, Oren Glanz - "But unless they know how many people who came into the shop and actually wanted to buy, and went out because they couldn't get the thing off the shelf, or even get in the door, they have no idea what to do."

There are success stories, but they're mostly in voice. I spent a fascinating half hour with the General Operations Director of Martin Dawes - a successful mobile operator who has become a billing system supplier with a product called DISE.

DISE is now a success story at Vodafone; the Vodafone business operation (formerly Project Telecom, acquired two years ago) switched from its eleven disparate billing systems to DISE and it is working well. Vodafone IT projects manager Ian Jennings will be presenting a paper tomorrow (Wednesday) on how successful it has been.

And it does Revenue Assurance? Yes, of course it does! - but does it allow you to run a mobile data supermarket with ringtones and ringback and wallpaper and shop? Well, no, not really; this is a business system management product, not a store front designed to resell 200-300 SKUs (stock-keeping units) from hundreds of different suppliers and agents.

The thing is: the operators have spent the last two years boasting about average revenue per user, and how mobile data will improve it. But the business hasn't evolved, because actually, they are utterly focused on their voice revenues. And the smallest threat to their voice revenues is a huge hit on profits, compared to even the worst disaster on mobile data.

The MMS disaster

Figures for multimedia messaging (MMS) are too bad to be described. Of the millions of phone owners who are registered for the service, fewer than half have even tried to send a picture message, and of those, most failed. A tiny percentage of those who failed, tried again - and mostly, failed. None of them ever tried beyond that, except for a tiny few who succeeded.

But it's clear that offering MMS impressed the investors. Big finance houses have poured good money after bad, investing in "the future of mobile data" while in fact, the operators were offering the products more to stop customers leaving, than to make money.

The industry probably doesn't know just how bad the figures are for mobile data. They are focused far too closely on voice; they don't need to know what's happening on ringtones. They see huge revenues, and they don't ask what the margins are.

But the new buzzword is not ARPU but AMPU - average margin per user, not revenue. And all the operators I've investigated, have a red ink number for AMPU. Once source estimates that Vodafone loses around 15c per music download/ ringtone/ MMS - and my estimates suggest that Vodafone is, therefore, almost certainly the most profitable (!) mobile data supplier in the West (Asian figures are very different). I would personally estimate that smaller operators lose ten times that amount on every mobile data transaction.

Churn and avoidance

The future of churn avoidance, is customer ownership. To do that, operators have to provide something similar to the service Danger offers to users of the T-Mobile Sidekick II super-phone in America - the phone which was a cult item even before Paris Hilton had hers hacked.

With the Sidekick (or Hiptop) all the data on the phone isn't on the phone. It's on the Danger server. All your pictures are instantly transmitted to that server as you take them; all the messages are merely displayed on your screen, but stored at Danger's server; all your contact names and addresses, all your appointments, and everything else. If you drop the phone in the sea, you get another one which has exactly the same data "stored" on it.

This is a concept which  Brough Turner of NMS Communications calls "the locker" - a room inside the network, where all the customers' treasures are kept, including special ringtone, ringback (NMS is the world's evangelist on ringback) and associated downloads are all managed. Turner's system looks to the marketing of this concept; what  is needed is something that looks to the profitable management of the shop.

If you find Billing Systems show encouraging in this, good. The problem, of course, does one step further than that. Here's the problem:

"If the networks actually start making mobile data work, and people start buying them, and the billing systems make it profitable - can the networks actually cope with the throughput?

And I'm afraid the answer is: "Not this year, and probably not next year, either."

Which is awkward; because I think it's next year that the telco investors will finally lose patience, and start insisting on getting some return on their investment. At that point, the networks simply have to be able to deliver, and charge, and collect and make a profit on this. If they can't even deliver, they are (to use a technical term) stuffed.