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Compensation Analysis of Next Generation Services

28 – 31 March 2006Dagstuhl Seminar Internet Economics

Professor George Huitemag.b.huitema@rug.nlgeorge.huitema@tno.nl

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Introduction

• University of Groningen (RuG): Mathematics, in particular dynamical systems (quasi-periodicity)

• KPN Research: 1988 – 2002, TNO Information & Communication Technology: 2003 – now, SeniorStrategist (www.tno.nl)

• From 2001, RuG, Professor of Telematics; Faculty of Management & Organization, Research School Business & ICT

• Member Executive Council Global Billing Association (GBA, www.globalbilling.org)

• Research Area: Billing and Customer Care

Billing Knowledge groep at TNO ICT:•Support of end-to-end billingprocesses; •Specification of business, functional and technical requirements; •Design of billingarchitecture and –systems/processes;•Testing, audits;•1st time enigineering in state-of-the-art Billing Lab.

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Overview

• Introduction• Basic Billing Steps

• Billing Developments• Current Operations• Current Research

• Compensation• Compensation Complexities• Basic Compensation Case• Extended Compensation Case• Compensation Agreements

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End-UserServiceProvider

Service

Input• Customer Information• Pricing Information• Accounting Information

Output• Invoices• Notifications

Billing

€

IntroductionBilling Basics

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RatingPricing Information

Mediation

Accounting: Accounting Details

Customer InformationBilling

Bill Presentment

Payments, Collections,Reconciliation

IntroductionBilling Subprocesses

InvoicesNotifications

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Billing Developments

Operations1. Billing of Packagers2. Convergent Billing3. Flexible Pricing Models4. Mobile Content Billing5. CRM & Billing6. Mobile Payments

Research7. Compensation

• Ambient Networks• Sensor Networks

Trends & Developments

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1. Billing of Packagers

Customer

Operators

Packager

Access Networks

Service ApplicationsPlatform

ServiceProviders

Servers

Service

PartnersPartners

BillingBilling

Examples: Fixed Mobile Convergence, Multiple Play, .

Trends & Developments

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1. Billing of Packagers

Customer

Operators

Packager

ServiceProviders

Service

PartnersBillingBilling

Mediation

PRM

•Partner Relationship Mgt (PRM)

Trends & Developments

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1. Billing of Packagers

Trends• Customers choose Brands not providers, operators• Customers want a single point of contact• Billing done by specialized Billing Service Providers

Key Success Factors Operators• Roadmap and Implementation plan for Operators wide Packager architecture• Availability of adequate PRM system

Trends & Developments

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2. Convergent Billing

Partners ControlNetwork Application

Converged Services

Mediations LayerMed-1

Med-2 Med-3

Customers

RetailWholesale

• No stove pipes• Horizontal convergence

•Mediation, •Rating, •Billing

BillingWholesale

Prepaid

Postpaid

Retail

Trends & Developments

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2. Convergent Billing

Trends• IMS Presence & Core• VoIP• Fixed Mobile Convergence (FMC)• Prepaid/postpaid convergence

Key Success Factors Operators• Roadmap and Implementation plan for operator wide mediation,

rating and billing architecture

Trends & Developments

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3. Flexible Pricing Models

Partners

Services

Mediations Layer Customers

Retail

Wholesale

• Pricing models fit customer needs better • Pricing models support new business models and new services

RatingBilling

Trends & Developments

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3. Flexible Pricing Models

Trends• Multi Contract SIM• Energy Bill• Prepaid top-up methods • Customers want more transparency and cost control• More event based pricing, bundles, cross product discounts, bonus

constructions, flat fees, group-based rate plans, home zone constructions, …

Key Success Factors Operators• Flexible and powerful rating engine • Online/Real Time interfaces with Customer and Product Databases

Trends & Developments

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4. Mobile Content Billing

Trends• Content becomes Infotainment• Mobile content is dominated by 3G (Girls, Games and Gambling) in

Video Messaging• Mobile TV

Key Success Factors Operators• Enabling communication of triggers, stimulation (e.g. conversational

content: personal, interactive, self-expression)• Billing/rating of events (triggers) and of VAS:

downloads/streaming/interaction• Implementation of adequate DRM – Billing solution

Trends & Developments

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5. CRM

• Shift from customer acquisition to customer retention• Implies shift from product oriented to customer centric approach

Network

Service

Customer

Billing CRM

Info

Data

Usage Data

Customer data

Trends & Developments

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5. CRM

Trends• Customers want to

• control their costs• be treated as an individual• have end-to-end control over service

• Customer Lifecycle Mgt• Customer Revenue Mgt• Best Plan Advice

Key Success Factors Operators• Offering online secure access to billing and CRM data• Supporting packaged propositions

Trends & Developments

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6. Mobile Payments

Trends• National (bank) solutions, no international solutions (Simpay debacle)• Korea/Japan develop successful m-payment solutions based on NFC• Strong foothold for credit card • M-payments• Micro payments• EBP & payments

Key Success Factors Operators• Supporting Payment Service Providers with introduction of m-payment

solutions• Fixed Mobile convergence

Trends & Developments

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What is beyond 2008?

• Current billing trends will stretch out over the horizon• Increased focus on customer satisfaction and customer care• The move to IP• Prepaid becomes more about financial risk mgt than servicing low-

value customers• Real-time billing infrastructure gives better control over service

usage and accounting• Next-generation mobile content and data services require flexible

OSS and Billing systems (self provisioning and self care)

Trends & Developments

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Compensation

• What is Compensation?• Basic Compensation Scheme

• Compensation Examples• Ambient Networks• Sensor Networks

• Compensation Complexities

• Thanks to Ralph Kuhne (Uni Tubingen/Siemens) for some slides

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What is Compensation?

• Instead of hierarchical billing we consider peer-2-peer billing• Therefore we speak of Compensation• Note that the compensation relationship may vary per service (session)

• With Compensation a compensated party (charging party) and a compensating party (charged party) are involved.

• The compensated party provides some service for which it gets compensated.

• The form/amount of compensation is negotiated • Or already determined in a pre-established agreement or contract

CompensatedParty

CompensatingParty

Service

Compensation

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Basic Compensation Case

Party 1resources

compensation

Interworking Steps

• Advertising (service, network)

• Evaluation of Compensation

Agreement (price, payment method

Record format, split of comp. functions over

two or more parties)

• Interworking

• Ending (also of compensation)

Compensation Functions in CF

(Compensation Functional Entity)

1. Accounting

2. Charging

3. Billing

4. Presentment

5. Payments (Collection)

CF Party 2 C

F

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Compensation Analysis in Ambient Networks

• Ambient Networks is an Integrated Project within the 6FP (IST-2004-2.4.5)

• Aim is to develop a new networking concept beyond today’s fixed and 3G mobile standards• Networks will become more technically heterogeneous,

accommodating old and new access systems as well as applications and services: migration and service roll-out will be not a one-off activity but a constant activity

• Today’s systems will be complemented by a diverse mixture of other networks – personal, vehicular, sensor, hot-spot and more. A network of networks will have to form and re-form dynamically (self-composition and self-management)

• Smooth transition from legacy networks

• Task Leader Task TG3: Compensation (82PM); 2006 -2007• Partners: DoCoMo Labs, Elisa, France Telecom, Siemens,

Telefonica, TNO, VodaFone

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An Ambient Network Scenario

Front Office

Back Office

Mediation

Front Office

Back Office

Customer Utility Company

Example Compensation in Sensor Networks

Smart Meters (sensors)

Customers may also be Energy Providers and hence are compensated by the Utility Companies

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Compensation Complexities

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Extended Compensation Case: Compensation Service Provider involved• A Compensation Service Provider (CSP) provides some functionality

necessary for compensation to take place, e.g.• it maintains the account of one of the involved parties• it collects information about resource consumption and rates it

(delegation of charging task)• A CSP may buy the claim of the compensated party and sell it to the

compensating party (both interactions may involve negotiations)• More than one CSP might be involved

CompensatedParty

CompensatingParty

CompensationService Provider

Service

Compensation

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Extended Compensation Case

Party 1resources

compensationCF Party 2 C

F

Compensation Service Provider

CF

Compensation Info

•usage records

Compensation Info

•invoice (postpaid),

•decrease of account (prepaid)

Compensation Info

•Prices

• customer details

• accounting

• payments

•Mediation

•Charging

•Presentment

•Management of accounts

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Compensation Complexities (1) Seamless Interoperator Handover

Home-Mobile NO

Visited-MobileNO

Otto

subscription

compensationagreement

Visited-MobileNO

dynamic compensationagreement

access

handover

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Compensation Complexities (2) Otto provides a relaying service

Home- Mobile NO

HotSpot Otto

subscription

compensationagreement

compensating party compensated party„Compensation Service Provider“(provides Otto‘s account)

Theo

compensating party

access

• Otto is compensated by the HotSpot for providing a relaying service• Theo compensates the HotSpot (is not aware of Otto’s extension)

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Compensation Complexities (3) Otto moves to another domain unaware of the underlying network

Service Provider

HotSpot I

Otto

compensationagreement

compensated party

compensating party

• Otto compensates Service Provider• SP compensates HS I• Otto moves to HS II while having seamless handover of service • Hotspot II compensates Hotspot 1 • What if HS1 drops out or HSII raises the price?

HotSpot II

Otto

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Compensation Complexities (4)Independent Compensation of Service and Access

Operator

Service

Provider

CF

CF

€ (compensation for services)

€ (compensation for access)

service

• Example: User makes use of service offered by SP, access is by Operator

• User has business relationships with SP and with Operator

• Therefore user compensates SP as well as Operator

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Operator

Service

Provider

CF

CF

€ (compensation for service + access)

€ (compensation for access)

service

access

• Example: User makes use of service offered by SP, access is by Operator

• User has only business relationship with SP and therefore compensates SP

• SP compensates Operator

Compensation Complexities (4a)Dependent Compensation of Service and Access

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Operator

Service

Provider

CF

CF

€ (compensation for service + access)

€ (compensation for service)

• Example: User makes use of service offered by SP, access is by Operator

• User has only business relationship with Operator and therefore compensates Operator

• Operator compensates SP

Compensation Complexities (4b)Dependent Compensation of Service and Access

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Compensation Complexities (5)

Aggregator Compensation Scheme

Operator

Service

ProviderCF

CF

€ (compensation for aggregated service)

€ (compensation for service)

Service

Aggregator

CF

€ (compensation for access)

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Under construction

• Definition of • Compensation Agreement• Compensation Functional Entity• Transport of Compensation Data between networks over interfaces

• Business Models and Compensation Configurations• Online or offline charging• Dynamic Compensation Agreements (dynamic pricing)• Re-negotiating Compensation Agreements

• Compensation and Security• Input to Standardization Bodies (IETF, 3GPP,..)

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Discussion