Telecommunications Revenue Assurance

By Lindy Do

ACC 626

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Table of Contents Note to Practitioner ...................................................................................................................................... 3

Introduction................................................................................................................................................... 4

Telecommunications Industry....................................................................................................................... 4

Revenue Leakage........................................................................................................................................... 5

Poor Operational Processes and Procedures ............................................................................................ 5

Poor Systems Integration .......................................................................................................................... 6

External and Internal Fraud....................................................................................................................... 6

Average Amount of Revenue Leakage ...................................................................................................... 6

Revenue Assurance Strategies ...................................................................................................................... 7

Outsourcing Revenue Assurance............................................................................................................... 7

Fixing Root Causes of Revenue Leakage ................................................................................................... 8

Revenue Assurance Process Maturity ....................................................................................................... 8

Implementation of Strategies ................................................................................................................... 9

Challenges Facing Revenue Assurance.......................................................................................................... 9

IP-Based Services..................................................................................................................................... 10

Billing Complexities ................................................................................................................................. 10

Interconnection Arrangements ............................................................................................................... 11

Future of Revenue Assurance ..................................................................................................................... 11

Revenue Operations Center .................................................................................................................... 12

Key Performance Indicators .................................................................................................................... 12

Revenue Assurance Market..................................................................................................................... 12

Conclusion ................................................................................................................................................... 12

Appendix 1 – List of Revenue Assurance Providers .................................................................................... 14

Appendix 2 – Revenue Assurance Maturity Levels ..................................................................................... 15

Appendix 3 – Specific VoIP Issues ............................................................................................................... 16

Appendix 4 – The Revenue Operations Center ........................................................................................... 17

Glossary ....................................................................................................................................................... 18

Bibliography................................................................................................................................................. 20

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Note to Practitioner This paper will provide an overview of one of the largest issues facing the telecommunications industry which

is revenue assurance. Billions of dollars are lost annually through revenue leakage because of faulty internal control

processes, systems and fraud. As an auditor of a telecom company, you will need to understand the industry and

the factors that affect their revenue cycle in order to design audit procedures and to gain sufficient and appropriate

evidence that supports the fact that revenues recorded are not materially misstated. After reading this paper, you

should be able to identify the environmental and company-specific risk factors to account for in your audit plan.

Revenue assurance is the umbrella term that describes the activities that a telecom company will undertake in

order to ensure that their processes and procedures minimize revenue leakage. Global spending on revenue

assurance services and products is expected to grow to $934 million in 2008 up from $508 million in 2003 (Hankins,

2004). Much of this money will be spent on outsourcing the revenue assurance function to third party vendors

since 68% of telecom companies are using such vendors (SubexWorld, 2007). Because you will be relying on these

outside parties’ performance in your audit, a section 5970 report would be required which reports on the

operational effectiveness of the controls at that third party. If a section 5970 report cannot be obtained, you will

have to perform more substantive audit work on the client. The audit plan should be adjusted accordingly.

This paper will alternate between using the terms telecommunications company, telco, service provider,

operator, and carrier, which all mean the same thing. Also, please refer to the glossary for a definition of terms

used in the paper.

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Introduction Revenue assurance is the umbrella term that describes the activities that a telecommunications company will

undertake in order to ensure that their processes and procedures minimize revenue leakage. This leakage occurs

when revenue that has been earned by the company, such as when services are rendered to the customer, but lost

on its way to the billing systems so that the customer never gets invoiced. Many telecom companies do not like to

talk openly about revenue assurance. This is because it is a process that can identify the amount of money they

lose as caused by their inaccurate BSS/OSS networks. In the past, the problem was largely ignored; because trying

to assess the problem would only point out to a telecom executive that the errors in the systems were wasting

their shareholders' money (Wieland, 2005).

However, some of the myths that surrounded the revenue leakage issue such as that the problem is too big

and complex to address or that the amount of revenue lost is not really that much (Geppert, 1998), that allowed

executives to ignore the problem have been proven to be not true. Today, there are many revenue assurance

providers and products which can help minimize losses. SubexAzure's fifth annual “2007 Global Operator Attitudes

to Revenue Management Survey” estimated that the average leakage rate was 13.6% of revenues (SubexWorld,

2007). Since the 2007 global telecom market revenue is estimated at $2.3 trillion (Business Wire, 2007), this

represents a $313 billion annual loss for the market. Even for an average company making only $6 billion annually,

that's a loss of $816 million that could be prevented. Telecom service providers know that they cannot continue to

ignore this problem and thus a market for revenue assurance products has developed.

This demonstrates the significance of the revenue leakage problem and indicates that companies will need to

actively seek a solution in order to minimize their operational losses. This paper will describe some of the strategies

that have been proposed to combat the problem but before that, an overview of the telecom industry is provided

along with details regarding the sources of revenue leakage. The actual corporate implementation of these

strategies is then discussed followed by current challenges facing revenue assurance and lastly, a section describing

the future of revenue assurance is provided.

Telecommunications Industry Historically, the telecom industry has been globally regulated with significant barriers to entry. Carriers were

guaranteed certain profit regardless of their operational expenditures so they could afford high cost processes,

including revenue leakage, and still make money (Levine, 2005). As a result, the carriers did not prioritize the

development of efficient or accurate processes that control the data flows through their systems (Pratt, 2006)

which contributes to the current high rates of revenue leakage reported by telcos. Also, the volatility of the

telecom industry resulting from privatisation, merger and acquisition activities, continuously changing technologies

(Evans, 2004), along with intense competition, which really only began in the last five to ten years due to the

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Telecommunications Act of 1996 deregulating the industry (Pratt, 2006), has forced managers to revaluate their

system processes for leaks and find ways to plug the holes to improve performance and maximize revenues.

Another major factor that increased the demand for revenue assurance was the 2002 Sarbanes-Oxley Act.

This required the CEO and CFO to sign off on the integrity of the financial statements, which includes assuring that

revenue is measured accurately (Stanislaw, 2005). Other external drivers for revenue assurance are the customers

who require accurate, complete and timely invoices and shareholders who demand effective controls over business

operations (Evans, 2004) to increase their shares’ value. To meet all these demands, a company must identify the

sources of their revenue leakages and provide for a solution to patch up the holes.

Revenue Leakage Due to the massive volumes of low-dollar and complex micro-transactions that stream through the multiple

processing systems of a typical telecom company and then trying to meter the information at various control points

and recombining them into coherent, personalized billings without any errors is basically impossible (Lombardi,

2000). Although leakage may be inevitable, identifying the main sources can help find solutions to minimize them.

There are three primary revenue assurance problems; they are the unbilled customer (which occurs when the

system does not recognize them), the mis-billed customer (those who are billed the wrong amount for services

consumed), and stranded network resources (the false identification that equipment is unavailable which then

causes unnecessary investment in new equipment, i.e. stranded terabytes of unused but potentially billable traffic)

(Aginsky, 2006). In a typical telecom company, there are many specific sources of revenue leakage; they are

described below followed by a discussion regarding the average of amount of revenue leakage.

Poor Operational Processes and Procedures There are many sources of leakages, most of which stem from poor operational processes and procedures.

For example, leakage can occur even before a single call is made by the customer when there are human errors in

the service activation process where the order details are first entered into the billings system (Pratt, 2006). Human

errors can also impact the invoicing system by having incorrect information entered into the rating engine (Pratt,

2006), for example, long distance charges of 9 cents per minute are entered as 8 cents per minute or by entering

the wrong termination date for pricing promotions. Such errors would affect many customers and cause the

telecom company to lose large amounts of unbilled revenue. Also due to poor operational processes, a carrier may

be oversupplied with connectivity. For example, there may be unallocated resources that are not being recycled

from customers who have left and cancelled services (Morisy, 2007).

Another source of leakage is due to errors in the usage processes (the mediation and billing systems) involving

call detail records (CDRs). Considering that a typical telecom company handles around 170-200 million CDRs a day

(Evans, 2004), leakage can occur anywhere along the network as the CDR is transported from the switch to the

mediation system to the billing system, whereby the CDR is misrouted, corrupted or misidentified (Pratt, 2006).

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Poor Systems Integration Another reason why leakage is such a large issue is related to a company’s network of systems. Most telecom

systems were built based on 1970s technology to support a very structured and rigorous regulated market

(Lombardi, 2000) and does not work well in today's environment due to the required flexibility to accommodate

the fast-paced changes occurring with technology and in the industry. Large telecom networks are not actually one

system but a set of different disaggregate legacy systems that have either evolved over time or are the result of

merger and acquisition activities (Ryan, 2000). Integration of the different back office systems is often done poorly

because management do not have the resources to undertake such a project and also because they were not made

to work with each other in the first place. The gaps between the systems are usually handled manually so the

potential for inconsistencies, errors and leakage is especially high (Srivastava, 2005).

Other times, revenue leakage occurs due to errors occurring during upgrades and changes to the network

systems. Telecom carriers are under pressure to introduce new, complex services and pricing promotions quickly,

without fully resolving back office issues in order to properly bill for them, which creates further weaknesses in the

system (Levine, 2003; Cronin, 2004). Many errors also occur at the point of interconnection between two carriers

since the interfacing systems were not designed to work with each other (Tulloch, 2003). This can also cause the

problem of phantom traffic whereby revenue can be lost due to the inability to identify the originating carrier and

therefore interconnection fees cannot be billed (Dell, 2006).

External and Internal Fraud Telecom fraud involves the theft of services or deliberate abuse of the network because the perpetrator

intends to avoid or reduce charges for services used (Jacobs, 2008) and has been cited as the number one factor for

operator losses in 2007 (SubexWorld, 2007). Fraud can occur externally by other carriers (intentional phantom

traffic) or other outside sources (Guerra, 2005) or internally by a carrier’s own employees (by providing discount

rates to friends and family) (McClelland, 2004). This is a big problem because it can erode margins, consume

network capacity and jeopardize customer relationships. The main type of fraud is subscription fraud whereby

users sign up for services and use the account for national and international calls with no intention to pay. Another

type is premium rate service fraud where operators of those 900 number lines organize fraudulent calls to their

numbers to inflate incoming traffic and increase their revenues (Johnson, 2002).

Other scams involve cloned mobile SIM cards where an existing customer’s hardware is replicated and used to

make calls on their account without them knowing until they get their monthly bill (Johnson, 2002). Another

problem is that many telcos set up offshore are to launder money (by charging low rates and then closed down)

which would affect interconnection revenues because these companies are usually shut down quickly without

paying those fees (Global Telecoms Business, 2004).

Average Amount of Revenue Leakage Some telecom executives want to know what the average amount of leakage is so that they can compare their

companies to that figure. However, actual leakage reflects peaks and valleys rather than a steady flow and ideally

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over time, the peaks should become less severe but given the continuous changes in the industry, companies have

not been able to focus on driving down leakage (Shaw, 2006). Expected leakage varies and is based on many

factors, such as customer segment, organization maturity, changes to the network and sector specific risks. Most

leakage is correctable; the challenge lies in its initial detection and identification (Shaw, 2006). The next section will

discuss some revenue assurance strategies can help with this process.

Revenue Assurance Strategies A revenue assurance strategy includes all the activities that a telco does to ensure that aspects of systems,

policies, process, and procedures that impact revenue is addressed. The core elements of a good revenue

assurance strategy includes performing a risk assessment in order to prioritize high risk areas, integrating revenue

maximization techniques and implementing key automated tools, creating a revenue responsible organization,

embedding quantifiable monitoring mechanisms and having committed champions (Browning, 2003).

The strategy should emphasize having a holistic, end-to-end approach, meaning that a review of the full

revenue cycle is done to capture more leakage events than when doing separate and disjointed assessments (Shaw,

2006). There should also be an independent and dedicated revenue assurance team consisting of cross-functional

team members. Revenue leakage is usually treated as a billing issue, however one department is not responsible

for all elements on the invoice (Lombardi, 2000), and therefore, an organization-wide charter for revenue

management is required rather than treating it as the sole responsibility of that single group. The long term

effectiveness of revenue assurance strategies will depend on the enterprise’s mindset as cultivated by the

champions (Shaw, 2006). The right leadership team and corporate culture which have accountabilities do not

tolerate revenue leakage is crucial to success of revenue maximization strategies (Browning, 2003).

The first step to providing revenue assurance would be the development of clear, measured, and accountable

day-to-day processes along with key automated tools that can prevent leakage, such as training employees on data

entry and change control procedures. Reactive controls should also be developed for those problems that cannot

be prevented (Lombardi, 2000), for example, software can build alarms into the systems so that errors can be

detected as they occur. Quantifiable monitoring mechanisms should also be embedded into the system, such as

tools that can provide for trending analysis, reconciliation to control totals and performance of recalculations to

confirm accuracy of data derived from the system (Sobol, 2003). Automated software tools are keys to a revenue

assurance strategy due to the scale and complexity of telecom billings. They can catch errors and proactively

address them before they move downstream to leak revenue or cause customer dissatisfaction (Srivastava, 2005).

Outsourcing Revenue Assurance To keep costs under control and not sacrifice performance, many telcos are working with third party revenue

assurance providers instead of performing activities in-house. The benefits include that they will always have up-to-

date, sophisticated systems and expertise while charging only on a pay-as-you-go basis (either by percentage of

savings or transaction volume). It is also always quicker to implement because the IT facilities, operations and

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support team are already in place (Cronin, 2004) and there are many quality vendors offering their services (please

see Appendix 1 for a list of vendors). SubexAzure’s 2007 survey reported that 68% of operators use third parties

and would lose 30% less compared to those who perform revenue assurance in-house (SubexWorld, 2007).

However, many third party vendors just identify the leakages by collecting data from the network and comparing

with information generated by the billing system and do not actually work to prevent the errors (Levine, 2003).

Suggestions on how a telco can eliminate the root causes of revenue leakage are described below.

Fixing Root Causes of Revenue Leakage A major task is to ensure that the data integrity of CDRs and IPDRs are maintained throughout the end-to-end

processes. In order to do this, a telco must fully understand their organization’s usage data management

requirement and network topology and how it delivers its services. They must be able to quantify the scale of the

problem, have a method to resolve the discrepancies, and a way to measure and report periodically along with a

coordination of changes required (Ibbett, 2003). An example of an audit methodology to ensure integrity would be

test-calling procedures. Frauds are difficult to prevent but if telcos have good procedures in place to detect unusual

account activity, they can at least cancel those subscriptions.

The BSS/OSS systems also need to be integrated and streamlined in order to reduce errors and increase

efficiency (Wieland, 2004). The mediation systems are especially important now, because with IP-switched

networks (which is discussed in more detail in the next section) instead of the old circuit-switched networks, a telco

must pull call and event data from different network elements in the distributed IP environment (Guerra, 2005).

The system needs to be able to identify and isolate erroneous data, inspect and correct it and then recycle the

exception back for re-processing (Guerra, 2005). Some international companies have advanced mediation systems

which help them cut down on revenue leakage. For example, South Korea’s SK Telecom performs value-based

billing whereby they charge the subscriber what they are willing to pay by tweaking content rates so price sensitive

subscribers can download an otherwise expensive movie at an off-peak time, say 3 am with a hot bill available

within five minutes of the subscriber’s session (Baker, 2005). Buying an advanced off-the-shelf mediation tool from

these international companies can be helpful. Another way to improve a telco’s BSS/OSS systems is to decrease the

number of different systems in their infrastructure to cut down on errors due to poor systems integration. For

example, Verizon’s executive director of strategy says his company currently has 18 different billing systems serving

72 lines of business but plans to bring it down to only five billing systems in the future (Wickham, 2003).

Revenue Assurance Process Maturity The typical revenue assurance maturity pattern seems to place early efforts on “low-hanging fruit” (i.e.

validity of interconnection fees) followed by identification and repairing root cause of leakages (i.e. data integrity

and process optimization) (Finegold, 2006). This is an important note because revenue leakage is inversely related

to the maturity level of a telco’s operational control infrastructure; as the control environment becomes more

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comprehensive and preventative in nature, the potential for finding sizable revenue leakage declines (Shaw, 2003).

Please see Appendix 2 for a chart that identifies the characteristics of a telco’s maturity level.

In the end, a good revenue assurance system should have a broad range of applications in order to act as a

flexible toolbox, capable of handling current and future needs and must support the growing requirements for

commercial and financial transparency and ability to respond quickly to regulatory changes (Stanislaw, 2005).

Implementation of Strategies Revenue assurance programs provide many benefits, most obviously by increasing revenues, but leakage is

still accepted in the industry. The problem is that every telco is in the same boat, as Keith Willetts, chairman of TM

Forum states, “operators benchmark against each other but not against Dell or Wal-Mart” (Limbach, 2006). Other

reasons include the monopolistic heritage of the industry where accountability is low priority, falling margins are

causing operators to try to reduce costs instead of focusing attention on revenue leakage, and are busy trying to

comply with Sarbanes-Oxley that they may not see the link between it and revenue assurance (Limbach, 2006).

Historically, many operators did not have a dedicated revenue assurance department or even a dedicated

budget (Limbach, 2006) with reasons being that no one likes to admit to revenue collection deficiencies or fraud on

their networks and many saw the revenue assurance functions as a cost centre instead of a an earnings generator

(Cronin, 2004). However, today’s views of revenue assurance is more of a board level discussion than before

because they can see the recovered revenue hitting the bottom line numbers much faster than by introducing a

new service (Global Telecoms Business, 2007). The trend now is that there is more of an enterprise versus project

approach now. Even though multi-disciplinary teams were encouraged from the beginning, many companies still

viewed revenue assurance as a project by the IT department that targets a single business function without

thinking about how it may other areas of the company. However, many C-suite executives are now sponsoring

revenue assurance efforts and having it span the entire organization from human resources to processing as well as

networking and billing (Hankins, 2004). For example, CIOS are also now more focused on corporate financial

performance more on top-line, by increasing revenue, and not just bottom-line cost savings (Karpinski, 2008) so

they will work to ensure the BSS/OSS systems are functioning properly.

Challenges Facing Revenue Assurance Carriers are not just the telephone company anymore but a communications company (Hutton, 2004). With

data of multiple types, in various formats, and including various third party content (such as ringtones and games),

crossing a variety of disparate platforms, BSS/OSS and operating systems, it is very difficult for telcos to converge it

all into one form (Aginsky, 2006). In order for these next generation providers who deliver voice, video, data, and

internet, to properly and reliably bill customers (Hill, 2006), revenue assurance is required. Some specific issues

related to these challenges are discussed in the following.

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IP-Based Services The rapid development of broadband makes revenue assurance even more important now. This is the largest

growth area for every telecom operators since it includes services such as VoIP (please see Appendix 3 for specific

VoIP issues) and online gaming, which use data packets or IPDRs and not CDRs (Global Telecoms Business, 2007).

CDRs are largely homogenous and standardized while IPDR usage records have more complex elements such as

transport medium, data volume, packet originator, destination and quality of service metrics (Levine, 2005). This

makes it more difficult to track and bill, especially for incumbents who built their entire billing and accounting

infrastructure around circuit-switched voice calls and because many CDR concepts are irrelevant in the IP world

(Vasquez, 1999). Telcos will need sophisticated mediation tools such as the architecture called IP Multimedia

Subsystem (IMS). IMS can unify the networks of the future and is designed to bring all services (voice, video, and

data) under one IP based delivery platform and enable precise control over service delivery (Milner, 2006).

With IP based networks and internet based services, telcos will also have to face additional threats such as

hacking, denial of service attacks, spam and viruses, worms and Trojans (Johnson, 2002) and provide for mitigating

controls to prevent their networks from going down.

Billing Complexities Not only must a telco be able to track usage, but they must also juggle complex billing rules around individual

prices (Levine, 2005). The speed of new technology and marketing does not afford time for processes to improve

and keep up with new and pricing promotions (Hankins, 2004). In the past, companies would offer two new

services per year but now it is more like ten new services launcher per month (Nairn, 2004) and many operators

offered picture messaging for free because they could not bill for it (Tulloch, 2003). An example of further

complexities in billing for price promotions is when bundling different services together, there is a sophisticated

pricing schemes such as a discounts sliding scale based on how many services are subscribed to (Wilson, 2005).

Bundling is complicated by the multiple billing systems and provides more opportunities for losses if a telco’s

BSS/OSS systems cannot properly bill for services rendered (Hankins, 2004). In order to properly bill for services,

telcos must ensure that their billing systems are integrated. For example, consolidated or aggregated billing is

rarely complete because it is difficult to reduce the weak links in a provider’s fragmented systems environment.

Telcos must also work at integrating their product-oriented legacy systems with new customer-oriented

systems (Lombardi, 2000); because pricing regimes are very complex nowadays, they must manage the risk of

overcharging customers which if exposed can be very damaging to reputation (Lee, 2007). Revenue assurance

processes have usually been centered around products but now have a customer focus whereby their satisfaction is

very important to companies now. If customers can be kept satisfied, a telco can reduce their churn rates, lost of

future revenue and customer acquisition costs (Hankins, 2004).

Billing systems that are customizable will become competitive tools, enabling service providers to react more

rapidly to changing market and technology conditions in building new service bundles and getting them into the

network quickly (Wilson, 2005).

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Interconnection Arrangements As business models become more complicated, so do interconnection arrangements. This includes roaming

agreements and third party content provider contracts. With regards to third party content providers, who provide

services such as ringtones and music downloads, telcos can lose revenues when they cannot collect revenue from

the customer but still have to pay content provider for their services (Lucas, 2004).

The potential for leakage increases exponentially with proliferation of content offerings, the number of

suppliers, different arrangements and rapidly changing products. Reconciliation of data is important because as

data volumes increase, the risk of inaccuracy increases as well (Global Telecoms Business, 2006). Content owners

also need quality management at the BSS/OSS network level because if their content is delivered defective to

customers, their reputation is damaged as well. They will also seek more transparent reporting regarding

information such as subscriber uptake and impact of cross-platform marketing (Finegold, 2006). Revenue assurance

products are required in order to ensure that a telco’s revenue stream is properly disaggregated so that the

amount belonging to the telco and the amount owed to each third party content provider is allocated properly.

Problems occur for roaming contracts when international calls are made on the network and interconnection

fees are paid but that carrier does not actually have a roaming agreement with roamer’s home network and so

there is no way to recover the revenue for those calls (Wieland, 2005). Roaming revenue (about 10% of total

operator revenue) is very difficult to manage due to constant changes of contracts between countries, the high

volume of data traffic and the complexity of information transfer. However, the roaming business processes must

be accurate and up-to-date in order to protect roaming margins, which are already lowered by intense competition

(Ferrerira, 2006). Another problem that occurs with mobile networks involves prepaid cards because credit

deductions are not always done in real-time and customer can continue using the card even after they have

expired. Revenue assurance products should be able to address these issues in the future as well.

A key question many telcos are asking themselves is whether they should focus their revenue assurance

activities on their biggest current market (voice) or on growth area (IP-based content) which will generate greater

revenues in the future. BSS/OSS systems need to be able to reconcile information such as IP address, network

topology, data packets with billing schemes, pricing tables and information about customers. If flexible revenue

assurance procedures are not implemented now, it will be challenging to retro-fit them once problems occur

(Global Telecoms Business, 2007). The last section of this paper will discuss the future of revenue assurance.

Future of Revenue Assurance The telecom industry is constantly changing making it more difficult to perform revenue assurance. However,

there are new developments such as the “revenue operations center” (ROC) for the CFO which is akin to the

network operations center to the CTO (Burkitt-Gray, 2006), IMS, which was described earlier, and key performance

indicators which will assist in stopping revenue leakage.

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Revenue Operations Center It is not a product but a concept where different software solutions come together along with the people,

processes and hardware to form a facility whereby revenue integrity can be ensured through continually

automated tracking of KPIs (Milner, 2006). It can allow the telco to address abnormalities, process throughput

problems, and revenue leakage before they impact profit (Nicholson, 2008). The drive behind ROC is its focus on

financial performance versus the network and could show the impact of different departments on a product

thereby tracking operational efficiency across the entire organization, not just department by department. ROC can

monitor functions and resources in a company’s control and also those that are included in the supply chain, such

as content providers and other third party resources (Gerwig, 2008). Revenue assurance used to happen after the

event but now, given the competitive landscape and tight margins, it needs to be as real-time and proactive as

possible (Aginsky, 2006) which is where the ROC fits in the picture. Please refer to Appendix 4 for more details on

the ROC concept.

Key Performance Indicators Due to the TM Forum, some operators have started benchmarking. When it used to be that no one wanted to

share their leakage information, now an industry standard can be specified (Global Telecoms Business, 2007). This

standardization of measuring leakage required because operators measure different ways. There are two types of

KPIs, the business ones such as average revenue per bill cycle and trending of bill revenue per geographical region,

and operational ones such as quality of service and CDR/IPDR volume tracking (Hankins, 2004). The TM Forum

requires corporate membership but once joined, a full list of KPIs can be assessed on their site.

Revenue Assurance Market As ownership of services move from operators to third parties, the telco will become the medium whereby

these services are provided to the customers. Operators will spend less time on the development of products and

more time on the development of the infrastructure to support those products. This new generation of networks

means that operators are now just a bridge to all these services which means very low profit margins. This ensures

that revenue assurance function is going to grow ever more important (Global Telecoms Business, 2007).

As operators realize the value of a more holistic, enterprise-wide approach to revenue assurance, they are

looking for integrated platforms and frameworks which include not only software but also services that identify and

resolve problems and modify processes to minimize further leaks. Until recently, vendors offered only single-

purpose tools that solved an operator’s specific problem but with the advent of the ROC, it is predicted that once

the market stabilizes, takeovers will occur in the highly fragmented market, and vendors will be able to provide

more comprehensive solutions for their clients (Levine, 2005).

Conclusion Revenue leakage will continue to increase due to the dynamic telecom environment; however, if companies

can implement a successful revenue assurance program, any revenues found internally will have an immediate

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impact on bottom line numbers. If not, telcos will be throwing away shareholders’ money and investors will price

this risk into valuations or will move elsewhere. Operators should make sure they are setting the right, flexible

technology to cope with current and future business and technological requirements in order to compete and

survive into the future.

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Appendix 1 – List of Revenue Assurance Providers The auditor of a telecom company should be aware of the various vendors that their client may engage. This list is

taken directly from the Billing & OSS World directory of revenue assurance providers. Please refer to their website

at BillingWorld.com for more details.

Revenue Assurance Providers

Business intelligence Compliance monitoring Cost management Risk management Accenture Alliance Telecom Solutions BusinessFusion Inc. Comarch Information Technology CSG Systems DataZA System International Ltd. Element Customer Care ENABIL Solutions Equinox Information Systems Focus On Telecom Omniware Solutions Inc. SDD Subex Inc. Tekno Telecom LLC Vertek

Accenture Comarch Information Technology DataZA System International Ltd. Element Customer Care Focus On Telecom Omniware Solutions Inc. Subex Inc. Tekno Telecom LLC Vertek

Accenture Advanced Software Concepts (ASC) BusinessFusion Inc. Comarch Information Technology DataZA System International Ltd. DCA Services Inc. Equinox Information Systems Focus On Telecom Omniware Solutions Inc. SDD Subex Inc. TTI Telecom Vertek XINTEC SA

Accenture Advanced Software Concepts (ASC) BusinessFusion Inc. Comarch Information Technology DataZA System International Ltd. Element Customer Care ENABIL Solutions Focus On Telecom Omniware Solutions Inc. Subex Inc. Vertek

Credit monitoring Fraud Interconnect billing Sarbanes-Oxley compliance

Accenture BusinessFusion Inc. DataZA System International Ltd. Element Customer Care Focus On Telecom Fusion BPO Services Inc. Omniware Solutions Inc. Subex Inc. Vertek XINTEC SA

Accenture Alliance Telecom Solutions Comarch Information Technology Comptel Corp. DataZA System International Ltd. ENABIL Solutions Equinox Information Systems Focus On Telecom Omniware Solutions Inc. SDD Subex Inc. Tekno Telecom LLC XINTEC SA

Accenture Alliance Telecom Solutions BusinessFusion Inc. Cerillion Technologies Comarch Information Technology Communications Data Group Comptel Corp. CustomCall Data Systems DataZA System International Ltd. Element Customer Care ENABIL Solutions Equinox Information Systems Focus On Telecom FTS - Formula Telecom Solutions Ltd. Intec Billing Omniware Solutions Inc. SDD Subex Inc. SunTec Business Solutions Suntech Tekno Telecom LLC Vertek

Accenture BusinessFusion Inc. Comptel Corp. DataZA System International Ltd. Element Customer Care Focus On Telecom FTS - Formula Telecom Solutions Ltd. Intec Billing MetraTech Omniware Solutions Inc. Subex Inc. Tekno Telecom LLC Vertek

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Appendix 2 – Revenue Assurance Maturity Levels Revenue Assurance Maturity Models (RAMMs) are useful as evaluative tools and can provide a company the basis

on how to set up their own revenue assurance program. The table below lists the details of the five phases of the

metamorphosis of a typical revenue assurance lifecycle. The practitioner can perform an evaluation of their client’s

revenue assurance maturity level and set audit risk accordingly.

The table is taken directly from the Billing & OSS World article, “Making Revenue Assurance Maturity Models

Practical.” Please refer to this article for more information.

The Five Stages of Maturity

Level 0 No revenue assurance practices, processes, policies or tools are in place. Level 1 Basic revenue recovery consists of ad hoc, manual audits, generally driven by a small, voluntary team or

by individual efforts. Some revenue is recovered. Level 2 Basic project and process management involving repeatable tasks is implemented. Point solutions are

installed to detect and correct certain types of revenue leakage. Business rules and audits are defined. A project-level team is in place, but project prioritization remains best-guess.

Level 3 Revenue recovery shifts to revenue assurance, where greater automation is introduced to move from auditing to continuous monitoring of revenue streams. Business rules for detecting and correcting leakage are implemented systematically into existing processes. Teams are focused more on analysis and correction than simple identification, driven by technology tools that help prioritize areas of greatest leakage and potential ROI. Business analytics and dashboards are implemented to quantify and forecast revenue assurance performance.

Level 4 Leakage is quantitatively understood and controlled. Formal processes and controls are in place. Financial streams undergo regular, systematic analysis. Tools are expanded across the enterprise. An expert revenue assurance team is in place, and it educates and builds participation with other product and functional groups across the enterprise. Operational assurance metrics and dashboards track root causes of leakage, rather than just leakage itself.

Level 5 Revenue assurance shifts to revenue management. Revenue assurance practices, processes and tools are analyzed for performance and continuous improvement. The focus is on cross-functional, cross-organizational efficiencies and communication. Tools and processes are enhanced to identify potential problems and take preventive action. All new services are designed with revenue assurance controls built in or factored in.

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Appendix 3 – Specific VoIP Issues VoIP services produce many revenue assurance issues for telecom companies. Practitioners should be aware of

these issues when they are auditing their client. The following is a table of the main issues as summarized from the

Billing & OSS World article, “Top 10 Revenue Assurance Problems with VoIP.” Please refer to this article for more

information.

Top 10 Revenue Assurance Problems with VoIP

1 It's More Than Just

Switch-to-Bill

For VoIP, the RA model will have to be network-to-bill; scattered network elements need to be collected and into a next generation, more complex mediation systems, rating engine and billing system.

2 Order-to-Network management

A bundled package is ordered and delivered; however, some services weren't received by the customer so they are not willing to pay that portion of the fee. How does the network know what was missing and how does collections account for this?

3 Order-to-collections Also known as fraud and credit management; user authentication in a VoIP mobile setting is weak plus user self-provisioning, unauthorized Wi-Fi access.

4 Access charges "VoIP currently does not pay access charges to terminating carriers; but once this loophole is closed, the terminating carrier will charge at the highest rate, as is done today for terminating traffic with calls that lack origination information. A future potential for fraud is that if a VoIP phone is cloned and calls made, the company will have no revenue but a large access charges bill.”

5 Taxes VoIP is not currently taxed but once the government starts, a RA issues arises because the provider won't be able to accurately determine whether traffic is intrastate or interstate because of the VoIP non-geographically based phone number. It is a lose-lose situation if taxes cannot be calculated correctly (i.e. the government will be after the company if undercharging but if overcharging, customers may launch a class-action lawsuit).

6 IP-based content trading partners

If end users do not pay for the services (either intentional or because they didn't order it or the QoS was poor), the company still has to pay the content provider and incur the expenses from customer service calls and collection calls.

7 Enterprise market Large billings with corporate customers will abound with the proliferation of IP-based services.

8 Sarbanes-Oxley CEOs/CFOs must certify to the integrity of internal controls (i.e. the billing systems); RA will become an issue if companies start charging VoIP services by usage instead of today's flat-fees, auditing the elements from network-to-bill will be difficult and expensive.

9 Regulation VoIP regulation uncertainties related to E-911 and CALEA mandates.

10 Rush to market Revenue assurance problems are more difficult to solve after than before a new product is launched.

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Appendix 4 – The Revenue Operations Center The revenue operations center brings together different software solutions along with the people, processes and

hardware to form a facility whereby revenue integrity can be ensured through continually automated tracking of

KPIs. Auditors will have to obtain a section 5970 report from these third party vendors. The table below details the

various components of a typical center.

The table is taken directly from the Billing & OSS World article “ROC On: Creating the Revenue Operations Center to

Maximize Profit.” Please refer to this article for more information.

ROC consists of the following key functional areas:

Fraud management Monitor, detect, and correct unauthorized consumption of resources. Risk Management Decreasing risk of subscriber default and other A/R issues. Service Provisioning & Inventory Assurance

Ensuring services are provisioned as required to meet subscriber commitments, that fulfillment processes are accurate and efficient, and that resources are consumed and documented with greater precision.

Usage Integrity Assurance

Employing revenue assurance techniques to ensure service usage is properly accounted for and reflected in a range of planning and operations management processes.

Billing Assurance Ensuring billing accurately represents all expected revenue and can be tied to resource utilization to maximize the monetization of network resources.

Margin Management Tracking transaction-based costs and revenue to understand overall business performance of individual products and services in order to identify other margin-affecting and cost issues, such as out-payments, SLA penalty payments, customer rebates, bad debt write-offs, etc.

Tracking and Analysis of Data Collected

This framework must also have functions that can track and trend the data collected, calculate thresholds and targets, mine for profitability profiles and KPI analysis and tracking, and reporting and dashboard abilities tailored to the particular users' needs.

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Glossary Broadband - refers to data being transmitted where multiple pieces of data are sent simultaneously over a telephone or cable line.

BSS (Business Support Systems) - this term refers to dealings with customers with activities such as taking orders, processing bills, and collecting payments.

Bundling - a price discount promotion which prices together a number of different services which if subscribed to separately would attract a higher price.

C-suite - This refers to the corporate titles conferred on individuals identifying their function within the organization. Common titles are Chief Executive Officer (CEO) and Chief Financial Officer (CFO).

CDRs - records of telephone exchanges made on the network, including call start time, duration of the call, and receiving and calling number along with other information required for the company to properly bill the customer.

Churning - describes customer loss; the different types of churn are voluntary, involuntary and internal.

Interconnection - the physical linking of a carrier’s network with that of other carriers in order to exchange traffic.

IPDRs (IP Detail Records) - provides information about IP-based service usage that can be used by the BSS/OSS billing systems to charge customers for services rendered.

IMS (IP Multimedia Subsystem) - architectural framework for delivering IP multimedia to mobile users.

KPIs (Key Performance Indicators) - financial and non-financial metrics used to help an organization define and measure progress toward organizational goals.

Mediation systems - converts CDRs and IPDRs into a data type that is usable by the billing systems.

OSS (Operations Support Systems) - computer systems used by telecommunications service providers to describes functions dealing with the telecom network itself, such as configuring network components and managing faults.

Phantom traffic - unidentifiable and un-billable network traffic sent to a carrier that lacks information to identify the originating carrier.

SubexAzure – it is now called just Subex; it is an information technology company providing BSS/OSS and fraud management solutions for telecom operators. They commission an annual revenue leakage survey called “Global Operator Attitudes to Revenue Management Survey.”

Test calls - is a revenue assurance technique that replicates events on a teleco’s network to identify potential revenue leakage areas.

TM (TeleManagement) Forum – this is the telecommunications industry’s association of web and media companies focused on end-end service management.

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Trending – a technique used for comparing summary value of data element over specified period of time. Amount of change is statistically evaluated to determine normal ranges with abnormal results scrutinized for possible process or content errors.

VoIP (Voice-over Internet Protocol) - a protocol optimized for the transmission of voice through the internet.

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