The Pros and Cons of Competitive marketing in Telecom Industry http://wp.me/p1ZsI2-6S
It is interesting to ponder the implications of a long back decisions of TRAI making ‘Per second Billing’ mandatory for all Mobile Telecom Service Providers. This is in line with the golden rule in Telephony charging that customer is never to be over charged. However, it does not mean that the Service Provider has to forgo what is legitimate according to standard business practices.
1. The Universal standard charging method in Automatic Telephony service.
The universal charging method in automatic Telephony service is based on ‘Carlson’s Revised Metering’ method, that is adopted so far in Automatic telephony both in Land line and Mobile phone systems. The method adopted is to levy a predefined initial ‘flat’ call charge known as “Answer Fee” for every outgoing call, charged at the time of call answer, followed by uniform or variable periodic charges for the remaining call duration depending on the type /category of the call. The same rule is applicable to both Mobile and Land line phone systems.
Normally, the “Answer Fee” includes call charge for predefined initial call duration. There is enough provision and flexibility in this charging system to define various parameters and values as required in individual systems. This method of charging is adapted in various technology systems, analogue as well as modern digital systems.
Modern telecom systems adopt post processing of billing records generated by the systems and therefore, offer much more flexibility to incorporate large number of tariff plans keeping the basic concept same according to universally adopted methods.
2. Why is it necessary to adopt a Universal Charging method.
a. Charging methods need to follow a common universal standard, as otherwise it will become a total mess both for the Operators as well as for the customers. The best way is to follow current standard universal charging method; the distinction between charging done by different Service Providers shall be in offering differing tariff plans, but using the same basic and universal charging methodology.
b. In Public Telecom Network, it is mandatory for Service Operators to have provision in their systems to make available universal access to any phone in the world. For easy appropriation and revenue sharing of call charges between different networks for the call transactions, especially in the case of roaming etc., it is necessary to have a Standard Universal Charging method to avoid anomalies in charging by different service providers involved across the world.
c. Telephone users use the Telephone, Network and systems for various type of telephone activities such as Originating calls, receiving calls, various calls ending in busy and no reply, number not obtainable etc., Since every such usage involve the Systems & Networks, most of which are not charged could be construed as ‘use’ with different definitions for the term ‘use’ and misnomers such as ‘pay per use’ etc., and become chargeable unless a Universal Standard Charging method is adopted.
3. The Telephone usage and charging phenomena.
Of the total call attempts, the Originating calls are about 50%, the remaining 50% being Incoming calls.
Of the Originating calls, only about 30% to 40% of the call attempts are successful and revenue earning calls as the remaining end up in ‘Busy’, ‘No reply’, various ‘Number Unobtainable’, ‘Miss Calls’ etc.
The net effect is that only about 20% of the total telephone usage are in effect become chargeable and revenue earning. Since the remaining 80% of usage involve considerable part of the System, Networks, logistics and administrative efforts, it is necessary to organize the charging method by incorporating a component of charge in the revenue earning calls to compensate for this major chunk of non-revenue generating usage to make the business viable.
In view of the above, the Universally accepted standard charging method, provision is made to levy a suitable charge as ‘Answer fee’ in every revenue earning call to compensate to some extent for the above mentioned phenomena of predominantly uncharged call usages. The predefined ‘Answer fee’ includes call charge for predefined initial call duration that is pre-charged at the instant of call answer. The subsequent periodic time and periodic charges could be the same or different according to tariff plan.
4. Implication of the fraction in the end periodic duration.
In the analogue systems where pulse metering is adopted, in which the ‘Ans fee’ being is pre-charged at the answering instant, the subsequent periodic fee also are pre-charged at the beginning of the charging duration, the fraction in the end periodic duration also get charged. Therefore, in the analogue systems the number of periodic pulse applicable is equal to talk time divided by the periodic duration plus one, ignoring the remainder fraction. The call may terminate at any point of time during the initial charge period or during subsequent periodic duration.
4.1 As the revenue is based on the ‘talk time’ of revenue earning calls, there will be no much variation in overall revenue with various types of tabulation methods just because a small fraction of calls are low duration calls.
4.2 The mean of the fractions will be around half of the periodic duration.
The net effect if analogue method of charging is adopted there is chance of extra charging of about half periodic charge. As the periodic duration become smaller such as in ‘One second Charging’ the implication the fraction in the end duration will not be significant as mean of the end fraction will be only half a second.
5. Impact of ‘One second charging’
The differentiation of the standard charging method with “Per Second Charging” revolves about the issue of charging “Answer fee” and reducing the impact of charging the end fraction. Where the periodic duration is small, such as in ‘one second charging’, the effect of end fraction becomes insignificant.
However, in ‘one second charging’ if the ‘Answer fee’ is made equal to a periodic charge, “Answer fee’ will not have much impact on the over all charge amount and hence ‘the whole concept of this form of charging method become meaningless.
As the revenue is based on the ‘talk time’ of revenue earning calls, there will be no much variation in overall revenue with various types of tabulation methods just because a small fraction of calls are low duration calls.
In fact advantage of ‘one second charging’ is that it helps the user in not getting charged for the fraction of the end periodic duration.
Unlike in analogue systems where pulse metering while the call in progress is in use, charging in digital systems is by post processing the charging data in an external billing system. While post processing the charging data, it is possible to charge exactly for the actual period of use with any periodic charging parameter in the tariff plan. Therefore, such anomalies or advantages as being projected by the Telecom Service providers and TRAI do not exist any more. Therefore, the argument that ‘One second billing’ will benefit users becomes meaningless.
6. The importance of ‘Answer Fee’ component in the charging method.
‘Answer fee’ component of the charging ensures realization of minimum revenue to the Service provider and hence has a major impact in the overall business case. Doing away the ‘Answer fee’ will result in serious deterioration in the overall revenue. The best way to ensure fair business practice is to leave the decision of pricing of ‘Answer fee” to the market.
The real issue is about the need of charging an ‘answer fee’ according to standard charging method to ensure minimum revenue. This can be easily done by defining a suitable value for the initial charge at the time of answer as “Answer fee’ and charge for the remaining period according to actual use. In systems where this is not technically possible such as in existing analogue systems, use a fixed ‘answer fee followed by ‘one second’ periodic metering, so that the revenue earned will be adequate to sustain the business.
8. Call charging land line Telephony systems.
Convergence of systems and methods, wherever possible is the need of the day. It is not known why the decision of TRAI making ‘per second billing’ mandatory only the Mobile Telephony Services. A good percentage of telephone calls involve both Mobile as well as land lines. It is desirable to have identical charging method in Mobile as well as land line networks.
Conclusion: Per second billing is nothing new. It was adopted in GSM networks in Mumbai in 1996 initially by BPL and then MAX and withdrawn later due to obvious reasons. Basically, these are only some technology jargon to create media hype by Operators to confuse the customers and thereby fishing and poaching customers other Operators wit cut throat tariff cuts.
The crux of the matter is the tariff and charge per unit time is important and not the duration at which charging is done. As explained earlier, there is no considerable advantage with tariff plans that dot fit in the business case neither for Service Providers as it cannot withstand as a long term offer while Users discomfort in hopping from one Service Provider to other. Deviating from universally accepted standards in tariff metering plans will only add confusion in the entire Business. It will also open out scope for unhealthy alternatives to charge the user for various usage of the phone for which charges are not levied now with one guise or other.
In every business, there are certain straightforward, genuinely rightful rules of moneymaking. Ignoring these will be suicidal. As in every business, GSM Telecom business also thrives by playing with volume. .
There could be different options like diversifying to more of ‘non-telephony value added services, like MONEY THROGH MOBILE (mTm) devised by me as early as in late ’90s and conveyed to Telecom Service Providers, The Print & Visual Media. Please see my Blog in the link wp.me/p1ZsI2-4g.
Visualizing it could disrupt Banking Industry and eventually Economy of the Nation unless well regulated I did not venture in knowing fully well it opens out opportunity make huge amount of money in no time with little investment, I had been after Government and RBI ever since to look seriously into it regulate it to keep the Money within Banks. I had also suggested ideas how to go about in blogs sent to every Tom, Dick & Harry in Government & RBI to do something about it. Please see in the links wp.me/p1ZsI2-Ku & wp,me/p1ZsI2-XG and how to convert the disruptive technology to advantage Government in my blog wp.me/p1ZsI2-Yn I think people in there doesn’t understand what I write in simple language with usual jargons!!
Giving away the legitimate revenue earning avenues to attain volume is suicidal. For example during the early days of GSM, when operators started giving SMS free of charge, I advised them not to do it as it will kill the voice call revenue. Similarly if ‘One Second Billing’ is introduced sans suitable ‘Answer fee’, the net effect was dwindling of revenue for all. It is more so with transition of telephone usage from Voice call to short duration data & multi-media access, the average effective usage time will become less and less and unless there is suitable provision to redeem revenue, such as a legitimate minimum charge for every call in the form of ‘answer fee’, it will kill the Industry.
The best option for the operators is to adopt standard charging plans with legitimate form of charging and concentrate on good quality service to win over the competition than using mere propaganda gimmicks such as ‘Per second billing’, ‘Pay per use’, No charge Data Services etc. One think TELCOs should know is Voice or Data receives or sends by the end user happen through the TELCOs Systems and Network over normal\routes or via various OTTs. Therefore, TELCOs have full right to get due share of revenue of such non-telephony related value added services. Please see my blog wp.me/p1ZsI2-d
Hope better sense will prevail with TRAI in not unethical business ideas on charging ideas etc., with obvious reasons visible to any middle school children that neither will benefit Users nor the Industry in the long run and likely to open yet another Pandora’s box.
Author: P. Abraham Paul
e-mail: email@example.com Tweet @pa_paul