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September 2014

Wholesale Systems: What They Are & Why They are Important to Telecom’s Future

Wholesale Systems: What They Are & Why They are Important to Telecom’s Future

Defining where telecom wholesale systems begin and end is a bit of a problem.

So many functions and subsystems are on the buffet table: everything from interconnect billing and roaming, to routing and partner web portals.  And operators are challenged to knowledgeably invest in solutions that lower their costs and allow them to more profitably work with partners.

But not to worry.  Daniel Ölvebrink, Manager of Wholesale Revenue Management at Basset, is here to sort out the major wholesale functions for you in a fine tutorial with some simple-to-understand diagrams.

Dan Baker: Daniel, over the years Basset’s been serving up solutions for several back office functions such as fraud management and revenue assurance, but today you are putting the focus on wholesale.  Why is that?

Daniel Ölvebrink: Well, Dan, we figure wholesale has a great future.  Traditionally, operators have been tightly focused on the retail side of the business.  Wholesale has always been secondary.

But now, with heightened competition on the retail side and traditional services being threatened by over-the-top players and app providers, there’s a focus on business models supporting new revenue streams.  Invariably that means working with partners and large accounts which is what wholesale is all about.

We find the new way of carrier thinking is to view retail and wholesale as equally important business areas.  Wholesale is going to be extremely significant — significant in both delivering a great end-user experience and having an impact on the bottom line.

Today it’s no longer efficient for an operator to single-handedly invest in and develop its own set of services and infrastructure for every next generation service required.  Establishing partnerships for innovation, growth and revenue sharing: that’s the new order of the day and that means wholesale.

Understanding these trends -- and given our long experience in wholesale billing, routing as well as revenue assurance and fraud — we at Basset feel we are in a unique position to address the many facets of wholesale revenue management.

Let me walk you and your readers through a quick overview of the wholesale landscape and the opportunities that exist to improve it:

The Wholesale Landscape

Basic Functions

When we say wholesale, what do we mean?  Well, first of all, its traditional interconnect — both international and national.  Direct interconnections, through carrier hubbing arrangements, often with bilateral agreements and volume deals.  Wholesale also includes inter-working for SMS and MMS.

MVNO is another traditional wholesale function: enforced through regulation, but often enables segmentation and branding.  The most common way is to partner with an external player.  Look, for instance, at Virgin Mobile who acts as a pure marketer of mobile services in various markets.  Another way is for the operator to form an MVNO of its own -- create its own brands for particular markets.  And a third way — which we see becoming increasingly common in the LTE space — is for the operator who built the LTE network to not have its own subscribers but to direct all its network capacity to MVNOs.

Both inbound and outbound roaming are part of wholesale too.  And LTE brings in new flavors of roaming which will drive the need for IP access and transport, which is also likely to increased demands for IPX’es.  And then we have session-based services like RCS, although the business model is not completely clear, from a wholesale perspective.



Wholesale Services & Customers

Turning now to the services that are wholesaled.  At one level, there’s the actual Infrastructure that can be shared.  An operator can lease basic components such as co-location facilities, data centers and dark fiber, so the partner can build out a network of its own.

Interesting case: an incumbent operator in Sweden built out huge infrastructure complexes throughout the country.  And now they are trying to use these same data centers -- originally built to host their own equipment -- to build cloud data centers and content caching for resale as wholesale and enterprise offerings.

With the explosion in data growth, Capacity is the second level of wholesale and it can be traffic via carrier Ethernet, IP transit or fiber.  Many carriers have heavily invested in backbone infrastructure, and many groups sit on impressive networks.

If you stretch your mind a bit, you realize that the business relationships and agreements that an operator has with other service providers are similar to what it has with large enterprises.  So together these can be called Large Accounts — basically customers who you work out large and complex individual deals with.  These are typically formed in a wholesale style arrangement with individual (partnerified) terms over high values and large volumes.

Then there are Machine-to-Machine (M2M) or the Internet of Things services rolling out in areas like Fleet Management and E-Health where complex partnerships need to be hammered out and managed using wholesale-style agreement.



The Elements of Wholesale Revenue Management

The secret to managing the complexities of the wholesale business is modularity and scalability.

There is a pressing need to secure and optimize traditional interconnection and roaming with proper billing, routing and revenue assurance.  Groups need to leverage on their scale through smart consolidation efforts and planning.

And at the same time, a smart Wholesale Revenue Strategy is to fully capitalize on their assets/infrastructure and build wholesale products and offerings they can take to market.

So this is the purpose behind Basset’s Wholesale Revenue Management suite, and consequently the modular approach in which we sell and deploy it.  A modular solution is the best way to get targeted functionally on a modest budget with an opportunity to add onto the solution later.

The starting point for our system is the capture of network usage events through a Mediation and correlation system.  Flexibility enables interaction with not only network switches, but also readings for data capacity (95 percentile) as well as, for example, actual data center energy consumption.

It’s also necessary to comply with Roaming standards (TAP, RAP, RAEX, etc.) and these are evolving fast, and really have the possibility for visibility and control of your roaming business which today can be an issue with data clearing house offerings.

On a side-note here: it’s becoming increasingly important it is to keep track of your interconnection cost and correlate that against your roaming rate.  You could, for example, afford to offer a lower roaming rate if you’re interconnection fees make up for that traffic.  This is the type of visibility you get from a Wholesale Revenue Management suite.

Next is the Rating and charging capability to rate the usage according to various charging styles, such as recurring or one-time, plus various discounting schemes, volume-based agreements and revenue sharing.

Wholesale is not just about collecting revenue, it is also about expense and cost management and being able to Reconcile and manage disputes when something is wrong.  Verifying partner invoices accurately is critical: we see lots of errors being missed because operators lack the tools supporting the complexities around numbering plans and late traffic.

When you work in wholesale, of course, it’s about huge transaction volumes but with fewer accounts.  Much of the traffic is running over bilateral agreements, including volume-based discounting which additional requirements on billing, settlement and routing.

These arrangements may run over several months, setting up and planning these requires visibility over already sold volumes as well as available capacity.  Changes to agreements are common, meaning your routing must adapt to make sure any commitments are fulfilled.  Settlement process must also be able to handle unbalanced agreements, declarations and well as post period netting.

There’s an explosive need for partner Credit Management as wholesalers begin to work with an expanded list of partners: bad debt is a big problem.  The idea here is to maintain a tight rein on exposure and credit limits as you work with smaller partners who may not be as creditworthy as your well-established partners.  Even prepaid arrangements are common nowadays.

Also, as you increase the number of partners, you add lots of administrative overhead in reporting usage, price/statement exchange, and managing disputes.  Then typically you want to offload this through exposing functionality via a Partner Web Portal.

Basset has brought in our extensive history in Fraud Management, alarm and action functions to our wholesale suite.  It’s necessary to monitor fraud at heart of the wholesale business because of the large level of risks and the peculiar nature of wholesale vs. retail fraud.



Stiff competition in international voice trading has forced operators to care about cents and seconds.  Wholesales success is increasingly about reacting to quality changes, siezing opportunities, avoiding risk and constantly staying alert.  Today, quality is more important than ever, so the faster you can discard low quality routes, the more competitive offering you will have — and the higher margin you can generate.

Routing optimization automates this.  It calculates and maintains how you should send your traffic in the best way, the best quality based on the lowest possible cost for your different traffic profiles. It needs to consider constraints such as capacity, loop prevention and commitments.

Lastly, we need Network Provisioning to at all times keep routing implemented accurately in all the switches and network equipment.

An automated Trading capability secures and automates managing supplier number plans, rates and destination mappings.  In the voice business, you can start losing money fast unless you react on the routing and selling side and update your rate plans, your number plan, or even re-route some of the customers our there if a supplier updates their offer or you risk cherry-picking.  So, it is really about maintaining tight commercial control.

This bring us to the other side of trading, which is margin management and pricing generation, the capability of bundling up the package you want to sell and the margins you want to achieve.

Daniel, it’s nice the way you have organized the various wholesale functions and tied it all together.  So let me ask the next logical question: in which of these areas do you see operators needing help and earning a fast ROI?

Well, an immediate return of investment comes from finding all your revenue.  Typically when we set up a billing operation we see lots of transactions going unattended, and we enable automatic billing for services that are currently billed manually — at high risk.

Another ROI place is cost control.  Here, proper Reconciliation and Dispute Management routines are key.  When you properly verify your suppliers’ invoices, you immediately see that they are not invoicing you correctly.  Today a lot of errors are never detected and part of the reason for that is it’s too tedious to manually verify inbound bills on the detailed level required.

Another valuable feature is better managing of Bilateral Agreements.  More and more traffic is running over bilateral agreements because committing to a certain volume of business allows you to negotiate better rates.  Unfortunately, many of the systems operators now use in this area don’t provide enough feedback to create truly profitable agreements.

And of course, Routing Optimization is a necessity today.  There is simply no room for mistakes in your routing.  Delivering high quality termination is really what carriers must do, and for service providers it is the best way of improving margins.

Finally there’s also no substitute for tight, close-to-the-source Fraud Detection and Revenue Assurance.  In the fraud space alone, I’ve seen estimates that wholesalers lose $6 billion a year.

What size of carrier needs the kind of wholesale solutions Basset offers — is it large carriers or small?

The choice of several different set-ups, like on-premises or cloud, makes the solution available to carriers of all sizes: large, medium and small.

Actually, I’m sometimes surprised that more operators don’t support the fuller range of functions.  Even some of the large carriers are missing key functionality.  Most wholesalers are good at event-based rating, generating monthly statements, and routing voice via a basic LCR capability.

However, when it comes to the more complex wholesale-specific functions, there’s a lot of room for operators to grow.  For instance, complex bilateral agreements, volume discount agreements, in combination with settlement schemes are a key area they need to address.  Likewise, the monitoring of wholesale payments, collections and credit limits is not very mature in our view.

On the reconciliation side, operators do well at comparing bottom line numbers, but many can extract much greater value by drilling deeper into the rates and number plans of the invoices they receive.  And it’s there where an automated reconciliation tool is essential.

We also see a need for a better order management and CRM platforms related to wholesale activities, and just about every operator we talk to is interested in improving their provisioning capability.

Reporting is also key.  When it comes to the interconnect voice, of course, the margins are going down, so you need to have better control, alarms, and alerts to react faster to changes and ensure you get a healthy profit margin out of the traffic that you are selling.  Fine-tuning can really improve your margins.

Activity is happening at the group level too.  For instance, operators are consolidating and centralizing their international and national interconnections.  This simplifies negotiations and allows them to better manage interconnect details.

Still another topic of great interest is what we call a “global wholesale dashboard”.  Here we collect interconnect and wholesale information in a central repository and database where they can out to all types of reports, dashboards, and KPIs around your interconnections, your wholesale, your roaming business, as well as correlations to your retail margins for the entire group in the single repository.

This is typically the first step of visualizing a group operation so that you can identify the best next steps of consolidation.

Finally, Daniel, I note that Basset has recently been acquired by Enghouse Networks, a Canadian firm whose been building a broad portfolio of solutions in the last few years.

Dan, we are definitely excited over the Enghouse acquisition because their portfolio is very complementary and will take our offering to the next level.

For instance, Enghouse offers a strong number portability capability so we will gain access to that vital information to boost routing accuracy and reduce termination costs.

Enghouse also offers real-time call routing which will allow us to implement routing rules on a call by call basis.  Say, for example, your fraud module identifies a fraud case.  Well, with highly granular routing capability, we can immediate stop that fraud by surgically blocking a specific A-number, destination, or supplier.

Last, the Enghouse Group has broad experience with SaaS, so a richer Basset cloud offering will also make our solution more appealing.

Thanks for the nice briefing, Daniel.

Copyright 2014 Telexchange Journal

 

About the Expert

Daniel Ölvebrink

Daniel Ölvebrink

Daniel Ölvebrink is head of the wholesale product portfolio and strategy at Basset, part of Enghouse Group.

Prior to Basset, Daniel worked at Teligent Telecommunication creating product solutions around IP, on-demand service application creation, and real-time billing/charging.  He also spent two years working in a major melting pot of the competitive telecom landscape — the Philippines.   Contact Daniel via

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