Prepaid and postpaid convergence for fixed-line service providers: a technical need or a new marketing instrument?

Knowledge Base -> Publications

10.09.2007

Imagine you are in the supermarket and going to do shopping. But before you take the trolley to put the products in it, you are asked about your method of payment - cash or credit card. And depending on your answer you'll be directed to the different parts of the supermarket with the distinct range of products. Also, you'll be asked about the limit of money that you are going to spend and when you reach the mentioned sum you'll have to go out despite your intention to continue shopping.

The same is in the telecom industry with the prepaid and postpaid subscribers. Prepaid subscribers get bounded set of services and postpaid subscribers are offered a huge number of diverse services.

Prepaid and postpaid convergence is being heavily discussed by service providers for the past years. And now when the convergence has become imperative, service providers focus their activity on the new business lines including prepaid and postpaid convergence, which enables telecom operators not only to keep and improve relations with their customers but also to provide subscribers with new services and offer them flexible and convenient methods of payment. Moreover, prepaid and postpaid convergence results from telecom providers' aspiration for unifying the customer services environment. Aside from the above advantages, this will also encourage telecom operators to use benefits of both schemes in one system.

Traditionally, fixed-line telecom operators rate and charge their services in postpaid systems. Most of them were developed several years ago. Also, the real-time information processing isn't provided for in such a system, so the system is appeared to be of a poor flexibility needed for contemporary prepaid services. Furthermore, rating and charging the services in postpaid system, a telecom operator faces the problem of collecting payments for the services rendered. Certainly, telecom operators have the instruments to influence debtors, for example, by blocking line access or withdrawing the amount of debt from debtors' accounts. However, total volume of accounts receivable remains sizeable anyway, because subscribers frequently pay into account when the services are stopped. There is one more obstacle connected with returning of debts. Since subscribers are inclined to migration, they may leave their current service provider thus making the operator a creditor. Introduction of prepaid technology allows telecom operator to reduce the risk of non-payments and maintenance expenses, because prepaid services do not require contracts, accounts, etc. But from the other hand, the telecom operator provides postpaid subscribers with the diverse tariff schemes, bonus offers and of course with a wide variety of telecom services.

As for contract subscribers, they are interested in optimization of their service expenses. For example, high speed Internet access enables subscribers to quickly download huge amounts of data that could lead to the debts against their providers. So, in case of serving such a client, implementation of prepaid access to services requires minimized losses and simplified equipment maintenance. There is an important economic factor of prepaid scheme that consists in attractiveness to different subscribers' groups, quick and easy access to services, broad coverage of the target audience, simplified settlement procedures between operators, dealers, and subscribers, etc.

Fixed-line telecom operators offered prepaid-based products for those clients who weren't able to set up legally complex relations with the telecom operators. Thus, there were determined the basic requirements and restrictions for prepaid platform, such as: no obligations of subscriber to offset debts, simplified contracts or no contracts, no bills, limited services, etc.

The use of prepaid technology is due to economic expediency rather than technical necessity. For example, if operators need services which do no imply any accounts receivable. As long as quick estimation is crucial for prepaid platforms, they do not generally support complex rating and charging schemes. While tariffs appeal is a key point to win competition. Also, the prepaid platform alone implies bounded set of tariffs to apply, with almost no discounts applicable.

As for marketing, telecom operators create and roll out different programs for post-paid subscribers but not only because prepaid subscriber is anonymous, and it's virtually impossible to collect the information about his/her preferences and interests. When telecom operator is about to roll out new products for prepaid subscribers, it's appeared that they fail to do that due to the system incapability.

Because of the difference in hardware and processing technology, the postpaid and prepaid subscriber accounts operate in two independent systems, which are not even fully unified on logic level. In that case, telecom operator has to resolve problems related to providing the unified reporting form, statistic data collection and, most importantly, account management of these subscribers. The solution naturally suggests itself - to combine these two systems into one. However, integration of prepaid and postpaid platforms will enable telecom operator to explore additional benefits while making some problems because of the functionality duplication and complexity of the system interfaces interaction. If one looks aside from architectural solution of the prepaid and postpaid integration, he'll find that such a system could be a perfect instrument to realize diverse marketing strategies of telecom operator. The integrated solution is to provide abilities of the advanced billing system for all subscriber groups, arbitrary combinations of the real-time services, rate plans, payment methods, account currencies, etc. In spite of the evident attractiveness of the above capabilities, telecom operator will reckon with the higher load on the equipment and, presumably, the higher price of the solution itself. That's why implementation of prepaid and postpaid functionality in one system is necessary; and this functionality is implemented in any contemporary convergent billing system. So, service providers, which aspire to render new services and to be competitive, have to focus on a converged solution - one system which handles all types of subscribers and services. Such a system may consist of the following components:

- unified database for postpaid and prepaid subscribers to provide a single bill for all services;
- unified billing process to bill subscriber's accounts depending on the method of payment and the type of service;
- unified product directory, which is a repository for all types of services independently of the payment method. It may also decrease the time-to-market for new services and optimize billing process;
- unified pricing mechanism to rate and charge all the events.

The converged solution enables telecom operators to create hybrid accounts that can use both prepaid and postpaid payment methods, making easier for telecom operators to do business with their customers. A hybrid account can be determined by payment method or communications services. The payment process has never been more flexible in this converged environment as customers can choose the best methods to suit their needs and budgets. Converged systems give service providers the opportunity to improve ARPU and reduce subscriber attrition by combining prepaid and postpaid customers through innovative bundled offerings. Moreover, independently of the payment methods and offers chosen, service providers have a complete view of all customer accounts since all customers are supported by a single system.

Billing system has always been a key factor in developing new products and services. Now, when most of the service providers offering the similar products and generally competing in prices, they have to put higher attention to the marketing strategy. To win the clients, to be on top of the market, to increase ARPU level, and also to decrease the maintenance expenses for running two systems (prepaid and postpaid) because subscribers' base will grow anyway and operator will have to upgrade both systems, as well as to avoid equipment stress and etc., service providers have to focus on the functionality of their billing systems. In these circumstances the billing system becomes equally the marketing instrument and technical need.

Sergey Bocharov, Senior Technical Expert, Software Solutions Devision, Inline Telecom Solutions