The past 20+ years have been an evolution – and an education - for communications service providers (CSPs) and how they manage their revenue. Needless to say, over the years, it’s become quite a lot to manage.
According to Statista, global telecommunications industry revenue reached nearly USD$1.5 trillion in 2019 – showing the great lengths CSPs are going to monetize their networks and the importance to protect their revenue and margins along the way. Let’s take a look back to understand how and why revenue assurance has become a hot topic again as we move into a new decade.
The Shake-Up: 1996
In the U.S., up until the mid-1990s, the telecom industry was being run by a monopoly of large telecom companies called the Baby Bells. In this environment, the process of billing customers and managing revenue was fairly straight forward. But then came the U.S. Telecommunications Act of 1996. Its main goal was to deregulate the industry, and to "let anyone enter any communications business – to let any communications business compete in any market against any other." This is when the telecom industry became the Wild West, with a complex network of competitive players of all shapes and sizes, called competitive local exchange carriers (CLECs). They focused on the smaller markets that the larger players had mostly ignored.
Gold Rush / 1998 - 2000
By the late 1990s, the telecom industry was flush with new investments and cash. After the Telecommunications Act of 1996 was passed, capital flooded into the telecom sector as existing firms and new ones began building networks over land, undersea and in the air. This telecom ‘Gold Rush’ coincided with the dot-com boom. New fiber was being installed underground, creating construction projects seemingly everywhere to support new ISPs and CLECs – with private investment soaring and stock prices hitting record levels.
Just about anyone and everyone referred to themselves a CLEC in those days, and this really complicated the billing process. The big operators were hamstrung with inflexible billing systems that couldn’t manage this new intercarrier complexity, while the new CLECs needed new billing systems of their own. At the height of this Billing Bonanza rose more than 150 suppliers of billing systems. Some of these companies had never sold a single system but were valued at over $1 billion. The market was on fire – these were the boom days of telecom. Sure- there were revenue leaks and areas of waste, but the industry was awash in money and no one seemed to care. Until…
The Telecoms Bust / 2001
In the early 2000s, the telecom bubble began to burst. For the past five years, ‘build it and they will come’ had been the telecom mantra, but it no longer held true. Companies began to realize that there wasn't enough business to go around, so they raced to gain market share by engaging in vicious price wars that drove down revenues. When Nokia announced in 2001 a mere 60% increase in sales - the world reeled. In effect, the race to the bottom had begun. Over the next year, more than $1 trillion in telecom valuations was flushed away. Suddenly, balance sheets were scrutinized, and belts were tightened.
Easy Picking / 2002
In the early post-bust days, finding telecom savings was like shooting fish in a barrel. $250 million could be found sitting in a suspense file that no one had bothered to research. Telecom financial analysts could be heard saying, “I went back to my office after lunch and saved the company $23 million.” But soon the easy, low hanging fruit had been found. Carriers realized that to stay competitive, they needed to invest in resources to help expose areas of revenue leakage and eek out additional savings. From 2003-2005 the focus of telecom providers changed, and suddenly, finding money that had been left lying around during the rush for customers became critical to staying in business. This was the birth of Revenue Assurance (RA) in the telecoms industry.
RA Golden Years / 2003 - 2005
Over the next few years, reigning in out-of-control costs and uncovering hidden savings became priority number one. Revenue Assurance departments were established internally within every telecom company, and outside experts were hired to train teams to get costs under control. Suddenly there was a Revenue Assurance Manager for every department in every telecom company, and they wielded newfound respect and responsibilities. Revenue Assurance experts and processes became part of product development teams – and often had veto power over new product launches deemed too financially risky or whose margins were too thin. Investors eventually began rewarding profitability over subscriber growth, which to this day continues to create healthier, more sustainable companies.
Maturity / 2006 - 2008
2006-2008 were focused on improving processes, measuring, and improving them again. RA tools improved as technology continued to advance, powering insights that gained the attention of the C-suite and Board of Directors. The overall belief became, “If you identify lost revenue to shareholders, then you have to fix the problem.” Finding hidden costs suddenly wasn’t enough. Billing Directors were now expected to find and fix the root cause of the problems and better manage profit margins. Fortunately, new database capabilities allowed for the use of data analytics to expand on the impact and value of revenue assurance.
A Digital Transformation / 2009 – 2019
No sooner had revenue assurance reached an age of maturity when the digital revolution began. This decade created new levels of change and complexity that would impact almost every department, leading to a multitude of new revenue assurance challenges. This was also the decade of carrier consolidation- where multiple legacy billing systems, sometimes numbering in the dozens, would need to be converged and managed together. Consolidation Audits became the way revenue assurance was deployed to help oversee this sticky process.
In addition, the convergence of wireless and wireline services created further billing challenges. Prepaid mobile services added a real-time nature to billing that was extremely challenging to manage. Traditionally, billing departments had up to 30 days to reconcile customer charges before invoices were mailed, but in a world of prepaid accounts and real-time billing, revenue assurance was once again front and center.
Over the Top (OTT) providers, MVNOs, mobile apps, and other new digital services stretched the need for revenue assurance even further by creating complex new partner revenue share models that needed to be closely managed and assured.
The Future of Revenue Assurance
The Revenue Assurance evolution continues to this day. The digital transformation created the need for a new generation of revenue assurance. Business Assurance is this next level; a company-wide, holistic approach towards financial health that goes well beyond the billing domain. Some estimate that the rise of M2M and the IoT will double the size of today’s communications market – with roaming a business area that is poised to gain a resurgence. The customer of the future won’t look like today’s customers. It might be a car, a tractor or a team of robots in a warehouse. A flood of new services and business models will need to be managed and billed for, creating the need for a more automated and proactive approach at assuring revenue and containing costs.
In this era, mobile dashboards and cloud-based, machine-learning powered revenue assurance tools will be critical to help reduce costs and keep everyone on the same page. Revenue Assurance is also a relevant source of data that can be used across the organization, uncovering critical business insights that improve the customer experience, especially when paired with data from other sources, such as contact centers, marketing and network operations. Information that can be used for streamlining and optimizing service provisioning and billing and providing customer support teams with the critical information they need – when they need it.
At Mobileum, we are poised for the future of Revenue Assurance, and we’re ready to partner with our customers for the long term. Our recent acquisition of WeDo Technologies has brought a new wealth of RA talent and expertise to the Mobileum family, and we couldn’t be more excited to extend our market leadership in this arena.
To learn more about how Mobileum can help create a future of positive revenue growth for your company, please contact us.
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