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• Cost analysis of Mobile
• Charging and Billing
• Arturo Basaure
• November 2005

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Contents

• Cost analysis framework
• CB architecture
• Offline and online CB architecture
• OCS, BD
• Vendors solutions
• Cost assumptions
• Scenarios
• Offline postpaid, offline prepaid
• Online prepaid, online postpaid
• Comparison offline vs. online
• Operator cases
• Prepaid vs. postpaid markets
• Outsourcing vs. investing
• Analysis and Conclusions

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Cost analysis framework
Top-down approach FDC, ABC Bottom-up
approach ECPR, LRIC
Our framework ABC/TCO combination
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CB Architecture
source 3GPP
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Offline and online CB processes
offline
CTF charging trigger function CDF charging data
fucntion CGF charging gateway function OCF
online charging function ABMF account balance
management function RF rating function BD
billing domain
online
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Online Charging System (OCS)
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Need for online

• More flexible content charging
• Less financial risk when charging online
• Use of Prepaid when introducing new services
  (e.g. games)
• Enable higher transaction value and higher number
  of transactions
• But
• Flat rate trend in mobile services (offline)
• Need for high availability of online system (high
  OPEX costs of maintenance and personnel)
• Convergence can take a long time
• However
• Hold two systems is more expensive than one
• Trends
• Outsourcing
• NO or SO?

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The Billing Domain
Offline

• In online
• Rating is real-time (in the OCS)
• Fraud management is online (in the OCS)
• No invoicing if prepaid
• ? Less costs in the BD than before

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Vendors solutions

• Conflict between OSS and BSS vendors
• Both OSS (IN-prepaid) vendors and BSS (billing
  system) vendors are going online.
• Different implementations. 3GPP model differs
  from the reality.

Source Am-beo
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• Even the same vendor can have different solutions
  for different operators
• High integration costs when deploying online
• Easiest for Greenfield operators. They avoid
  integration costs.
• Example Convergys

IN-prepaid extension
BD extension
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Assumption for cost estimatesResults from
interviews
Offline Online
Billing system 5x, CGF (Mediation) x Billing system 3x OCS 3x
Integration costs 6x
Personnel and maintenance costs increase 20
For CAPEX costs, we assume a payback period of 5
years (equal devaluation)
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Main variable cost elements with their drivers
In the charging domain, the number of
transactions is the main driver. In the billing
domain, the number of customers is more important.

• Variable costs
• running, monitoring and contacting customers
  (personnel).
• Maintenance, support related with each element.
• Developement (updates) considered as CAPEX,
  fixed for each year.

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Offline Postpaid

• OPEX related with the billing system invoicing,
  personnel
• In general, we consider the system operation and
  maintenance as OPEX and the system updates as
  CAPEX.

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Offline PrepaidHot-billing (near real-time)

• Fraud management increase personnel costs
• Prepaid avoids invoicing costs

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Online prepaid

• Integration costs are as much as online CAPEX
  costs
• Online prepaid avoids OPEX costs related with
  the billing

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Online postpaid

• Most expensive scenario
• Greenfield operator avoids integration costs

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General comparisonOPEX, CAPEX, Charging and
billing
OBS We consider integration costs as CAPEX
(55) and OPEX (45)
CAPEX costs
OPEX costs
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Cost per transaction
Offline postpaid payment

• Online decreases the cost per transaction
• Online enables higher transaction value. In this
  way, the cost per transaction (in percentage)
  decreases in relation with the total transaction
  value, even though online system demands a large
  investment.
• Online enables higher number of transactions,
  decreasing the cost per transaction
• Online has a value system with fewer players
  than the postpaid-offline model. In this way, the
  cost per transaction decreases, and the revenue
  sharing percentage increases.

Online prepaid payment
source Toni Saikkonen, adapted.
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Case analysis

• Cases according to ECOSYS models
• Greenfield vs. incumbent operators
• With vs. without 3G license (SO vs. MVNO)
• Prepaid market vs. postpaid market

A 2G operator with 3G license
B 2G operator without 3G license
C Greenfield operator with 3G license
D Greenfield without 3G license
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Postpaid vs. prepaid country
Postpaid market (e.g. Finland) Using online
prepaid for introducing new services (e.g.
content and games).
Prepaid market (e.g. UK) Switch to online could
be faster because it involves more services.
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Outsourcing the OCS
Source Am-beos nCharge
Example of outsourcing Paying according to the
number of transactions.
OBS the pricing curve is not linear. It
represents a volume advantage.
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Operator cases
2G operator with 3G license
2G operator without 3G license
Greenfield operator with 3G license
Greenfield operator without 3G license
(2G MVNO)
(2G and 3G MVNO)
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Service usage forecast (millions of
transactions/month)
Prepaid market 70 prepaid penetration
Postpaid market 95 postpaid penetration
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Analysis example 2G operator with 3G license

• Offline costs increase more linearly. Online has
  biggest volume advantage.

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Results in graphsa) 2G operator with 3G license
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b) 2G operator without 3G license (outsourcing
the OCS)
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c) Greenfield operator with 3G license
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d) Greenfield operator without 3G
license(outsourcing the OCS)
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Comparison between cases

• Prepaid operator can avoid OPEX costs related
  with billing activities.
• Greenfield operators can avoid integration
  costs.
• Charging is more important than billing.
• The SO plays a major role as compared with the
  NO.

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CB cost per transaction

• Online decreases the CB cost per transaction.
• Prepaid operators have in all cases a cost
  advantage.
• During the first years, Greenfield operators
  (CB) have higher cost per transaction.
• Operators (incumbent vs. Greenfield) do not
  differ too much in cost per transaction after the
  adoption.

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Conclusions

1. CB is important to operators because it secures
   the continuous revenue flow. In addition, a
   proper CB system enables users to access new
   services.
2. The main reason for going online is the user
   requirements for security and ease of payment.
3. However, user satisfaction is not the only reason
   for going online. Online systems also reduce the
   CB cost per transaction.

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Conclusions

• d) Operators should not concentrate on decreasing
  the overall CB costs, but on decreasing the cost
  per transaction.
• e) Despite that prepaid operators have a cost
  advantage postpaid operators must also deploy
  online CB systems to fulfill user requirements.
• f) The flat rate trend does not stop the
  migration into online. Even though flat rate is a
  possible future trend, not all customers and
  services will adopt it and operators will need an
  online system.

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Thanks!