The evolution of subscriber billing

May 11, 2011 - Openet

Subscriber billing models, better known as pricing plans, are hot topics around the world today. And why wouldn't they be? Subscribers want to save money, operators want to make money and everyone wants to go home happy. However, there is a chasm between subscriber expectations and an operator's ability to profitably meet those expectations, and that's the driver behind the evolution of billing plans.

Recent history of subscriber billing

Consumers have been pummeled with news and offers for new devices, which promise unprecedented functionality. Likewise, offers from wireless carriers promise lightning-fast content delivery, flawless quality and affordability alongside special offers and incentives on specific devices. Unfortunately, network capacity and speed can undermine these promises, eroding subscriber satisfaction and trust no matter how much the subscriber is paying for service.

As a result of devices becoming ever more sophisticated and subscribers demanding a growing portfolio of content and services, network congestion has been a top-of-mind challenge for quite a while now, and operators are finding the balance between hardware buildouts and software fixes to smooth the flow of services. However, when unlimited plans were de rigueur, operators couldn't effectively manage unprioritized data traffic. The result? Network congestion resulted in hang time for subscribers, dropped calls, interrupted data delivery and, ultimately, unhappy consumers. Something had to give—but this move has been far from an overnight success.

Kicking and screaming

Change isn't easy—especially when the concept of "unlimited" is going the way of the dodo and customers are asked to pay for data consumption. Subscribers are used to two-year contracts, "new every two" upgrades and all-you-can-eat voice and data pricing—all of which adds up to service providers hemorrhaging money. Operators have faced a PR struggle, first by capping usage on "unlimited plans" and prioritizing traffic—inciting negative commentary on throttling practices that are necessary to remain profitable. Likewise, by "taking away" unlimited data plans and replacing them with more profitable tiered pricing plans, operators set off an uproar that is still felt today as an increasing number of subscribers join the smartphone revolution with an expectation of high service for short money.

Consumers are slowly becoming accustomed to the idea of tiered service plans, which are priced by consumption. In the U.S., AT&T famously rolled out tiered services with the latest edition of the iPhone, and rumors quickly surfaced that Verizon and other carriers would follow. Additionally, AT&T has recently implemented tiered services for wired broadband, predicted to be the next wave of billing for Internet use.

What's next?

So what does all of this mean? First, it means that subscribers are resisting the idea of paying for use, even if that means monthly bills will be lower than those for capped "unlimited" data. Additionally, hybrid billing models are on the rise around the world, allowing for pre-paid, post-paid, or a combination of the two, which provides a new kind of flexibility for payment options. Finally, for operators, policy management strategies ensure that each subscriber is billed for what they use, no more and no less, plugging revenue leaks and ensuring accurate billing.

Policy management will also protect both operators and subscribers from bill shock, which creates difficulties on both sides of the relationship. The Cell Phone Bill Shock Act of 2010 proposes required notifications from operators to subscribers when they are about to reach the limits of their plans. For operators to comply, sophisticated policy management technology must be put in place to track every subscriber against their plans and take appropriate action. This requirement is another important milestone in the evolution of billing, as it clearly places responsibility for bill shock on operators' shoulders.

Take on the tablets

Tablets are also changing the face of wireless billing. Take the iPad—this game-changing device broke new ground with regard to billing plans. U.S. pricing plans for the iPad are both pre-and post-paid, offering the user the choice as to whether to enter into a contract. These relatively new options for billing speak to the need to offer consumers flexibility and control over their plans, and offers opportunities to shop around not only for the best price, but for the best options for their wallets and wireless lifestyles.

As the tablet market heats up and these devices evolve, more pricing options will become available to appeal to a broader base of users. The force of the market will dictate the value of tablet data service, and pricing will likely come down as the market becomes more saturated with devices. In the meantime, operators are fighting to offer exclusive content and premium services to differentiate tablets and services from one another.

Setting the stage for 4G

4G plans are already being offered to subscribers, sometimes before 4G service is even available. A significant differentiator for 4G will be plan structure; consumers will pay different prices for different types of data (email, in-app data, movies, etc.) and billing plans will be structured a la carte. Operators such as Sprint are already structuring attractive plans that include mobile broadband and social networking access (i.e. Facebook) as two options; these plans will enable unprecedented personalization, and will also enable operators and content providers to learn what content is truly valuable to subscribers. With ABI Research predicting 44 billion app downloads by 2016, there is a lot of room for profitability from customized plans.

While recent, the evolution of billing has shown what subscribers want and need to stay engaged and satisfied, and what operators need to stay competitive. Service is no longer enough—devices have to be sexy, functional and enabled by services and plans that allow them to shine. This new challenge is setting the stage for sophisticated, relevant billing practices, where everyone is poised to reap the benefits.


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