Government Regulation of Service Levels for Telephone Company

Call Centres in Canada– Work in Progress –

Armann IngolfssonSamina Khandakar, Tarja Joro

armann.ingolfsson@ualberta.ca

School of Business, University of AlbertaEdmonton!

Workshop on Call Centers, Montreal, May 11, 2006

Calgary

Motivation

• How should planning problems for call centres be posed?– Minimize cost, s.t. service level above a

standard in every period– Minimize cost, s.t. aggregate service level

above a standard• Answer depends on the context• For regulated public utilities, answer depends on

the form of quality regulation

Related Literature

• Economics of quality regulation– Highly stylized game-theory models– Typical “firm’s problem:”

• Max profit = P(x, q) x – C(x, q), s.t. q ≥ MQS• x = quantity, q = quality, P = price/unit, C = total cost

• Regulating telephone service quality– Institutional issues

• Little attention to operational issues – how to deliver a specific level of quality– In economic terms: what is the structure of C(x, q)?

TelusSask

TelMTS

Bell

Aliant

NorthWestTel

Telephone Companies in Canada

The Regulator: CRTC

• Regulates telephone companies, broadcasters, cable service

• Timeline:– 1876: Bell patents telephone– 1893: Rate regulation starts– 1968: CRTC formed– 1982: Service quality regulation starts– 1992: Long-distance competition– 1993: Telecommunications act– 1997: Local competition

How the Regulation Works

• Sixteen Quality-of-Service Indicators

• Each indicator has a pass/fail standard

• Companies self-report every three months

• Performance reported per month

• If below standard, firm must report monthly until standard met three months in a row

• Penalties decided on a case-by-case basis

Call Centre QoS Indicators

• 3 of 16 indicators are related to call centres:– Access to business office– Access to repair bureau– Access to directory assistance

• Standard: 80% answered in ≤ 20 seconds

Questions

• What does it cost to meet the standard?• How does service level vary with time if standard

is met at minimum cost?• Influence of firm size

– 100 K – 20 M subscribers

• Influence of staffing method– Constant utilization staffing– Square root staffing

• What if the standard had to be met every hour?

Firms

Firm Subscribers

NorthWestTel 110,000

SaskTel 820,000

Telus 9,618,000

Bell 21,275,500

Assumptions

• Performance in hour t can be modeled as a stationary system:– M/M/s(t) (Erlang C), or– M/M/s(t)+M (Erlang A)

• Single employee type

• No scheduling issues

• No call volume forecast uncertainty

Notation

(i, t) = Arrival rate to company i in hour t= n(i) (t) / 250

n(i) = # of subscribers for company i = avg. # of calls per subscriber per year

[0.5 – 2]

(t) = fraction of daily calls in hour t [Example from Green, Kolesar, and Soares (2002)]

= service rate [6 per hour]

1/ = avg. patience [= 1/ = 10 min.]

More Notation

r(i, t) = (i, t) / = Offered load for company i in hour t

SL(i, t) = service level for company i in hour t = Pr{Delay ≤ 20 seconds, served}

SL(i) = aggregate service level for company i = demand-weighted average service level

Staffing methods

• Constant percentage safety staffing:

• Square root safety staffing

80.0)SL(:)(min)(*

))(1)(,(),(

iixix

ixtirtis

80.0)SL(:)(min)(*

),()(),(),(

iiyiy

tiriytirtis

Cost vs. size [Erlang C]

0.1%

1.0%

10.0%

100.0%

0.5 1.0 1.5 2.0

Avg. calls per subscriber per year

Pe

rce

nt

safe

ty s

taff

ing

Const. %

Square root

Northwesttel

SaskTel

Telus

Bell

Cost vs. size [Erlang A]

0.1%

1.0%

10.0%

100.0%

0.5 1.0 1.5 2.0

Avg. calls per subscriber per year

Pe

rce

nt s

afe

ty s

taffi

ng

+2

%

Const. %

Square root

Northwesttel

SaskTel

Telus

Bell

Service Consistency vs. Size [Erlang C]

30%

35%

40%

45%

50%

55%

60%

65%

10,000 100,000 1,000,000 10,000,000 100,000,000

Avg. call volume / year

Fra

ctio

n of

day

with

SL

>=

80%

Const. %

Square root

Service Consistency vs. Size [Erlang A]

30%

40%

50%

60%

70%

80%

90%

10,000 100,000 1,000,000 10,000,000 100,000,000

Avg. call volume / year

Fra

ctio

n of

day

with

SL

>=

80%

Const. %

Square root

Example: Northwesttel [Erlang A]

0

1

2

3

4

5

6

7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hour

Off

ere

d lo

ad

, st

aff

ing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Se

rvic

e le

vel

Offered load

Const. percentage

Square root

Example: Bell [Erlang A]

0

100

200

300

400

500

600

700

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hour

Sta

ffin

g,

off

ere

d lo

ad

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Se

rvic

e le

vel

Offered load

Const. percentage

Square root

Conclusions

• Costlier for smaller firms to meet standards• Performance may be far below standard at off-

peak hours, if firms meet aggregate standard at minimum cost

• Incremental cost of meeting standard at all hours decreases with size

• Constant percentage less costly than square root safety staffing– [For Erlang C. Not clear yet with Erlang A]

Further Work

• Benchmark: minimum cost staffing

• Finish Erlang A analysis

• Compare to regulation in other countries– USA, Brazil

Discussion: Analysis Tools

• Erlang C: Queueing ToolPak (MS Excel function library)– Demonstrate

• Erlang A: 4CallCenters software

• How should we “package” our tools to maximize their use?

Discussion: Auditing

• Companies self report performance data

• How can/should companies be audited?

Discussion: Auditing

• Approach 1: Use models to check whether self-reported data is plausible

• Approach 2: “mystery callers”

• Approach 3: ?

Discussion: Auditing

• Brazil: companies report inputs (arrival rate, service rate, number of servers), regulator uses model to compute output (SL), compares to reported output

• How should this be done?– How often?– For what time interval?– Using what model?– When should action be taken?

Discussion: Data Reporting

• What data should regulated companies be required to report?

Discussion: Monitoring

• Manufacturing: SPC charts to monitor production processes

• Why not for call centers?• Monitor:

– Service times– Abandonment rates– Forecast errors– …

• What modifications are needed for using SPC charts in call centres?

Discussion: SL Constraints

• Aggregate vs. period-by-period

• Q: what’s the value of consistency?

• Customers react to perception – expectation

• Asymmetry: negative impact of not meeting expectations likely larger than positive impact of exceeding expectations

BACKUP SLIDES

Example: Northwesttel [Erlang C]

-

10

20

30

40

50

60

700 2 4 6 8

10

12

14

16

18

20

22

Hour

Offe

red

loa

d /

sta

ffin

g

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Se

rvic

e le

vel

Offered loadConst. percentageSquare root

Example: Bell [Erlang C]

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

0 2 4 6 8

10

12

14

16

18

20

22

Hour

Offe

red

loa

d /

sta

ffin

g

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Se

rvic

e le

vel

Offered loadConst. percentageSquare root

Cost of Constant SL [Erlang C]

0.1%

1.0%

10.0%

100.0%

0.5 1.0 1.5 2.0

Avg. calls per subscriber per year

Pe

rce

nt

safe

ty s

taff

ing

Const. %

Const. SL

Northwesttel

SaskTel

Telus

Bell