Thought Leadership

ONLINE CONvErgENt ChargINgSoftware SolutionS for a MultiService world

SAP Thought Leadershiptelecommunications

the majority of consumers are uninterested in technology. they simply want to use ser-vices – at the time, in the place, and in the manner of their choosing. thus the common denominator for any convergent charging system is that service pricing makes sense for the customer while enabling the service provider to differentiate in line with a sound customer ownership strategy.

CONtENt

4 Executive Summary

5 Convergent Charging 5 improved customer loyalty

with Service and Payment convergence

5 differentiated Services with Prepaid and Postpaid convergence

5 Business and Systems rationalization

6 the Benefits of a converged Pre- and Postpaid Solution

8 IMS Market Opportunities 8 charging challenges for iMS

Services 8 Standardizing charging

10 Integration and Business Benefits

11 The SAP Approach 11 find out More

ExECutIvE SummaryPreParing for the future

one area that is coming under scrutiny as a source of potential cost savings – and as a way to improve competitiveness – is charging and billing. the cumber-some charging and billing applications that many large providers are currently stuck with are slow-moving and costly to maintain. they often suffer from rev-enue leakage, offer insufficient protec-tion against credit exposure risk, and hinder business model innovation by making even moderate changes a long and expensive process. greenfield operators have seen the light and do not make the same mistake: they have chosen a different approach for charg-ing and billing, adopting converged online charging from the beginning. now the established service providers are also mapping out a plan to wean themselves off their legacy systems and over to a single, converged online charging system.

these service providers are recogniz-ing that they can dramatically reduce their operating costs while improving their customer intimacy, reducing reve-nue leakage, and enabling more rapid change of their business model to get ahead of the competition.

as service providers prepare for tough times ahead in a challenging macroeconomic environment, they are looking to reduce costs. the smarter providers are looking to go beyond simple cost cutting; they view the current climate as an opportunity to spur more innovation and gain market share.

4 SAP Thought Leadership – online convergent charging

CONvErgENt ChargINgdeliver Both ServiceS and PayMent convergence

Improved Customer Loyalty with Service and Payment Convergence

the majority of consumers are uninter-ested in technology. they simply want to use services – at the time, in the place, and in the manner of their choos-ing. thus the common denominator for any convergent charging system is that service pricing makes sense for the customer while enabling the service provider to differentiate in line with a sound customer ownership strategy.convergent charging systems must therefore deliver both service and pay-ment convergence:• Service convergence to enable the

bundling of multiple services at the charging layer, enabling cross-product discounts and promotions

• Payment convergence to offer pre-paid, postpaid, and blended payment mechanisms and capped postpaid mechanisms for all services

this approach can result in the follow-ing advantages:• centralized rating for all services,

providing flexible pricing and packag-ing capabilities

• charging layer interacting in real time in close proximity with applications and service delivery platforms to obtain authorization and charging information for multiple services

• online rating and balance manage-ment so that customer balances con-tinuously reflect actual usage – with full protection provided against fraud and credit risk exposure

• Service platforms that can react

immediately when a subscriber allow-ance is reached or credit is exhausted – interrupting the service and auto-matically making a relevant sugges-tion to the subscriber

• Significant savings in operating expenses with a single system and faster service introduction – in some cases, reducing time to market from months to days

differentiated Services with Prepaid and Postpaid convergenceintroducing pre- and postpaid conver-gence is an intelligent strategy toward customer ownership. if service provid-ers can utilize payment mechanisms as tools to differentiate their service offer-ings, rather than be constrained by them, they can find ways to add value to new service bundles, differentiate offerings, and further reduce the likeli-hood for churn.

Prepayment is the traditional mechanism for mobile users; prepaid voice repre-sents more than 50% of the worldwide mobile subscriber base. however, pre-payment mechanisms are growing in importance in both fixed and mobile envi-ronments as customers demand increas-ing control of expenditures. in developing countries, for example, customers are expressing preference for prepaid broad-band services. the demand is also grow-ing in environments where services are used concurrently, such as from third-generation (3g) network devices. online charging provides up-to-the-minute charging information for unbilled transac-tions and opens the door to hybrid pre- and postpaid plans.

Prepaid functionality can be combined with postpaid accounts where caps on spending can be imposed. Postpaid customers can predefine amounts that they are prepared to pay per month, and as they reach their predefined limit, they can receive notification. Such pay-ment methods are already in practice by european triple-play providers, for example, that offer capped postpaid services. Spending limits can also be applied to individual services, with wal-lets being associated with specific high-end services such as pay-per-view films from a broadband or cable service.

Business and Systems rationalizationPrepaid intelligent networks (in) are proficient when delivering high-perfor-mance, real-time capabilities for call control, authorization, rating, and bal-ance management for decrementing and recharging accounts. however, these systems were not designed to support sophisticated multimedia ser-vices and thus render new-service introduction a complex and lengthy pro-cess. Most prepaid in systems today are in fact focused on voice and just a few simple data services. these sys-tems tend to be highly restrictive when introducing discounts and promotions and in managing hierarchies for corpo-rate groups or family plans.

Postpaid billing systems, on the other hand, offer extensive possibilities in terms of the services that can be intro-duced, the hierarchies that can be man-aged, and the end-of-month promotions and discounts that can be applied. yet new-service introduction often does

5SAP Thought Leadership – online convergent charging

entail very lengthy, complex coding and development lead times, and promotions and discounts can only be applied at the end of the month. further, postpaid bill-ing systems have not been designed for real-time operations but instead for mass, offline batch processing.

Subscribers for both types of systems are usually distinct and managed by entirely separate databases and, typi-cally, by two different teams with diverse skill sets. the inevitable result is huge operational costs for running

these two systems in tandem. the objective of any new convergent charg-ing architecture must now be to com-bine the benefits of existing prepaid and postpaid systems and create one cost-efficient, next-generation charging sys-tem able to ease the rapid deployment of new services (see figure 1).

next-generation convergent charging systems are designed to rationalize the architecture for lower total cost of own-ership and higher return on investment by creating a single system to handle

all services. to meet future demands, charging, rating, and service control must go online with real-time function-ality at the heart of the system. an online charging layer delivers:• consolidated real-time rating• centralized call and session control• account balance management• convergent pricing and packaging

The Benefits of a Converged Pre- and Postpaid Solution

one of the most attractive benefits of a converged approach is cost control. a single cost-effective platform enables providers to manage balances and ser-vice wallets for all subscribers and servic-es, independent of their payment meth-od of choice. in addition, this solution supports service differentiation. Providers can: • Support subscriber groups with sets

of interrelated pre- and postpaid bal-ances – for families or corporate cus-tomers, for instance

• enable flexible configuration of spending caps, allowances, credit limits, and service-specific wallets

• Manage dynamic charging where the balances to be charged are deter-mined per transaction at runtime

• ensure real-time, online operation with high performance and high availability

Figure 1: Comparison of Legacy Systems and Convergent Charging Architecture

RechargeOnline and OfflineCharging• Call Control• Sessions• Service Logic

Account BalanceManagement• Balances, Wallets• Hierarchies

Convergent Rating• Events, Sessions• One-Shot, Recurring• Discounts• Promotions

Billing

Convergent Charging architecture:

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Mediation Rating Account Management• Discounts• Promotions• Hierarchies Collection

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Legacy architectures today:


Service providers can now offer family or group plans that combine multiple account balances that interrelate, with some members of the group on prepaid plans, some on postpaid, some with postpaid allowances and spending con-trols, and other balances shared across the group (see figure 2).

they can now even associate specific wallets to specific services. a parent could, for example, determine a limit on the number of movie or music down-loads a child is allowed in one month. Parents could recharge their child’s prepaid account via their own postpaid account. increased subscriber controls are likely to increase customer loyalty and reduce churn.

Postpaid Family Account

Postpaid (limit) - Mother

Prepaid - Father

Prepaid - Child

Data Services

Music Services

Figure 2: Combining Multiple Account Bal-ances That Interrelate $

$

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the objective of any new convergent charging archi-tecture must now be to combine the benefits of ex-isting prepaid and postpaid systems, and create one cost-efficient next-genera-tion charging system able to ease the rapid deploy-ment of new services.


the iP Multimedia Subsystem (iMS) is driving the need for real-time conver-gent charging systems. iMS was born out of the needs of mobile operators by the third-generation Partnership Proj-ect (3gPP) standards body, and its uni-fied architecture is now being adopted over a range of fixed technologies in order to promote the rapid and low-cost introduction of new multimedia services. on the it side, vendors are also offering their own service delivery platforms (SdPs) with the same objec-tive for simplified and rapid service deployment.

convergent charging solutions are a necessary complement to both iMS and SdP architectures. they ensure that applications are network indepen-dent and can be introduced quickly, and that they can be flexibly priced and packaged across diverse access technologies.

Charging Challenges for IMS Services

the Session initiation Protocol (SiP) is the signaling protocol of choice for iMS, facilitating the use of multiple ses-sions and applications concurrently. for

example, a triple-play customer could be watching an iPtv movie service, launching an iM application, and even chatting away on a voice call to a friend, all at the same time. these numerous communication exchanges inevitably generate a host of simultane-ous charging information. a constant exchange of information is therefore necessary between the network layer and the charging layer to manage the authorization to use each service. this exchange is also required to initiate charging requests as a service is con-sumed to enable the rating procedure. finally, an account balance manage-ment function may come into play for providing real-time balance updates, either for decrements to a prepaid bal-ance or simply for real-time billing updates for the user to control spend.

Standardizing chargingas the standardization process for iMS has evolved, there has been a growing consensus among various standards

ImS markEt OppOrtuNItIESiMS aS a driver for convergent charging

convergent charging solu-tions are a necessary com-plement to both iMS and SdP architectures. they en-sure that applications are network independent and can be introduced quickly, and that they can be flexibly priced and packaged across diverse access technologies.


bodies, such as the 3gPP working groups and the telemanagement forum, that an “online charging” layer is required in complement. this new charging layer will sit close to the net-work and interact in real time with appli-cations, dynamically gathering charging information to enable flexible pricing, rating, charging, and convergent account balance management. in sim-ple terms, this translates into providing the customer access to all services irrespective of payment method, be it prepaid or postpaid or even a combina-tion of both (see figure 3).

an online charging layer applies real-time technology to manage the multi-plicity of services. it enables an exchange of information between the charging layer and the network element or applications in real time; the informa-tion exchanged can affect the delivery of service for the end user. the interac-tion is to handle authorization, rating, credit control, and subscriber account-balance management.

an offline charging function is necessary to handle postpaid subscriptions. the charging information does not affect the service rendered in real time, and the final result of this charging mechanism is the forwarding of rated call-detail record files to the billing domain.

Key elements within the 3gPP stan-dard for online charging are the following:• independent and centralized rating

engine for all services– calculating a number of nonmone-

tary units (service units, data vol-ume, time, and events)

– calculating the amount (price) of monetary units for a given number of nonmonetary units

– determining the tariff based on the subscriber’s contractual terms and service being requested

– Managing counters applicable for rating

• account balance management func-tion for prepaid services– holding the subscriber account– controlling adding and deducting

monetary amounts from accounts– Performing credit reservations on

the account– Managing counters applicable for

the account– handling functions such as

requests for session- and event-based charging via a charging layer

according to general industry discus-sion, the standard most likely to be adopted soon will be the key network-to-charging layer standards ro for

online and rf for offline charging, respectively. the online ro interface is defined using the diameter protocol, which grew out of work in the internet engineering task force (ietf) to expand on the older radius access, authorization, and accounting protocol.

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Figure 3: Architecture for Convergent Pre- and Postpaid Online Charging


INtEgratION aNd BuSINESS BENEfItSSolutionS for new entrantS and incuMBentS

a decision to invest in any convergent charging system will be driven by a need to gain flexibility and reactivity to meet transient market needs. the abili-ty to rapidly price, rate, and bundle any combination of services together and introduce cross-product discounting and promotions will determine the abili-ty to differentiate in the marketplace.as service providers address their new service pricing and packaging challeng-es, they are also evaluating solutions that will address pre- and postpaid con-vergence in the future.

incumbents and greenfield service pro-viders come from different perspec-tives and are each taking different approaches with regard to convergent charging. greenfield providers have the benefit of a clean slate when deploying infrastructure and information systems, whereas incumbents are constrained to a vast extent by their costly existing

legacy systems and investments. how-ever, investment in a new convergent architecture can be quickly offset by the cost savings and business opportu-nities that convergent systems deliver.

greenfield operators and new entrants can choose convergent systems and benefit from lower capital and operating expenses and a single system for man-aging all services from day one. they also have the advantage of being able to provide value-added service offer-ings from the beginning, allowing for greater market differentiation.

incumbent providers have too often failed to utilize their legacy prepaid and postpaid systems to their full potential. it therefore makes more economic sense to introduce an adjunct charging system, allowing the legacy billing sys-tem, or the existing prepaid balance management systems, to remain in

place for existing services. the new rating and charging systems can man-age the sophisticated pricing and charging requirements for new servic-es. existing services can then be migrated gradually over time to the new system to offer more comprehensive service bundles, thereby ensuring an roi from both old and new systems.

a decision to invest in any convergent charg-ing system will be driv-en by a need to gain flexibility and reactivity to meet transient mar-ket needs. the ability to rapidly price, rate, and bundle any combi-nation of services to-gether and introduce cross-product dis-counting and promo-tions will determine the ability to differenti-ate in the marketplace.


thE Sap apprOaChSaP® convergent charging

the SaP® convergent charging appli-cation is a flexible solution, designed with convergence in mind and meant to adapt to the potential needs of telecom service providers. it complements tra-ditional in architectures by providing sophisticated pricing and rating func-tionalities. the application can deliver a comprehensive convergent charging solution complete with online and offline access for both incumbent and greenfield operations. SaP convergent charging is also aligned with the emerging standards for online charging, and SaP developers are closely follow-ing developments in this area.

native convergent functionality makes SaP convergent charging ideal for emerging iP services such as mobile data and multimedia broadband servic-es. the application is also designed to meet the needs of demanding service providers by offering combined pre- and postpaid services to millions of mobile and broadband subscribers.the extensive, standards-based appli-cation programming interfaces (aPis) and integration framework enable SaP convergent charging to be integrated into a range of charging architectures in a variety of carrier environments span-ning mobile, broadband, and on-demand services. Key features include the following.

Unconstrained pricing – designed to deliver complete pricing flexibility with high performance and no compromis-es, SaP convergent charging virtually eliminates functional or technical limita-tions to developing offers for different types of services. an intuitive gui enables “visual programming” in which

components for making choices, dynamic table lookups, macros, and arithmetic computation are assembled into a decision tree to build a custom algorithm that will calculate the price of a service.

Pricing and profit simulation – SaP convergent charging enables what-if analysis that allows pricing managers to get answers to define optimum price structures and bundles for customer segments, for example. they can bet-ter determine which partners are best to use and how lowering costs can improve profit margins.

Advanced rating features – time, date, geographic, content size, content type, shared plans for friends and family or corporate plans, bundled offers, cross-product promotions, and instant dis-counts: all of these different types of rating can be combined within a single rate plan. event-based, recurring charg-es and one-shot charges are also man-aged as a coherent whole by the rating engine using the same intuitive gui.

Modular online balance management – online balance management provides convergent pre- and postpaid account management, delivering full control over the totality of the pricing of servic-es and bundles.

Subscriber controls – Subscriber poli-cies held at the charging layer equip parents and employers with appropriate spending controls on a per-service basis and even according to predefined times of day.

High performance and scalability – Proven in tier-1 mobile operator envi-ronments worldwide, the solution offers high rating performance in aggre-gate and per cPu. SaP convergent charging has multiple references in the challenging environment of real-time online and prepaid charging, where low latency, high throughput, scalability, and five-nines reliability is delivered.

Compatibility with related applica-tions – SaP convergent charging is designed to integrate easily with the SaP convergent invoicing for telecom-munications and SaP customer rela-tionship Management and order Man-agement for telecommunications packages to form a comprehensive consume-to-cash solution. thus, ser-vice providers can manage both cus-tomers and their accounts with anintegrated solution.

Find Out More

to learn more about SaP convergent charging and the SaP for telecommu-nications solution portfolio, please con-tact your SaP representative today or visit us online atwww.sap.com/telecommunications.


www.sap.com/contactsap

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Thought Leadership