Usage Based Billing Best Practices

For those of us who have been involved in usage based billing since the early 2000’s, 2016 feels like “deja vu all over again”. While this is the year Internet service providers globally began to embrace usage tiered services, Canadian service providers pioneered usage based billing over 5 years ago and there are many lessons to be learned from their pioneering efforts. As one of those “lucky” pioneers, I had a ringside seat to the regulatory, technology, and user challenges of introducing this new service model. Usage based billing is not a simple service model to enable within the network or introduce to market but these 4 best practices are critical to achieving commercial success.

#1 – Avoid Creating Fear, Uncertainty, and Doubt

Understanding usage is critical to accepting new service models. Unfortunately, the average data subscriber has little to no awareness of the network traffic they consume. An educated subscriber base translates into fewer customer support calls.

The education period typically lasts for 6-12 months, during which time subscribers receive usage reporting on customer portals and active notifications advising them of threshold events. You know you’ve done a good job with your education process when subscribers call to self-upgrade BEFORE you start billing.

A final thought on usage based billing fee structures. No one who signs up to a $50/mth service ever expects to receive a $1000 overage bill. Capping overage charges to a reasonable maximum will reduce anxiety and avoid billing disputes while still creating an economic incentive for heavy users to migrate to larger usage plans.

#2 – Accuracy is Everything

Counting bits accurately is not as easy it as looks. Network elements can report the wrong values. Subscriber CPE mapping may be incorrect. Some traffic can be considered “non-billable” requiring identification and zero rating to be applied. Before you can bill for usage, you have to have commercial quality metering.

Ensuring usage meter accuracy requires testing of each individual step from collection through to mediation. It also requires ongoing data validation processes to ensure end-to-end system integrity. Things to look for in a usage metering solution include 3rd party system validation and continuous usage monitoring within subscriber subgroups.

#3 – Smart Mediation Saves Money

One of the core challenges behind usage based billing is turning network usage data into normalized billing records. Mediation must be consistently reliable and must satisfy the needs of not only billing but also other BSS and OSS systems such as service assurance and enterprise data warehouse. The risk service providers face with usage based billing is creating an internal tsunami of data.

Smart mediation saves money in a number of ways. By isolating the logic required to turn usage records into billing information, the amount of additional processing and customization required in the rating system is lessened which can translate into lower infrastructure and license costs. By differentiating mediated records based on the target system requirements, a single platform can be used to update multiple OSS and BSS systems. Things to look for in a mediation platform include flexible output record formats and configurable aggregation levels.

#4 – The Future is Uncertain So Be Adaptable

The market and regulatory realities of service providers are ever changing. The service models and go-to-market tactics of new technology introductions are often very different than those which emerge in mature markets. Governments continue to investigate regulatory frameworks for broadband services in order to balance consumer rights and corporate responsibilities. The next phase of business growth will be defined by increased competition for existing customers and the development of new customer segments such as prepaid.

Adaptability is the key to thriving in a dynamic environment. Your usage billing platform needs flexible service management in order to continuously evolve your data service portfolio to match the continuously changing needs of customers and regulators.
Introducing usage based billing is not easy. It requires upgrading networks and systems, educating customers, and ensuring accuracy and reliability. While it is not easy, it is worth it. Based on the Canadian experience of the past 5 years, usage based services improve business outcomes by encouraging more organic subscriber upgrade paths to higher tiers (or voluntary churn of unprofitable customers) and creating greater customer value with service plans that fit individual subscriber needs. As subscribers become familiar with their usage needs, we may see more operators eliminating speed as the service definition in favour of simple Small, Medium, Large sizes.