Operators are already missing out on profits from existing revenues, so how will they cope with the increasingly complex value chains new services and applications will bring? John Cronin, CEO of Azure, tells Keith Dyer how operators can cut losses, trade more efficiently and make sure they are ready for new market models.
Mobile Europe: Azure is a company that is making a name for itself in the revenue assurance market. For those that haven't followed the story, can you tell us about yourself and perhaps your place in the mobile market?
John Cronin: Even though Azure became its own legal entity in April 2003, it’s actually been going for something like 10-12 years as an independent business within BT. We spun out as a profitable organisation and we have got around 200 people in Azure today. So it’s not like we are a normal start up. We’ve got deep knowledge and experts within Azure not only in software but in mobile, fixed and cable communications. Customers in the mobile area include 02, Telenor Mobile and Telfort to name three. And we’ve even done some work for Manx Telecom on their 3G pilot. So we do understand the mobile business.
ME: What are the priorities for mobile operators at the moment?
JC: When you really get down to it, what is a mobile operator? The core of a mobile network infrastructure is equal to a fixed network. What's different is from the aerials out to the handsets. A lot of the difficulties the fixed operators have had over the years are the same for the mobile companies. Mobile operators are looking at delivering high volumes of content, doing reconciliation, audits and dispute management with no losses, which is exactly the same as we have been doing on the fixed side over a number of years. Two years back figures showed12.4% losses across the piece for operators and that has now grown to 13.7%. So in other words even if they didn't sign up more customers, and just got their own systems sorted, then that's 13.7% of revenue straight to the bottom line.
ME: What is causing these losses within operators?
JC: Its error to do with processes and internal procedures. Azure is all about revenue assurance within the networks --- we look at interconnect, fraud, margin management, route optimisation, mediation management and network integrity. Also, I would suggest people are being more open and putting their hand up and saying, "Yes we do have a problem here." Part of what our message has been is that people should get this to the board level and have someone accountable within these companies because it's been fairly low in people's priorities with nobody accountable at board level. To me it really fits in within the CFO of a company, some elements go to the COO but these are all inter-linked.
ME: Are companies now being more open about fraud as a problem?
JC: A lot of credit card companies have said in the past that there is no credit card fraud, but we know there is. Telcos say there's no real fraud on their network --- they're not going to tell the world that they've got a problem, so it has to be done gently and low key.
Nearly half of operators have identified fraud as a significant issue for them. Subscription, interconnect, roaming and internal fraud are the biggest areas. 29% of the mobile operators identified fraud is actually coming between operator to operator. We have developed a solution for interconnect fraud that no other competitor has. Some of our competitors do interconnect, full stop, or they do fraud on the retail side, but they don't do the combined packaged that we do.
On interconnect we would look at calls lost, calls not billed correctly, maybe calls not rated correctly. There was one mobile operator in Europe that found out, once we'd put an interconnect system in, that they were rating international calls at a national level. When they found that out, they corrected it and had a pay back within 11 working days, whereas originally they were looking at an ROI of 18 months.
We believe that fraud today on mobile is something in the region of 3-7%. Now on the fixed side it's round about 3% so already it's been identified and agreed with the mobile operators as a bigger area --- especially as more content becomes available. The value chain is much more complicated in the mobile arena than it is on the fixed.
ME: How does interconnect differ from margin management?
JC: I see margin management as really route optimising --- being able to look at profitability on the routing of calls, and the trades people have made, as well as on the billing side. Where we're going with this is to get to real times in terms of settlement. So we do it electronically and say, "This is the route we have agreed, as soon as that's done I've invoiced you and hopefully you'll pay me straight way" --- helping cash flow and cutting down on manual intervention.
ME: Is one of the problems integrating service launches at a marketing level with back office OSS and billing systems?
JC: The pressure on the mobile companies now is to really get products and services out rapidly --- to identify new revenue areas. When you look at data --- it stands at about 10-20% of revenue today and that will grow as people find more and more applications. In doing that they can they fall down if they do not have the correct processes and procedures. You get marketing coming out with great products but sometimes not ensuring the service or the QoS is in the background and the infrastructure is there right from the interconnect to the billing. At the end of the day this is profit they are losing because they capture the customer yet they are unable to bill them correctly due to not having a proper billing system.
So it is actual profit operators lose and by just having the correct people, processes and systems in place they can get round that. A lot of people have systems that are in-house, so you ask, "Have they kept them innovative? Have they become legacy?" The benefit of us is because we do this for several operators globally we can make sure we are ahead of the game in terms of what needs to be done to actually help.
They've got to make sure that at the end of the day whatever they carry, they bill for. Some customers are very good and have a policy of CDRs of zero loss but that's quite hard for mobile operators to do today because of the complexity and the evolution of where mobile operators have come from. They do need to be much more aware and actually put the systems and processes in place to combat that type of scenario.
ME: Yes, with that ever-lengthening value chain the complexity just increases and mediation becomes ever more important as elements stack up on the network.
JC: The solution to the complexity of the supply chain is being able to tag and identify that traffic and who gets a slice of that. I guess because the supply chain is quite complex the operators have got to get down to premium levels of service --- platinum, gold and silver services that people sign up for --- because bandwidth is a quite scarce resource in the last mile, whether it's mobile or fixed. I think that's where we're part of that solution, though not all the solution. You need to get everybody in the same room and agree this is what we will do. So I do think the operators have to look at network local loop management more so than they are doing and coming up with solutions to that, and we recognise that we're players within that.
Mediation really is the hub of all of it, everything else spins off that, especially going from voice into IP. It's looking at the events within the network and being able to record them and bill them that is the operators' real challenge at the moment, ensuring the integrity of their networks.
ME: Are there different ways OSS and billing companies can work with operators to help them keep up with their evolving needs?
JC: We go from bespoke solutions to bureau and co-sourcing. Today a lot of the operators are struggling for capex and we have a model that is opex. Opex means it's pay as you go so as we carry the traffic, you pay as you grow, which makes it easier for them.
We will also look at a model of revenue share or savings of revenue. People like the sound of that, but when they see the size of that they say, "No we'll go to pay as you grow because it's a lot less!"
What we did with BT was outsource out of BT the experts within interconnect. So what we are really all about is providing a service. We do licensed sales the same as some of our competitors, but we believe you will get a lot of companies will go in and do a report but then you've got to find someone to implement that, put the procedures, processes and systems in. We will do a report, but will also do something about it - take the report and ensure that we deliver against it. We can even take a batch of people's CDRs and run it through our systems. Because we are number one in fraud bureau world wide, number one in interconnect bureau and because we have already got that up and running we can run the processes through our existing systems, and identify some of the losses. We do a pilot, then roll it out and if a carrier operates in several countries we can put it into one, then a second, and so on. Over the years we have rolled out across Europe to all the companies that were part owned by BT in that manner.
Where I see us going is we'll even outsource, if people have got resource or part of a system then we'll take that to us then do an SLA back to manage it on behalf of that particular customer.
ME: I hear you are also working on a clearing-house system?
JC: Yes. One model that we are working on is a clearing-house. So rather than the Western model where operators have had their own system in place, what we'll now say is put that into a clearing-house so all the operators can then share that cost. It helps with cashflow, because the clearing-house does the netting of traffic sent, and cuts down on disputes because it's one integrated solution. Any errors or losses are identified swiftly because we are in control of the call end-to-end within the clearing-house, so it's much better in payment terms.
ME: Can you see this model working in Europe?
JC: I can do for MVNOs, because that's a whole new startup. MVNOs are experts in customer service, database management and customer loyalty projects, but we can actually put together a clearing-house they could all share. Another application might be for any new product sets where it's common across several operators --- they could look to do that.
ME: It's a forward thinking approach.
JC: We are always looking at the future. First and foremost we looked at the architecture of the company's skill sector experience, and at where this is all going. In areas like wholesale billing and margin management, there's a space there. There's not really a clear wholesale biller although there's lots of retail billers. So that's our capability and where we're going.
This may aid roaming, of course, but more importantly will enable use across spectrum bands within a network where operators are using lower frequencies for coverage, and higher frequencies for urban capacity. It may also mean being able to operate in both TDD and FDD spectrum.
One company, IP Wireless, is using Altair's Software Defined Radio (SDR) baseband processors to build LTE devices that can operate at specific frequencies. IPWireless' LTE device will incorporate Altair's FourGee-3100 baseband and FourGee-6200 RFIC chipsets. The FourGee-3100 is a 3GPP LTE baseband processor that supports LTE category 3 (CAT-3) throughputs (100Mbps/50Mbps DL/UL respectively). The chip implements a 20MHz MIMO receiver and is based on a proprietary SDR processor which offers increased performance but reduced power over traditional DSP cores. The chipset supports FDD as well as TDD versions of the LTE standard and has undergone interoperability testing with OEMs.
Jon Hambidge, of IP Wireless, said that the first product has been designed with a specific operator in mind. It will operate at 800MHz, 1800MHz and 2.6GHz. It will be available in the final quarter of this year, he said. Later devices would cover the US 700MHz bands, he said. Hambidge cited Vodafone Germany as one operator that is looking at such a deployment of LTE across different spectrum bands.
With experts now expecting there to be up to 15 LTE radio bands, the key for device OEMs will be to have platforms that enable them to select radios accordingly. Software Defined Radio and modems lend themselves to this. They also reduce power consumption - a critical factor as the industry looks to move from dongles to actual LTE handsets.
Icera Wireless is one company that has demonstrated multimode soft modems, showing LTE/HSPA interworking on its commercial HSPA sticks at Mobile World Congress this year using its Adaptive Wireless feature set and Livanto soft baseband. The company recently took $45 million financing to accelerate its product development.
An Icera spokesperson said that its next product would be out before the end of the year, and would enable LTE and HSPA.
Another company targeting the soft modem space is UK start up Cognovo - a company formed initially founded by TTPCom executives, before later incorporating ARM's Ardbeg Vector Signal Processor activity.
Cognovo's CEO Gordon Aspin said that the ARM VSP enables the company to design a Software Defined Modem platform that is dimensioned for handsets and portable devices capable of LTE Category 4 (150Mbps) but also scales to support multi-mode operation with other standards.
This puts it ahead of Icera, he said, describing Icera as a 1.5G version of the SDM.
Aspin also added that another advantage of the SDM is that its performance can be upgraded even once the device has been shipped. He said you could even see "white label" modems developed that have software downloaded onto them later. That raises the question, then, of who pays the IPR if software is being downloaded later than the manufacturing stage?
"It's potentially a very disruptive technology. You could create devices that have the world's best wireless processor but independent of any particular air interface."