MVNO Market

Slideshow Transcript

1. Slide 1: ”Cost analysis of Mobile Charging and Billing” Arturo Basaure November 2005
2. Slide 2: Contents • Cost analysis framework • C&B architecture • Offline and online C&B architecture • OCS, BD • Vendors’ solutions • Cost assumptions • Scenarios: • Offline postpaid, offline prepaid • Online prepaid, online postpaid • Comparison: offline vs. online • Operator cases • Prepaid vs. postpaid markets • Outsourcing vs. investing • Analysis and Conclusions
3. Slide 3: Cost analysis framework Top-down approach: FDC, ABC Bottom-up approach: ECPR, LRIC+ Our framework: ABC/TCO combination
4. Slide 4: C&B Architecture Billing Domain & Operator Backend Systems B* B* CAP CGF MSC CGF CDF CTF Bc B* CGF CDF CTF AS Ro Ga SIP AS CTF CDF CTF MRFC Rf OCS CTF MGCF BGCF CTF Ro P/S/I-CSCF CTF Ro S-CSCF IMS GW ISC Wo Wf WLAN PDG CTF Gy GGSN CDF CTF Ga CAP CDF CTF SGSN TPF CDF CTF Ga Ro Gx ONLINE CHARGING OFFLINE CHARGING source: 3GPP Rx AF CRF NOTE: Please note that the WLAN architecture is not final and is still under discussion within 3GPP SA5 SWG-B
5. Slide 5: Offline and online C&B processes offline CTF: charging trigger function CDF: charging data fucntion CGF: charging gateway function OCF: online charging function online ABMF: account balance management function RF: rating function BD: billing domain
6. Slide 6: Online Charging System (OCS)
7. Slide 7: Need for online • More flexible content charging • Less financial risk when charging online • Use of Prepaid when introducing new services (e.g. games) • Enable higher transaction value and higher number of transactions But: • Flat rate trend in mobile services (offline) • Need for high availability of online system (high OPEX costs of maintenance and personnel) • ”Convergence” can take a long time However: • Hold two systems is more expensive than one Trends: • Outsourcing • NO or SO?
8. Slide 8: The Billing Domain Offline In online: • Rating is ”real-time” (in the OCS) • Fraud management is online (in the OCS) • No invoicing if prepaid  Less costs in the BD than before
9. Slide 9: Vendors’ solutions Conflict between OSS and BSS vendors: • Both OSS (IN-prepaid) vendors and BSS (billing system) vendors are going online. • Different implementations. 3GPP model differs from the reality. Source: Am-beo
10. Slide 10: • Even the same vendor can have different solutions for different operators • High integration costs when deploying online • Easiest: for Greenfield operators. They avoid integration costs. • Example: Convergys IN-prepaid extension BD extension
11. Slide 11: Assumption for cost estimates Results from interviews Offline Online Billing system: 5x, Billing system: 3x CGF (Mediation): x OCS: 3x Integration costs :6x Personnel and maintenance costs increase 20% *For CAPEX costs, we assume a payback period of 5 years (equal devaluation)
12. Slide 12: Main variable cost elements with their drivers In the charging domain, the number of transactions is the main driver. In the billing domain, the number of customers is more important. Variable costs: • running, monitoring and contacting customers (personnel). • Maintenance, support: related with each element. *Developement (updates): considered as CAPEX, fixed for each year.
13. Slide 13: Offline Postpaid • OPEX related with the billing system: invoicing, personnel • In general, we consider the system operation and maintenance as OPEX and the system updates as CAPEX.
14. Slide 14: Offline Prepaid Hot-billing (near real-time) • Fraud management increase personnel costs • Prepaid avoids invoicing costs
15. Slide 15: Online prepaid • Integration costs are as much as online CAPEX costs • Online prepaid avoids OPEX costs related with the billing
16. Slide 16: Online postpaid • Most expensive scenario • Greenfield operator avoids integration costs
17. Slide 17: General comparison: OPEX, CAPEX, Charging and billing 180 180 160 160 *OBS: We consider 140 140 integration costs as 120 120 CAPEX (55%) and 100 100 Billing OPEX (45%) OPEX Charging 80 CAPEX 80 60 60 40 40 20 20 0 0 Offline Offline prepaid Online prepaid Online postpaid postpaid Offline postpaid Offline prepaid Online prepaid Online postpaid CAPEX costs OPEX costs
18. Slide 18: Cost per transaction Offline postpaid payment Online decreases the cost per transaction: • Online enables higher transaction value. In this way, the cost per transaction (in percentage) decreases in relation with the total transaction value, even though online system demands a large investment. • Online enables higher number of transactions, Online prepaid payment decreasing the cost per transaction • Online has a value system with fewer players than the postpaid-offline model. In this way, the cost per transaction decreases, and the revenue sharing percentage increases. source: Toni Saikkonen, adapted.
19. Slide 19: Case analysis Cases according to A B ECOSYS models: 2G operator 2G operator with without • Greenfield vs. 3G license 3G license incumbent operators C D • With vs. without 3G Greenfield Greenfield license (SO vs. MVNO) operator with without 3G license 3G license • Prepaid market vs. postpaid market
20. Slide 20: Postpaid vs. prepaid country Postpaid market (e.g. Finland) Using online prepaid for introducing new services (e.g. content and games). Prepaid market (e.g. UK) Switch to online could be faster because it involves more services.
21. Slide 21: Outsourcing the OCS Source: Am-beo’s ”nCharge” Example of outsourcing: Paying according to the number of transactions. OBS: the pricing curve is not linear. It represents a volume advantage.
22. Slide 22: Operator cases 2G operator with 3G license 2G operator without 3G license Greenfield operator with 3G license Greenfield operator without 3G license (2G MVNO) (2G and 3G MVNO)
23. Slide 23: Service usage forecast (millions of transactions/month) transactions postpaid market transactions of prepaid m arket 1000 1000 800 M tx/month 800 online m tx/month offline txs 600 transactions 600 400 400 online txs offline 200 200 transactions 0 0 04 05 06 07 08 09 10 11 12 04 06 07 09 10 12 05 08 11 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 tim e (years) tim e (years) Prepaid market: 70% prepaid penetration Postpaid market: 95% postpaid penetration N of transactions, Greenfield, postpaid m arket transactions, Greenfield, prepaid market 1000 1000 800 online transactions 800 M tx/month M tx/month 600 600 online transactions 400 offline offline transactions 400 transactions 200 200 0 0 06 07 09 10 12 08 11 2006 2007 2008 2009 2010 2011 2012 20 20 20 20 20 20 20 tim e (years) tim e (years)
24. Slide 24: Analysis example: 2G operator with 3G license • Offline costs increase more linearly. Online has biggest volume advantage.
25. Slide 25: Results in graphs: a) 2G operator with 3G license 2G with 3G license, postpaid 2G with 3G license, postpaid Financial & accounting billing personnel 180 180 invoicing 160 160 billing integration costs 140 140 cost variation (%) billing system 120 120 cost Charging charging personnel 100 100 variation Billing 80 charging integration costs 80 (%) Total 60 60 rating function 40 40 ABMF 20 20 online charging funtions 0 0 online mediation 2004 2006 2008 2010 2012 2004 2005 2006 2007 2008 2009 2010 2011 2012 mediation time (years) tim e (years) CTF/CDF financial & accounting f. 2G with 3G license, 2G with 3G license prepaid billing personnel prepaid top up 160 invoicing 140 160 billing integration costs cost variation (%) 120 140 billing system Charging 100 120 balance magt& top up 80 Billing cost 100 60 Total charging personnel variation 80 40 charging integration costs (%) 60 20 40 rating function 0 20 ABMF 08 10 04 05 06 07 09 11 12 0 20 20 20 20 20 20 20 20 20 online charging function 2004 2006 2008 2010 2012 tim e (years) online mediation time (years) Mediation CTF/CDF
26. Slide 26: b) 2G operator without 3G license (outsourcing the OCS) 2G without 3G license , postpaid 2G without 3G license postpaid 180 Financial & accounting f. 160 160 billing personnel 140 cost variation (%) 140 120 invoicing Charging 120 100 100 cost Billing billing integration costs 80 variation 80 Total 60 billing system (%) 60 40 personnel 40 20 20 0 integration costs 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 mediation 2004 2006 2008 2010 2012 tim e (years) OCS outsourced time (years) CTF/CGF 2G without 3G license, prepaid 2G without 3G license, prepaid 160 financial and accounting f. 140 140 billing personnel 120 cost variation (%) 120 invoicing 100 Charging 100 80 Billing billing integration costs cost 80 Total 60 billing system variation 60 40 (%) top up 40 20 charging personnel 0 20 mediation 1 2 3 4 5 6 7 8 9 0 charging integration costs tim e (years) 2004 2006 2008 2010 2012 OCS outsourced time (years) CTF/CDF
27. Slide 27: c) Greenfield operator with 3G license financial & Greenfield with license, postpaid Greenfield w ith license, postpaid accounting f. billing personnel 150 invoicing cost variation (%) 140 Charging billing system 100 120 Billing 100 cost charging 50 80 Total personnel variation 60 RF (%) 0 40 ABMF 20 06 07 10 11 08 09 12 20 20 20 20 20 20 20 0 online charging 2006 2007 2008 2009 2010 2011 2012 time (years) functions mediation online time (years) mediation offline CTF/CDF Greenfield with license, prepaid financial and Greenfield with license, prepaid accounting f. billing personnel 120 invoicing 120 cost variation (%) 100 billing system 100 80 Charging charging personnel 80 cost 60 Billing variation 60 RF Total 40 (%) 40 ABMF 20 20 0 online charging 2006 2007 2008 2009 2010 2011 2012 function 0 mediation online 2006 2007 2008 2009 2010 2011 2012 tim e (years) mediation offline time (years) CTF/CDF
28. Slide 28: d) Greenfield operator without 3G license (outsourcing the OCS) Greenfield without license, postpaid Greenfield w ithout license, postpaid financial and accounting 140 cost variation (%) 120 140 billing personnel Charging 100 120 invoicing 80 Billing 100 60 billing system cost 40 80 Total variation charging personnel 20 60 (%) 0 mediation offline 40 OCS outsourcing 20 06 07 08 09 10 11 12 20 20 20 20 20 20 20 0 CTF/CDF 2006 2007 2008 2009 2010 2011 2012 tim e (years) time (years) financial and Greenfield without license, prepaid accounting f. Greenfield without license, prepaid billing personnel invoicing 120 120 cost variation (%) 100 100 billing system Charging 80 80 cost 60 Billing charging personnel variation 60 40 Total (%) 40 20 CGF outsourced 20 0 OCS outsourced 0 06 07 08 09 10 11 12 2006 2007 2008 2009 2010 2011 2012 20 20 20 20 20 20 20 CTF/CDF tim e (years) time (years)
29. Slide 29: Comparison between cases Total C&B costs for Greenfield operators Total C&B costs for 2G operators 160 180 Green. w ith license 2G w ith license 140 160 postpaid postpaid 140 120 Green. w ith license 120 2G w ith license 100 cost (%) cost (%) prepaid 100 prepaid 80 80 60 Green w ithout 2G w ithout license 60 40 license postpaid postpaid 40 20 Green w ithout 20 2G w ithout license 0 0 license prepaid prepaid reference offline 04 05 06 07 08 09 10 11 12 reference offline cost 04 05 06 07 08 10 11 12 09 20 20 20 20 20 20 20 20 20 cost (100%) 20 20 20 20 20 20 20 20 20 (100%) tim e (years) tim e (years) • Prepaid operator can avoid OPEX costs related with billing activities. • Greenfield operators can avoid integration costs. • Charging is more important than billing. • The SO plays a major role as compared with the NO.
30. Slide 30: C&B cost per transaction C&B cost per transaction C&B cost per transaction 0,008 0,016 2G with license, 0,007 0,014 postpaid Green. with license, 0,006 0,012 postpaid 2G with license, 0,005 cost (€) Green. with license, prepaid 0,01 0,004 cost (€) prepaid 2G without license, 0,008 0,003 Green. without license, postpaid 0,006 postpaid 0,002 2G without license, Green. without license, 0,001 0,004 prepaid prepaid 0 0,002 0 05 08 11 04 06 07 09 10 12 20 20 20 20 20 20 20 20 20 2006 2007 2008 2009 2010 2011 2012 time (years) time (years) • Online decreases the C&B cost per transaction. • Prepaid operators have in all cases a cost advantage . • During the first years, Greenfield operators (C&B) have higher cost per transaction. • Operators (incumbent vs. Greenfield) do not differ too much in cost per transaction after the adoption.
31. Slide 31: Conclusions a) C&B is important to operators because it secures the continuous revenue flow. In addition, a proper C&B system enables users to access new services. c) The main reason for going online is the user requirements for security and ease of payment. e) However, user satisfaction is not the only reason for going online. Online systems also reduce the C&B cost per transaction.
32. Slide 32: Conclusions d) Operators should not concentrate on decreasing the overall C&B costs, but on decreasing the cost per transaction. e) Despite that prepaid operators have a cost advantage; postpaid operators must also deploy online C&B systems to fulfill user requirements. f) The flat rate trend does not stop the migration into online. Even though flat rate is a possible future trend, not all customers and services will adopt it and operators will need an online system.
33. Slide 33: Thanks!