The Telco Gospel, Chapter 1. In the Beginning, there was Long Distance Resale. And the Resellers saw that the margins were generous, and that arbitrage opportunities abounded. And the Customers saw that discounts were available, and flocked to the Resellers like the seagulls. And the Resellers enjoyed the simplicity of selling everything at a mark-up. And the Regulator saw that it was Good.
Yes, it was good back in those days. With a single, simple, product to sell, retail pricing and revenue assurance was straightforward because resellers were selling something in substantially the same form as they bought it. The wholesale systems from the carriers were either non-existent or primitive, but they did the job. Billing of just one product was quite easy.
Things started to get interesting with the introduction of products like capped calls by the carriers. Unlike resellers, carriers had fixed infrastructure costs and a very low marginal cost per call, so they could leverage this during off peak times. This posed a challenge for resellers who had to pay for any call at a wholesale rate, and could potentially lose money on some capped calls.
With the addition of mobiles to the reseller mix, the gap between how a product was bought and sold became wider. On a wholesale basis, it was mostly pure airtime, but the retail plans were full of “magic tricks” like 30-second billing, on-net special rates, included spend, and subsidized handsets. Again, carriers had a different cost structure, and deep pockets. This posed a major pricing challenge for resellers, who were still not used to selling anything at a loss.
The billing picture also became more complex as resellers started selling multiple products: long distance, line rental, mobiles, and data. Putting all of these on a single bill was a significant challenge. Fortunately, this was far more difficult for the slow-moving carriers – for them, it was cheaper and faster to just get another billing system than to integrate into existing systems.
More recent trends such as capped plans, and multi-product bundles have further widened the gap between the structure of what is bought and sold by resellers, and caused rating and billing to become more complex still. However, this brings with it opportunity to innovate and differentiate far more than in the past.
So where to from here? The shift of voice to run over data/IP networks leads the charge towards selling a raw “data pipe” with applications layered above it. These will be voice, content, software applications, movies, games, and more. The way these are packaged will be more and more as bundles. It will be interesting to see how the variety of suppliers: network providers, content providers, and aggregators or resellers, work together in the future.