MSOs Weigh Prepaid Strategies As Way to Drive New Revenues

Stephane Bourque, president & CEO, Incognito Software

Stephane Bourque, president & CEO, Incognito Software

September 18, 2012 – North American MSOs may soon join the growing number of cable operators in other parts of the world who are implementing prepaid service options to capture new revenues and add to subscriber convenience.
One development signaling the growing cable interest in support for prepaid services comes from Incognito Software, a leading supplier of provisioning and service activation systems, which has introduced key support elements for delivering a wide range of prepayment options. Another is the decision by Wipro Technologies, a global leader in IT support services with a long history in telecom, to focus on prepaid as one of the touchstones for its new cable sector business initiative.

The move to prepaid options, which can be applied to everything from core services to new a la carte offers and special marketing promotions, is especially strong in Latin America, Europe and the Middle East and Africa, notes Stephane Bourque, president and CEO of Incognito. “We’re seeing a huge push in prepaid services from MSOs in these regions, and to a lesser extent in North America as well,” Bourque says.

“We’re seeing the need for activation of a lot more a la carte services,” he adds. “People want to subscribe for a few days or increase bandwidth for a few days or weeks, and nobody wants to be tied to contracts. So operators can perform on these demands much better with prepaid platforms, which also allow people to come in and purchase Wi-Fi services for a few days or a few hours.”

Such capabilities are now supported by Incognito’s Service Activation Center (SAC), which the company has regularly enhanced over the past several years as a way to reduce the mounting complexities of implementing services and marketing programs in response to changing market conditions. “Operators need a tool that correlates network information with subscriber data,” Bourque says. “Only then will they get the big picture they need to make decisions on product pricing, service tiers and network planning.”

SAC, fully integrated with a wide variety of industry billing systems, allows providers to collect subscriber data using both Internet Protocol Detail Record (IPDR) and Simple Network Management Protocol (SNMP), he explains. It correlates this information with other service activation data, including subscriber, device and geographic location, to create a holistic and subscriber-aware view of the network. This data can then be exported to CSV, XLS, PDF or HTML files and used by various departments to help plan marketing incentives, product upgrades and network changes.

In its latest iteration the modular platform has been expanded with adaptors that support end-to-end service activation and fulfillment on a virtually unlimited range of on-demand services, going beyond the VOD and TV Everywhere activation capabilities of previous SAC iterations. Along with the prepaid capabilities with on-demand options such as those mentioned by Bourque, this enhancement applies to all the many approaches to expansion of TV Everywhere embodied in multiscreen initiatives now underway worldwide, including distribution of live as well as on-demand content to connected devices inside and outside the home.

“We’ve changed a bit of the architecture and added adaptors to support the multiscreen environment where operators can enable access to any type of device through our APIs,” Bourque says. “The architecture is generic and applies to everybody, whether they’re delivering multiscreen service over the traditional network, a managed IP network or over-the-top. And we’ve added a layer of abstraction that lets subscribers register additional screens for prepaid as well as the usual subscription payment method.”

Because SAC integrates and interacts with all necessary systems for one-touch service activation, operators can quickly roll out prepaid billing models, as well as optional add-on parental control services, he notes. “This is a natural extension of Service Activation Center’s integration with provider BSS/OSS systems and its ability to hasten new service time-to-market,” he says. “Ultimately, this product helps managed service providers decrease operational costs and increase revenues.”

One of the greatest incentives to setting up support for prepayment in North America may be an opportunity to expand the broadband subscriber base that Wipro is touting through its Accelerate initiative. As described by Steve Snyder, global head of business innovation at Wipro’s Global Media and Telecom unit, Accelerate offers a comprehensive and unique approach to capturing low-income and other non-subscribing households which don’t fit the customer profile targeted by traditional subscription services.

Wipro, an India-based firm with offices worldwide and a work force topping 138,000, has long been a player in cable-related technology by virtue of the product engineering services it provides to manufacturers such as TiVo, Cisco Systems, Juniper Networks and many others, Snyder notes. But it has built the service provider side of its IT service business, encompassing customer care, OSS and other outsourced elements, in the telecom sector, focusing on emerging competitors to incumbents in Europe, Asia and elsewhere.

Wipro’s foray into cable represents a new chapter in the telecom side of its business where it has restructured and grouped all its media and telecom practices into the new Global Media and Telecom unit in response to the convergence of business models across what were once diverse market segments, Snyder explains. “The skills we bring to help drive our clients’ business more effectively span the whole range of activities in this converged space,” he says. “Our goal is to provide services that have a significant impact on costs and the bottom line or improve top lines by helping our customers go after new market opportunities.”

Where cable is concerned Wipro looked for ways it could bring something unique to the market rather than simply competing with existing solutions, he adds. Along with the Accelerate solution, the company has identified energy management as a key opportunity in cable, where, as previously reported (see, for example, September, p. 21), new standards aimed at cutting consumption costs are being developed under the auspices of the Society of Cable Telecommunications Engineers.

Compared to energy management, the need for prepaid solutions is far less front and center in operators’ minds. Indeed, Snyder acknowledges, Wipro’s challenge is to convince operators that it has developed a way for them to make money in the under-served consumer market, notwithstanding long-held assumptions that the costs associated with high churn, low returns on marketing spend and bad debt are too high to merit pursuit of this sector.

“One of the few areas where there’s good growth potential is the unaddressed broadband space,” Snyder notes. “If you look at why people aren’t subscribing to broadband, they fall into three groups – one where the costs are too high; those who say broadband is interesting, but I don’t think I need it all the time, and people who are never going to take the service, like my 80-year-old uncle. The first two are by far the largest groups, and we think a prepaid solution can make a difference to a lot of those people.”

Prepaid service might make it possible to serve low-income households who might not otherwise qualify for broadband service or, for that matter, TV or voice, and to entice users who are not convinced they need broadband all the time but who may get hooked if they can sample it when they see a need. But the challenges of mounting prepaid service in cable are much higher than in mobile, where prepaid service options have become a staple of the business.

Supplying and installing cable modems, not to mention set-top boxes, puts a capital premium on starting a service along with an operations cost premium for acquiring customers who may not last. Ditto the costs of normal customer care if they can’t be amortized over a long-term relationship. And then there are the costs of maintaining a prepaid billing system where ongoing prompts for new payments represent an added burden to the usual billing cycle processes.

Wipro believes it has overcome these issues to the point where prepaid service can add significantly to operators’ bottom lines. “What we put together with Accelerate is a billing and operating support systems offer that leverages our IT, customer care and tech support outsourcing capabilities to allow MSOs to serve these kinds of customers at lower costs through a different approach,” Snyder says.

“Part of it is product simplification where prepaid service is much easier to activate and care for than the usual service bundles,” he adds. “Part of it is labor arbitrage where the minute a potential new customer calling into customer service is identified as a low-cost customer they are transferred to that lower cost service path. And our experience shows that costs incurred for supporting prepaid through our billing service are lower than the costs for in-house post-pay systems.”

That leaves the cable modem and/or set-top box if TV service is included in the prepay mix. Here there are several possible options, starting with, in the case of low-cost modems, simply charging the customer for the equipment as part of the initial payment, possibly including installation costs as well.

In some localities there are third-party support programs for providing low-income households essential equipment. And, in instances where the operator has supplied the equipment and a customer isn’t able to pay for the next period of service, there may not be a need to remove the equipment if the customer intends to resume service. Simply turning off the service might suffice.

“Accelerate is completely configured for collection, care and billing support based on all proven components that are in wide use outside the U.S.,” Snyder says. “It’s a cloud-based, scalable and highly flexible solution that can be seamlessly integrated with legacy systems so that you’re not operating two types of services from a back-office and operations perspective.”

The opportunity to generate profits on low-margin services comes at a key moment when the long-running growth trend in traditional triple-play is running out of steam. “There’s no certainty that new home security and energy management services are going to pick up that slack,” Snyder notes. “And there’s a limit to how long broadband growth can continue as a consequence of the death of DSL.”

Moreover, setting up a prepaid service system opens a path to new revenue opportunities among all classes of customers willing to pay for a part-time but not a full-time service. “Delivering service to vacation homes is an obvious example,” Snyder says. “We believe the time has come to experiment with prepay in the cable space.”