Analysys Mason RMA03 Interconnect and Partner Billing Jan10

Outlook
Interconnect and Partner Billing

Peter Mottishaw, Teresa Cottam and Larry Goldman
January 2010
Program: Billing & Customer Care
2009 Analysys Mason Ltd. All rights reserved worldwide.
Table of contents
Table of contents
Executive summary...................................................................................... 4
Market Share ............................................................................................... 6
Forecast ....................................................................................................... 9
Forecast by communications service ................................................................... 9
Forecast by region ............................................................................................. 10
Market drivers and inhibitors ...................................................................... 13

Drivers................................................................................................................ 13
High mobile subscriber growth .................................................................................... 13
Declining voice revenue and drive for cost savings .................................................... 14
Proliferation of non-telecom partners .......................................................................... 15
Bill disputes are increasing.......................................................................................... 16
New complex IP-based services ................................................................................. 16
Just-in-time buying and selling of capacity.................................................................. 18
Infrastructure sharing .................................................................................................. 18
Rate proliferation and change ..................................................................................... 19
Business inhibitors ............................................................................................. 19

Inertia combined with other priorities .......................................................................... 19
Lack of expertise ......................................................................................................... 20
Partner settlement projects are low in budgeting priority ............................................ 20
Business environment ................................................................................ 21

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Analysys Mason Ltd
Interconnect settlement ...................................................................................... 21

Roaming settlement ........................................................................................... 23
Content, application and advertising revenue share .......................................... 25
Buying an entirely new system .................................................................................... 26
Buying an adjunct system or module from existing interconnect or retail billing supplier
..................................................................................................................................... 26
Building a solution in house......................................................................................... 26
Outsourced service ..................................................................................................... 26
Market definition......................................................................................... 27
www.analysysmason.com
research@analysysmason.com
Partner and Interconnect Billing Definition ......................................................... 27
Analysys Mason Ltd

is registered in
England and Wales
Registration No. 5177472
CABS billing and reciprocal compensation in the US market ..................................... 33

Outlook
Interconnect billing ............................................................................................. 31

Roaming billing .................................................................................................. 34
Content and application partner billing ............................................................... 35
Vendor summaries ..................................................................................... 37

Amdocs .............................................................................................................. 37
Comptel.............................................................................................................. 37
2010 Analysys Mason Ltd.
Table of contents
Convergys .......................................................................................................... 37
Ericsson ............................................................................................................. 37
I-ConX ................................................................................................................ 37
Intec ................................................................................................................... 38
Oracle ................................................................................................................ 38
Sitronics ............................................................................................................. 38
Subex ................................................................................................................. 38
Telarix ................................................................................................................ 38
Valista ................................................................................................................ 39
Partner billing suppliers .............................................................................. 40

Recommendations ..................................................................................... 42
Recommendations for CSPs .............................................................................. 42
Recommendations for vendors .......................................................................... 43
List of figures
Figure 1: Partner settlement forecast ....................................................................................... 4
Figure 2: Partner settlement market share .............................................................................. 6
Figure 3: 2008-2013 Partner settlement forecast .................................................................... 9
Figure 4: 2008-2013 Partner settlement forecast by communications service ...................... 10
Figure 5: 2008-2013 Partner settlement forecast by region................................................... 11
Figure 6: Industry convergence.............................................................................................. 25
Figure 7: Partner and interconnect billing in the Analysys Mason segmentation .................. 27
Figure 8: General partner and interconnect scenario ............................................................ 28
Figure 9: Interconnect scenario.............................................................................................. 31
Figure 10: Mobile roaming scenario ....................................................................................... 34
Figure 11: Content and application partner billing ................................................................. 35
List of tables
Table 1: Comparison of partner and interconnect billing suppliers ........................................ 40

Outlook
Executive summary
Executive summary
A customer for telecom services has a contractual relationship with
a given communications service provider (CSP) who bills the
customer for services used. In the simplest case the CSP provides
the service a call within the CSPs network for example but in
many situations the service will require other service providers to
provide some of the service. Settlement is the process by which the
CSP who bills the end customer pays the other service providers
and third parties for their part in delivering the service. Interconnect
and partner billing software systems have evolved rapidly to
automate this settlement process.
Interconnect settlement software systems enable CSPs to
accurately record the volume and value of traffic (primarily voice
calls) that cross their network borders. CSPs terminating incoming
traffic from international destinations are able to claim a share of the
revenue from the originating CSP. Partner settlement software
systems provide equivalent capabilities for non-telecom partners
who provide content, applications and other services. This is the
fastest growing part of the partner and interconnect billing segment.
Figure 1: Partner settlement forecast
$700
$600
$500
$ millions
$400
$300
$200
$100
$Partner (CAGR 7%)
CY2008
CY2009
CY2010
CY2011
CY2012
CY2013
$418
$428
$448
$486
$528
$575
Source: Analysys Mason
We identify three major areas of partner and interconnect
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settlement;
Call termination settlement
Executive summary
Mobile roaming settlement
Partner settlement with content providers and other non-telecom
partners.
Call termination settlement is required when a call is made from one
CSP's network that requires termination on another CSP's network.
The originating CSP will bill the end customer. But it will be required
to pay one or more CSPs involved in the termination of the call. This
is the oldest settlement area, which has grown dramatically in the
last two decades with the deregulation of telecom markets and the
proliferation of mobile CSPs. It is now a mature area, but the
magnitude of the settlement charges (a significant percentage of
many CSPs revenue) creates opportunities for optimization of the
settlement infrastructure and process. Most call termination
settlements have been provided by third-party clearance companies,
but CSPs are starting to deploy their own platforms to support
settlement with major partners.
Mobile roaming settlement is required where the CSP subscriber
has roamed to another CSP and makes a call. Unlike interconnect
where settlement is usually performed by the CSP, settlement for
roaming calls commonly involves a clearinghouse or exchange such
as MACH or Syniverse. There are two main types of clearinghouses
used by mobile CSPs: data and financial. Some CSPs use
clearinghouses to exchange roaming data but prefer to settle
directly using their own settlement solution; others choose to
outsource both data exchange and settlement to a clearinghouse.
Partner settlement for service and content provided by non-telecom
partners is a rapidly changing and strategically important area. In
order to compete as mobile broadband is rolled out, CSPs need to
offer content, social networking, web 2.0 services, advertising,
search, location, gaming and other innovative services. There are
established internet and media companies that CSPs must partner
with to deliver these services. CSPs must also attract smaller
innovative partners to meet customer expectations. Partner
settlement systems address these types of relationships.

Outlook
Market share
Market share
The market share for interconnect and partner billing is shown in
Figure 2. The overall spend was $418 million in 2008. The top six
suppliers account for 43% of the market. This is a fragmented
market with the major billing vendors having the most significant
market share. Intec is the market leader with 14% market share
followed by Amdocs with 10%, Subex with 5%, Ericsson with 5%,
Telarix with 5% and Valista/Aepona with 4%.
Figure 2: 2008 Partner settlement market share
Intec is the long-time leader in this area by virtue of its strong

position in traditional interconnect billing. It has expanded its
product set largely by acquisition to add a range of capabilities
including carrier access billing systems (CABS). It has integrated all
of its interconnect billing, trading, routing, partner settlement and
management products into the wholesale business management
solution (WBMS). While no vendor is yet able to offer a complete
end-to-end solution for partner management and settlement, Intec is
now articulating a coherent, convergent vision of telecom partner
management with WBMS and is well placed to take advantage of
growth in this market.
Outlook
Amdocs is the leading supplier of CSP billing solutions globally.

Amdocs Partner Settlement Solution, based on Amdocs Partner
Market share
Manager, provides support for convergent partner settlement
including interconnect, roaming, content, digital advertising, MVNOs,
wholesale and dealer settlement. Amdocs Partner Settlement
Manager is a stand-alone product for managing the partner lifecycle
from registration to financial settlement and is part of the Amdocs
CES portfolio. In addition to settlement, the solution also provides
self-care and self-registration for partners, agreement management
and product and service management. When combined with
Amdocs QPass, Amdocs Partner Manager forms an end-to-end
digital commerce solution that provides support for a large number
of partners and potentially complex settlement arrangements. When
combined with Roam Clearing Manager the solution can be
extended to enable CSPs to in-source roaming clearing.
Ericsson is the leading network equipment supplier to CSPs globally
and a major supplier of software solutions. Ericsson's product set
derives from its own products such as the Ericsson Roaming Billing
Solution and Multimedia Brokering (IPX), as well as functionality
derived from its acquisitions of Drutt and LHS. The LHS solution
provides integrated customer care and billing for both retail and
wholesale customers. Drutt's MSDP (Mobile Service Delivery
Platform) solution - acquired in 2007 - provides multi-channel
support for a mobile service delivery business.
Subex has grown both organically and also by acquisition since it
was founded in 1992. Its original core expertise was in fraud
management and revenue assurance, but it boosted its partner
settlement and revenue assurance offerings with the acquisition of
UK-based Azure Solutions in 2006. The Subex solution suite now
provides revenue assurance, service fulfillment, fraud management,
data integrity management, risk management and interconnect/interparty management solutions. Typically Subex's
customers are based in Europe, Middle East and Africa (EMEA) and
are either a fixed (PSTN) or mobile CSP. The extensive revenue
assurance and fraud management capabilities the company
provides makes it appealing to CSPs who need to proactively
assure their partner settlement - particularly those that are at high
risk of partner fraud or of inaccurate invoicing.
Telarix is a specialist in traditional interconnect settlements. Telarix
offers a suite of modules iXTools that support end-to-end
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management and optimization of CSPs interconnect businesses.

Unlike most other interconnect settlement vendors, Telarix comes
from a background of routing software although it has substantially
Market share
expanded its proposition to include interconnect settlement, revenue
assurance and information exchange (via its iXLink platform).
IXTools supports routing, trading, business intelligence, optimization
of rates, rating and billing for different types of traffic as well as audit
and dispute management. It provides turnkey solutions for CSPs
that do not have the expertise to handle settlement solutions,
particularly international agreements, in-house.
Valista is a specialist focused on partner settlement with content
providers and other non-telecom service providers. It was acquired
by Aepona in June 2009 with the aim of offering a complete platform
for providing exposing and monetizing network and service
enablers.

Outlook
Forecast
Forecast
Changing business models make partner and interconnect billing
very important. CSPs have much more roaming revenue and are
working to manage the cost of those settlements. They are signing
new partners for content and advertising that has little impact now
but helps drive growth in the later years of the forecast. This
segment is held down by the recession but will grow from 2010
2013 at a stronger 9% CAGR (see Figure 3). Today it constitutes
10% of total billing spending.
Partner and interconnect is heavily influenced by two factors that
hold down spending for commercial systems. One is that CSPs tend
to develop partner settlement in an adhoc, in-house-driven manner.
The other is that most mobile roaming settlements are handled by
clearinghouses that provide roaming settlement as an outsourced
service.
Figure 3: 2008-2013 Partner settlement forecast
$700
$600
$ millions
$500
$400
$300
$200
$100
$Partner (CAGR 7%)
CY2008
CY2009
CY2010
CY2011
CY2012
CY2013
$418
$428
$448
$486
$528
$575
Forecast by communications service

Figure 4 shows the forecast broken out by communications service
type. Traditional interconnect settlements for PSTN services decline
as PSTN services themselves decline.
Outlook
Mobile settlements growth of 9% CAGR is driven by a number of

factors. CSPs are supporting more roaming partners and supporting
Forecast
more services for their roaming customers. They are also deploying
software to support direct roaming settlements rather than using
clearinghouses for all cases. Mobile is also the biggest area for
content settlement and in the later years will be dealing with
advertising settlements.
Business and wholesale services settlements are very small at $36
million last year but will grow at 12% CAGR to be over $60 million in
2013. CSPs are providing more business data and ICT services on
a multi-national basis that calls for more settlements with operators
who control access facilities in other regions or countries. Cloud
computing will also lead to more business services settlements.
Residential broadband settlements are driven by many of the same
factors that affect mobile services. CSPs are providing video content
and specialized services such as gaming through partners. They
already have significant advertising settlements, which will continue
and become more complex.
Figure 4: 2008-2013 Partner settlement forecast by
communications service
$350
$300
$ millions
$250
$200
$150
$100
$50
$-
CY2008
CY2009
CY2010
CY2011
CY2012
CY2013
Mobile (CAGR 9%)
$199
$214
$228
$255
$280
$310
PSTN (CAGR -9%)
$93
$81
$72
$68
$63
$57
Business (CAGR 12%)
$36
$34
$40
$46
$53
$63
Res BB (CAGR 10%)
$90
$98
$108
$117
$132
$144
Forecast by region
Outlook
Figure 5 shows the partner settlement forecast by region. North

America (NA) is significant but has the least growth while all other
regions have some notable growth.
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Forecast
NA put interconnect settlement on the map with all types of ILECs,
CLEC, IXCs, rural ILECs and mobile CSPs terminating voice traffic
for each other. This led to a lot of spending that still continues but
does not sustain much growth. Many of the major CSPs handle a
great deal of their partner settlement systems development and
maintenance in-house. We expect this to continue to be a factor as
content settlements grow and advertising settlements become
important. However, North American CSPs will spend money on
these new areas creating opportunities for ISVs and other
independent suppliers. Commercial spending in NA will match the
trends shown in Figure 19; while PSTN-related spending declines,
other service areas will drive new spending decisions.
Figure 5: 2008-2013 Partner settlement forecast by region
$300
$250
$ Millions
$200
$150
$100
$50
$-
CY2008
CY2009
CY2010
CY2011
CY2012
CY2013
NA (CAGR 1%)
$100
$97
$99
$101
$104
$107
CALA (CAGR 9%)
$32
$34
$36
$40
$45
$51
EMEA (CAGR 7%)
$194
$201
$211
$233
$253
$276
APAC (CAGR 9%)
$92
$97
$102
$113
$126
$141
Developed areas of EMEA and Asia Pacific (APAC) are starting to

spend money on content partner settlement and evaluating the
ways to handle advertising. They are also spending for roaming
settlements that do not require clearinghouses. EMEA and APAC
mobile CSPs have more roaming revenues, more volume among
key roaming partners and more roaming settlement costs that do
North American mobile CSPs.
Central and Latin America (CALA) and the developing areas of
Outlook
EMEA and APAC are heavily focused on mobile settlements. They

have termination agreements with more in-country networks and
have growing roaming revenues. Many developing market CSPs
11
Forecast
have used adhoc methods of interconnect settlement and will be
turning to more complete commercial solutions during the next few
years.

Outlook
12
Market drivers and

inhibitors
Market drivers and inhibitors

Increasing competition and the introduction and proliferation of
complex IP-based services are transforming the partner and
interconnect billing market. The pressure for CSPs to optimize their
business processes to reduce operational expenditure and to
comply with legislation and regulation is also stimulating the market.
The market is changing rapidly, however, as CSPs move towards
providing complex services and new business paradigms. Legacy
solutions will struggle to cope with these and replacements and
upgrades are likely to be supplied by either third-party vendors or by
outsourcing because in-house development has become much less
attractive to most CSPs.
Drivers
The principle market drivers are:
High mobile subscriber growth
Declining voice revenue and the drive for cost savings
Proliferation of non-telecom partners
Increasing number of bill disputes
Introduction of new complex IP-based services
Just-in-time buying and selling of capacity
Network sharing
Rate proliferation and change
The following paragraphs provide more background on the market
drivers.
High mobile subscriber growth
High mobile subscriber growth; particularly in emerging markets,
such as the Middle East, Africa, Latin America and emerging Asia,
will increase the amount of mobile and roaming traffic. It will also
stimulate the demand for new content and applications. These

Outlook
effects will directly drive spending on partner and interconnect billing

solutions. The global recession has slowed mobile subscriber
growth, but growth rates are still high and will accelerate as the
13
Market drivers and

inhibitors
recession comes to an end. This is reflected in our forecast for
spending in this segment.
A related affect is the increasing international mobility of mobile
subscribers. This stimulates more international and roaming calls,
increasing the volume of interconnect and roaming traffic as well as
the number of calls between different network types. These effects
mean CSPs need more interconnect partners to cover the
increasing range of countries their customers are travelling to and
legacy solutions are put under pressure due to increased volumes
of both partners and traffic. This will therefore drive the replacement
of legacy solutions.
Declining voice revenue and the drive for cost savings
In most mature regions CSPs are experiencing declining voice
revenues as competition and regulatory changes drive down the
price per minute and the introduction of flat rate plans. Even in many
emerging markets CSPs are experiencing pricing pressure on voice
calls. At the same time call minutes continue to grow. This
combination of increased usage and declining revenues puts the
operational costs of settlements under significant pressure.
In the European Union (EU), for example, the roaming regulation of
2007 now limits the amount CSPs can charge customers for
roaming calls in other EU countries. The EU had called for a
reduction in SMS roaming charges but found no change in average
prices after one year of asking for self-regulated decreases. In
September 2008 it announced its intention to reduce the price of
SMS while roaming by 60% from 1 July 2009. As roaming charges
are reduced in Europe, CSPs will have to increase their operational
efficiency in order for these services to remain profitable. This will
put pressure on the entire partner ecosystem to ensure that
inefficiency is not disguised in higher prices, because these higher
prices will no longer be sustainable.
In the US, there has been great emphasis on controlling operational
costs, both in terms of minimizing them and of increasing visibility.
This is due to wide-reaching legislation such as Sarbanes-Oxley
(SOX), which is designed to ensure better and more transparent
financial control. SOX has a direct impact on partner and
interconnect billing, since partner costs are a major component of a
CSPs operational costs. Due to SOX it has become essential that
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CSPs have a much better understanding of their net position with

respect to partner settlement, as well as for them to have taken
steps to combat fraud (including partner fraud). SOX compliance
14
Market drivers and

inhibitors
has already stimulated demand and will continue to do so - for
outsourced partner settlement and for technology that improves
partner interaction by speeding up information exchange, providing
audit trails and reducing disputes between CSPs.
Proliferation of non-telecom partners
The rapid growth in mobile and fixed broadband has created new
service opportunities for CSPs. To fully exploit these, CSPs will
have to deal with an increasing number of non-telecom partners.
The resulting partner proliferation is putting pressure on legacy
systems that were not designed to scale to this extent and is raising
a number of new issues for CSPs, including an increased risk of
revenue assurance and fraud issues. Since partnerships are no
longer necessarily between established, well known and trusted
partners, CSPs now need to monitor their partnerships more closely
to avoid the possibility of bad debt, fraud and poor quality services
affecting their own business. They therefore need to have more
visibility of current balances in order to detect problems at an earlier
stage. And increased visibility also enables them to invest in
partners that are positively contributing to the business. Legacy
systems, however, were designed for a time when partner
settlement cycles were much slower and are not optimized to deliver
this type of key data in the timescales now required.
From a commercial perspective, CSPs need to offer an efficient
partner platform to attract the best quality and most innovative
partners. Paying these partners on-time and accurately is an
important aspect of this, as is providing them with visible, up-to-date
information about balances owed to them so they can manage their
own business more efficiently. Legacy systems, however, are
usually disconnected from partners; with information being
exchanged in formats such as excel sheets or CSV. The onus is
currently on partners to check, scrutinize and dispute balances, and
the timescales for receiving this information are determined by the
CSPs billing cycle. Time pressure combined with the relative
inaccessibility of information means that many CSPs pay bills
without sufficient scrutiny. In addition, it is difficult for business
partners to judge their net position and therefore comply with
legislation that requires them to have tight governance over their
financial position. Ideally, information would be provided on a secure
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portal and updated regularly, or delivered in a manner that allows

analysis and interrogation. Investment in a range of partner
15
Market drivers and

inhibitors
systems, including billing, is required to deliver on this commercial
vision.
It should be noted that new entrant partners will favor outsourced
solutions as they may lack expertise in this area and believe that it is
not a core competence. In addition, the pay-as-you-grow model
favored by outsourcers will be attractive as it requires less upfront
investment.
Bill disputes are increasing
Driven by the proliferation of partners, lack of operational efficiency
and increasing pressure on Opex, the number of bill disputes
between CSPs is increasing. These can be both disruptive and
costly to settle, as they slow down cash-flow and consume
resources to resolve them. Bill disputes come in many forms: some
are due to poor information or data exchange; others due to
inaccurate processes or even fraud; others are over commercial
terms.
An example of the latter type of dispute occurred in early 2008 when
AT&T asked the FCC to arbitrate between itself and Sprint Nextel.
AT&T and Sprint had a bill-and-keep arrangement in nine US
states, which had been in place since 2001. In 2007 Sprint decided
it wanted to expand this arrangement to all its subsidiaries and in
September 2007 it persuaded Kentuckys public service commission
to allow it to expand its bill-and-keep agreement with AT&T to two
other subsidiaries within the state. Sprint says its position is backed
by an undertaking from AT&T to allow competitors to take
interconnect agreements they have in one state and replicate them
in others. AT&T argues that this was intended to reduce the cost of
negotiating agreements, not to allow competitors to avoid payment
for interconnect services. While neither company has provided
financial details on these deals, it is likely that it represents
hundreds of millions of dollars.
Improving the management of commercial and financial
arrangements between partners is vital to avoid bill disputes. When
CSPs invest in this area to improve the exchange of commercial
information such as rates and terms, combined with audit trails and
proof of agreed terms, the number of costly disputes drops
drastically.
New complex IP-based services
Outlook
In addition to increasing the number of potential new partners in the

value chain, the introduction of IP-based services has added a
16
Market drivers and

inhibitors
range of new factors that partner settlement systems will have to
accommodate. For example, CSPs now need to manage complex
content agreements including intellectual property rights
management issues. A key trend in rights management is to cut
rights finer and finer. CSPs need to ensure that they have the right
to use content when and where they wish to. While they may own
the right to use the content via SMS, for example, they may not hold
the right to use it on a website; they may have obtained the rights to
use it in the US, but not hold the rights to use it in Europe.
This is set to become a highly problematic area: large content
providers and aggregators do not always have precise visibility over
the rights they hold, while CSPs need to link rights information with
service design and delivery as well as partner settlement. This will
ensure that CSPs do not breach intellectual property rights and that
they pay rights owners the fees owed to them.
Complex IP-based services are also driving the requirement for realtime, active and web-based partner management. This allows
partners to securely access CSPs systems over the Internet and
monitor and query financial balances, agreements and other
partner-related information. (See Partner proliferation section
above.)
With the advent of long-tail service support and more sophisticated
service delivery platforms (SDPs) based on service-oriented
architectures, content and application billing is set to change once
again. The wholesale challenges of supporting long-tail services
are to handle a much wider variety of partnerships, some of which
may be low-transaction volume, low value and transient; but others
may prove to be highly lucrative and longer term partners.
Functionality will be required to closely monitor partner relationships
and highlight issues such as: low-value partners who transition to
becoming higher volume partners; partners that are causing
problems in the value chain (e.g. by supplying low quality service);
fraudulent partners. Better visibility allows CSPs to target more
support and better terms at the best partners, to garner more loyalty
from them and thereby potentially gain more revenue from them.
Partner settlement systems will therefore have to handle much
faster partner lifecycles, with the ability to onboard and off-board
partners quickly and at regular intervals. This faster pace of partner
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relationship will also drive the requirement for better integration with
revenue assurance and fraud management to ensure partners pay
what they owe for use of CSP services.
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Market drivers and

inhibitors
With the advent of service oriented architecture (SOA)-based,
sophisticated SDPs, CSPs will also need to handle the issue of
billing for core telecom assets that are exposed as service building
blocks to third parties. This is a particularly new and uncertain part
of the partner settlement market
Just-in-time buying and selling of capacity
One feature of the new business environment for partner settlement
(see Business Environment section) is that carriers are increasingly
buying and selling capacity in much shorter time frames and
sometimes just-in-time. Legacy partner settlement solutions are not
built to support this type of model but were intended to support a far
more sedate partnership environment.
Infrastructure sharing
Infrastructure sharing has been a feature of some markets for a
considerable time, but the range and number of infrastructure
sharing agreements has risen as a result of the build out of 3G
mobile networks. Infrastructure sharing comes in several forms
including basic unbundling and intra-country roaming, as well as
collocation and spectrum sharing and is a form of cost
optimization.
With intra-country roaming CSPs agree to build their networks in
non-overlapping areas and permit inter-network roaming backed by
a commercial agreement.
In the US, intra-country interconnect is the norm. Long-distance
carriers use and pay local exchange carriers for transiting and
terminating calls (carrier access billing); local exchange carriers
charge one another (reciprocal compensation) and long-distance
carriers charge one another (interconnect billing).
In the EU, Directive 97/33/EC encourages the sharing of facilities
and properties, but CSPs are expected to comply with local
competition law
In India the government revealed new guidelines for active
infrastructure sharing in April 2008, which permitted sharing of
antenna, feeder cable, nodes, radio access network and
transmission systems (but not spectrum)
In the Middle East and Africa, intra-country roaming is used
Outlook
extensively in countries like Jordan, Morocco, Oman, Saudi Arabia

and the United Arab Emirates, while unbundling is employed in
countries such as Egypt and Saudi Arabia.
18
Market drivers and

inhibitors
In the UK mobile CSPs 3 UK and T-Mobile agreed to 3G network
sharing in late 2007. BT established Openreach as a separate
business to provide equal access to the local loop to both its own
business units and those of about 400 rivals.
The type of infrastructure sharing employed and the relationship
between the carriers will determine the impact on partner
settlement, but in general it will increase pressure on legacy
solutions and stimulate demand for replacement.
Rate proliferation and change
The number of rates available for roaming and interconnect has
risen substantially as the number of potential partners has
increased. The speed of rate change has also substantially
increased. To take advantage of the best rates CSPs need a
solution that can upload new rates quickly and accurately.
Preferably it should highlight changes or rates where action needs
to be taken. Very few, if any, legacy solutions provide this type of
functionality and therefore this requirement will drive the purchasing
of new solutions.
Business inhibitors
Inertia combined with other priorities
Lack of expertise
Partner settlement projects are low in budgeting priority
Inertia combined with other priorities
There is great inertia in this part of the BSS/OSS market. The
market is characterized by a high level of custom-built or selfdeveloped solutions and replacement cycles are far longer than for
other BSS/OSS solutions. There is a tendency to view partner
settlement as a cost that needs to be managed, rather than an area
that can drive revenue increases, and thus traditionally there has
been a much lower level of investment or interest. Analysys-Mason
was told by a European CSP during the research for this report that
although their self-developed system wasnt coping with increased
volumes or complexity and its weaknesses were increasing
operational costs considerably, the interconnect department had
been told that they would have to manage. Asked what they
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intended to do, the CSP said they would have to find internal
resources to try and add on functionality and bolster their existing
system, even though they knew this was by no means the best way
to proceed.
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Market drivers and

inhibitors
In addition, CSPs may recognize this as an area that needs
investment and the positive impact this will make to their business,
they have even more urgent things they need to do first. Partner
settlement may not come high up enough on the list of priorities for
many CSPs and therefore investment will be delayed. This may not
be due to a lack of investment cash, but rather lack of personnel
and expertise to oversee change and an unwillingness to disrupt a
process, which while not optimal is still working. While there is a
relative low level of efficiency across the industry, CSPs may judge
their performance adequate when compared to peers, rather than
inadequate when compared to an arbitrary standard of best
practice. The effect will be to slow down investment and
transformation overall. However, when enough first movers improve
their partner management and settlement processes and solutions,
the bulk of the market is likely to swiftly follow.
Lack of expertise
Real heavy-duty expertise and thought leadership in this sector is
relatively rare. Many CSPs simply lack the expertise in-house to
transform the partner settlement processes. If they possess
expertise, then the staff is generally tied up trying to keep existing
systems running. This will impede renewal as implementing a new
solution or process requires available expertise and time to retrain
on new systems. Outsourcing or using a specialist third-party
supplier with in-house expertise will help overcome this barrier to
some extent.
Partner settlement projects are low in budgeting priority
Given the current economic climate, some CSPs may simply lack
the free cash to invest in partner settlement. Investing now to save
money later may be an attractive prospect, but it requires upfront
investment CSPs might not have. This can partly be overcome via
an outsourcing model or by risk-sharing (paying the vendor on the
basis of savings, for example).

Outlook
20
Business environment
Interconnect settlement
The partner settlement market was relatively stable for a long time.
Originally, interconnect was between large incumbent operators. In
order for their customers to send or receive data or calls to and from
customers of other CSPs, all CSPs involved in the origination,
transit and termination of the call or data session needed to be
interconnected at the network level. To begin with interconnection
was not billed, as incumbent CSPs operated on a biller-keeps-all
basis. However, increasing asymmetry on routes stimulated the
requirement for CSPs to monitor the amount of call traffic transiting
or terminating on their networks and bill for it.
CSPs therefore moved to a system of netting off, whereby two
carriers added up the calls they had sent to one another over the
previous period and settled the net difference using a settlement
rate.
At this point interconnect billing was generally performed on paper
or spreadsheets. Some of the larger incumbents with a high level of
wholesale traffic began to build their own in-house billing systems;
there was no third-party billing systems market at this time.
Gradually, the technology and expertise developed inside
incumbents led to the spinning out and development of a third-party
vendor market. However, the vast majority of interconnect billing
was still performed using in-house systems and even spreadsheets.
With increasing deregulation, and due to high levels of asymmetry
(the US in particular was paying around USD3 billion in settlements
to other countries in 2003), CSPs began to move to commitment
deals rather than use settlement rates. The main types of
commitment deals are minutes swap (where carriers agree to
terminate a pre-determined amount of traffic for one another) and
pay or play deals (where carriers pay for a given volume of traffic to
be terminated with excess minutes charged at a higher rate).
Commitment deals have changed the infrastructure requirements for
CSPs because they have driven up trade with other carriers in the
wholesale or carrier-to-carrier market. To enable CSPs to avoid
excessive costs or loss of revenue from low-traffic routes, bandwidth
Outlook
exchanges have sprung up to enable them to buy and sell capacity

anonymously. This, in turn, has increased price fluctuation, such
that carriers can now gain considerable competitive advantage if
21
they can access lower prices quickly and risk losing revenue if they
do not react to prices going up. The result is that CSPs now need
increased automation, least-cost routing functionality and improved
visibility and loading of rates. The sheer volume of rates available
means that CSPs increasingly need automated ways of analyzing
rate data to find changes to rates and to select the best rates for
them. However, least-cost pricing is not the only consideration that
needs to be taken into account, because least-cost routes may offer
low service quality. Therefore carriers also need information on the
quality of service (QoS) that is being offered so they can select the
best-cost route for them.
Information exchange is becoming a key aspect for interconnect
billing, as this is an area that adds to costs, fuels disputes and slows
settlement cycles. Typically, CSPs receive data from other CSPs,
from clearinghouses and from exchanges, which they have to
process, reconcile and pay. This data comes in a variety of different
formats and may very well not be accurate due to factors such as
duplicated, missing or incomplete records. However, the volume of
data is so large that many CSPs take a pragmatic approach to
dealing with it and tend simply to pay if the bill seems reasonable;
some will attempt basic bill verification by using sample data. Thus
there is often considerable inaccuracy that goes unchallenged.
The interconnect market is characterized by a high level of in-house
or custom-built solutions some of which are still as rudimentary as
a complex spreadsheet. However, there has been a slow march
towards third-party solutions and the factors discussed in Market
Drivers favor this trend continuing. It is likely that outsourcing of one
form or another will become much more common in the interconnect
market. This might be use of a third-party data exchange (such as
that provided by Telarix) or of an outsourced solution (such as that
provided by i-conX). Many interconnect billing vendors now offer
managed solutions or ASP solutions as options. The uptake of
outsourced solutions is favored by the relative scarcity of expertise
in the market, and by the fact that many mid-sized or smaller CSPs
view interconnect as a necessary business cost that needs to be
managed, rather than a revenue-generating opportunity.
Outsourced solutions allow CSPs that do not see interconnect as a
core competence to concentrate their efforts elsewhere while
Outlook
ensuring that this vital function is performed efficiently.

The use of clearinghouses for interconnect settlement makes a lot of
sense in markets where there is relatively little investment in
22
solutions. However, this model has failed to take off in recent years
not because it is not a suitable solution but because of factors
such as political reasons.
High on the agenda for many CSPs is to speed up settlement cycles
for interconnect, to make processes auditable to achieve
compliance with relevant regulation and legislation and to achieve
greater business-driven control of interconnect costs. Keys to
achieving greater control are visibility of information and the ability to
apply business intelligence to support better decision-making.
Interconnect costs are significant for the average CSP typically
generating between 25-60% of some CSPs revenues and
accounting for a similar proportion of costs for other types of CSP.
Even small changes in rates or the cost of administering
interconnect can result in many millions of dollars of profit lost or
gained.
Roaming settlement
GSMA figures indicate there are now 700+ GSM mobile operators in
218 countries, serving more than 2.5 billion customers. Added to
this are customers of other mobile technologies such as CDMA. An
increasing number of these subscribers are roaming outside their
home country, requiring mobile operators to collect and settle
roaming charges in a wide variety of currencies and under different
regulatory and tax regimes. Roaming revenues are considerable
estimated at $65 billion in 2006 and lucrative for CSPs.
In addition, intra-country roaming long the norm in the US is
increasing in other countries. In particular the cost of building out 3G
infrastructure has seen mobile CSPs agree to allow roaming
between one anothers network infrastructure as a way of
decreasing build-out costs.
Unlike interconnect, where settlement is usually performed by the
CSP, settlement for roaming calls commonly involves a
clearinghouse or exchange. There are two main types of
clearinghouse used by mobile CSPs: data and financial. Some
CSPs use clearinghouses to exchange roaming data and but prefer
to settle directly using their own settlement solution; others choose
to outsource both data exchange and settlement to a clearinghouse.
Outlook
Clearinghouses are commonly used because they simplify data

exchange and conversion as well as the management of a large
number (often over 200) of complex roaming agreements. Financial
23
clearinghouses can handle gross settlement whereby each
company pays each others invoices, as well as bilateral net
settlement (netting off) and multilateral net settlement (where all
CSPs agree to a common settlement period, funds are pooled and a
single transfer to or from the pool is used for settlement). In addition
to data and financial settlement, clearinghouses also offer other
services to CSPs, such as advice, consultancy and expertise to help
them design contracts and train staff.
Using a clearinghouse can be very expensive for larger operators,
as payment is typically by volume of call detail records (CDRs).
Some CSPs prefer to buy roaming software and perform financial
settlement internally; others use a hybrid approach and use
clearinghouses to settle with some partners while settling with
others using their own internal systems.
Until recently there was very little incentive for mobile CSPs to
decrease charges for roaming, which could be as much as 15% of
their profit. However, regulators such as the EU are now actively
regulating to decrease the cost of both voice and data roaming. This
puts pressure on mobile CSPs to decrease roaming costs in order
for them to maintain profitability.
On 1 October 2008 compliance with the Near Real Time Roaming
Data Exchange (NRTRDE) standard became compulsory for GSMA
members. NRTRDE is a method of reporting customers' activities in
the visited network, which means CSPs must send limited
information for fraud analysis within four hours of calls or data
sessions being made. This enables the home network to detect
anomalous and high network usage in near-real-time. CSPs that fail
to make the four hour window will be liable for any fraud associated
with the call or data session. The GSMA says that the standard will
reduce the incidence of roaming fraud by up to 90%, but it exposes
those who are not fully compliant to even more risk as fraudsters will
target those they perceive to be the softest targets.
The main problem with NRTRDE is the time between the data
exchange and the revenue loss caused by fraud. At the time of
settlement the visited network must prove up to several months
after the event that it sent the required information to the home
network within the four hour window. This could potentially create
more partner disputes - whereby partners try to prove or disprove
Outlook
that the data was sent unless undisputable audit trails are
available. Thus, although NRTRDE is focused on fraud
24
management, it impacts on both settlement and partner
management processes because of the requirement to retain data.
Content, application and advertising revenue share

Settlement for service and content provided by non-telecom
partners is a rapidly changing and strategically important area.
Figure 6 illustrates how the complexity of the telecom ecosystem
has increased. At the center is the service offering for the end
customer. This has moved beyond communication to include
content, social networking, web 2.0 services, advertising, search,
location and gaming.
Figure 6: Industry convergence
Advertising
Media &
Entertainment
Internet
Innovators
Existing services
migrating to the net
Rich entertainment & communications experience & more
Mobile
Operators
Fixed
Operators
Cable
Operators
This presents new challenges to settlement solutions as it

introduces a new range of billing parameters that have to be
handled, as well as new business challenges that have to be
addressed. Legacy interconnect solutions are not built to cope with
this type of settlement and CSPs have a number of choices when
looking to support partner settlement in an increasingly complex
ecosystem. The main options are; buy an entirely new system, buy
an adjunct to an existing system, build a solution or use an
outsourced service.
Outlook
25
Buying an entirely new system
This approach is often taken where digital commerce, advertising
and content are handled by a different team or division from
interconnect settlement. It can be quicker to select and implement,
but can also be more expensive. The lack of integration with
interconnect can make having a business-level view of complex
services revenues and costs more difficult to achieve. It can also
result in a fragmented way of dealing with partners that have
multiple relationships with CSP.
Buying an adjunct system or module from existing
interconnect or retail billing supplier
A CSP may choose to expand an existing billing system to support
content partner settlement. Where the vendor supports it, this may
re-use some of the core functionality of the existing interconnect
settlement engine supplemented with a new module to handle
specific needs of content. This can be cheaper and may make
dealing with partnerships easier because they are handled by one
team. It may also make having a business-level view of partners and
complex services easier to achieve. However, the range of
functionality may not be as cutting edge as when using a specialist
provider.
Building a solution in house
A CSP may judge that existing third-party solutions do not provide
the functionality required, may already have an in-house
interconnect solution, or may have in-house expertise to do this.
This may allow greater differentiation than buying a third-party
solution. However, there are fewer CSPs that have IT expertise
readily available today so this is becoming a much less costeffective solution than it once was. CSP may judge that IT expertise
may be better used elsewhere.
Outsourced service
A CSP may not have in-house expertise to run or may not wish to
commit time and money upfront as it believes revenues to be
uncertain. Using an outsourced service allows pay-as-you grow
options and may provide vital extra expertise. However, many CSPs
are concerned about loss of control of what is perceived as a vital
new revenue stream.
Outlook
26
Market definition
Market definition
Analysys Mason uses the buying behavior of CSPs to define market
segments. Figure 8 below illustrates the 23 functional categories of
telecoms software analyzed by Analysys Mason grouped under their
major segments: service assurance, service fulfillment, billing,
customer care, service delivery platforms and network management
systems. The partner and interconnect billing segment is
highlighted.
Figure 7: Partner and interconnect billing in the Analysys
Mason segmentation
Partner and interconnect billing definition

The need for partner and interconnect settlements arises because a
CSP must sometimes use other CSPs and service providers to
deliver the service required by the end customer. We can define
three types of roles that a service provider (including CSPs) can
play for the end customer;
1. Billing CSP; has the contractual relationship with the end
customer and bills the end customer for the use of the
service.
Outlook
2. Service controlling CSP or thrid party; directly controls the

end customers access to the service.
27
Market definition
3. Service providing CSPs and/or third parties; provides part or
all of the service to the end customer.
In the simplest case of a phone call that originates and terminates
on the network of the billing CSP all three roles are provided by the
billing CSP. In the most general case, shown in Figure 8, all three
roles are played by different CSPs or third-party service providers.
In this report we focus exclusively on where the end customer
relationship is with a CSP and not where it is with a noncommunications related service provider.
Figure 8: General partner and interconnect scenario
Authentication
and payment
Billing CSP
Usage records
Billing
Relationship
with end
customer
Controls
customer
access to
service
Delivers the
service
Service
Controlling CSP
or 3rd Party
Authentication
and payment
Usage
records
Interconnect
Service
Interconnect
Networks CSPs
Providing
Networks rd
and/or 3
Parties
End customer
The main interactions among service providers are shown in Figure

8. The principal flows are usage records flowing back to the billing
CSP quantifying how the end customer has used the service.
Payments flow in the opposite direction.
Originally interconnect billing was performed manually and then
performed using Excel spreadsheets. Even today, there is a high
penetration of home-built system and CSPs in many regions have
been relatively slow to upgrade these to modern third-party or
outsourced solutions.
We identify three types of partner and interconnect settlement;
Outlook
Interconnect billing: transiting or terminating calls that originated

on another network e.g. interconnect and CABS
28
Market definition
Mobile roaming: specific to the mobile market and can be for
either inter-country or intra-country calls or data sessions
Content partner billing: billing for content and applications
provided by non-CSP third parties
These are defined in detail later in this section.
As services and market dynamics have become more complex, an
increasing proportion of telecom services are composed of
component services supplied by partners, although services
supplied entirely on-network (for example, a voice call between
users of the same network where the call is carried in its entirety
over that CSPs own network infrastructure) still do not require
partner or interconnect billing. With the increase in service and
market complexity, however, there are now more partners, more
types of partnership and new forms of partner billing including:
Billing for content and applications used in complex IP-based
services
Billing for the use of core telecoms assets that are exposed as
service building blocks to third parties.
While partner billing is similar in terms of the type of relationship
being supported, in reality CSPs usually handle each type of partner
billing in a different way. Some CSPs particularly smaller ones
use their retail billing engine to perform their partner billing and have
not invested in additional functionality; some use an adjunct model
from their retail billing supplier; some invest in extensive specialist
functionality (typically large fixed CSPs) and some have chosen to
outsource interconnect billing (common for smaller CSPs in growing
markets, and for CABS). But while it is certainly possible to use a
retail billing system to bill for partner and interconnect services, it
should be noted that these differ from retail billing in a number of
key aspects:
There are fewer invoices for partner billing but each is much
greater in value, volume and complexity than a typical retail bill.
Whereas retail billing consists of millions of accounts each with
a small amount of data; partner billing consists of far fewer
accounts but each with a large volume of associated data
(potentially millions of data items)

Outlook
Pre-paid mobile does not generate retail bills but does generate
interconnect and partner bills
Unlimited calling plans do not require a detailed call record for
end user billing, but do require one for settlements. There is a
29
Market definition
much higher rate of error in interconnect bills and these errors
can have profound effects on a CSPs financial stability
Interconnect charges may be incurred for all call attempts rather
than just those that succeed and are charged to the retail
customer
Interconnect bills reflect the whole route of the call, not just the
origination and termination points.
While interconnect and partner billing solutions can be implemented
in a relatively simple fashion, they may also be integrated with a
number of other systems to provide a convergent, proactive and
business-oriented view of capacity, content and applications being
consumed. In a complex implementation partner and interconnect
billing solutions will be integrated with:
Fraud and revenue assurance to help maximize revenues
Complex rating to support innovative and dynamic pricing
Relationship management, including agreement management,
dispute management and self-care, to minimize the cost of
managing partners, monitor their value and any problems
arising from the partnership and enable CSPs to build a
profitable business with their most valuable partners
Mediation
Business optimization to enable key data about destinations,
utilization, QoS, discrepancies, margin analysis, trending, rate
offers and so on to be analyzed to improve business
performance
Least-cost routing/capacity trading to enable analysis of rates,
agreements, quality levels, and volumes to ensure optimal
routing, enabling CSPs to deliver against their customers
service expectations while maximizing their margins
Network management to maximize utilization of existing
capacity, manage and plan network traffic, and plan new
network build in response to forecast increases in demand
Financial solutions, to support invoicing, posting to general
ledger, purchase order matching, and so on.
For less complex implementations some or most of this functionality
may be provided by the interconnect billing system, or may be
Outlook
absent. In many carriers, interconnect and partner billing has for

many years been viewed as overhead and attention was focused on
minimizing the cost of supporting it. This meant that while CSPs
30
Market definition
invested in customer-facing retail billing systems, they were less
willing to invest in partner and interconnect billing solutions.
However, partner billing now embraces the need to minimize costs
by actively managing charges paid for services supplied by other
carriers and becoming a revenue-generating process due to the
advent of complex, content-based services.
Interconnect billing
Interconnect is the term used for connecting different CSPs
networks in order that calls or data services can be transited across
or terminated on a network other than the originating network.
Interconnect billing systems support charging for these interconnect
services. Figure 9 shows the generic interconnect scenario. In this
case the billing CSP (see Figure 8) also provides service access
control and call origination. Call termination is provided by the CSP
where the called party is currently located. Additional CSPs may be
required to carry the call and in the case of mobile networks, to
locate the called party.
Figure 9: Interconnect scenario
Billing CSP also controls

service and provides call
origination
Billing
Relationship
with end
customer
Controls
customer
access to
service
End customer
Authentication
and payment
Usage
records
Delivers the call

termination service
Interconnect
Interconnect
CSPs
providing
Networks
Networks
transit
and call
termination
Interconnect can be either between CSPs in different countries
(international or inter-country interconnect) or between carriers in

the same country (intra-country interconnect). As discussed in the
Outlook
Business environment section, interconnect payments can generate

considerable sums for some carriers and represent large pay-outs
31
Market definition
for others. Interconnect bills can have profound financial impacts
and may very well be the single largest operational charge for many
CSPs.
The interconnect market encompasses a range of billing models
from rough biller-keeps-all models and simple peering arrangements
to more precise billing for usage and ultimately dynamic bandwidth
marketplaces. As competition enters a market, the interconnect
billing model typically becomes more sophisticated as the number of
partners rises. This, in turn, stimulates the requirement for more
sophisticated partner billing solutions. In a non-competitive market
where few international calls are made or received there may be
little requirement for such sophisticated solutions, however, although
these types of markets are becoming less common.
Currently, many CSPs perform interconnect billing using a homegrown solution that may be as rudimentary as an excel sheet.
Larger CSPs typically manage their interconnect billing separately
from both their other partner billing requirements (such as content
partnerships) as well as from their retail billing solutions, although in
the future this may change in order to facilitate better revenue
assurance and business decision making, and to lower operational
costs. Some operators (most often smaller operators) already
perform interconnect billing using their retail solution or using an
adjunct module to their retail solution provided by their retail billing
vendor.
The type and sophistication of functionality required by CSPs will
vary according to their size, business model and the market in which
they are operating. In the past, the focus for many CSPs has been
on minimizing interconnect charges, although some large, fixed-line
carriers have established a healthy business from transiting and
terminating calls for other CSPs. In general due to the factors noted
in the business drivers section, interconnect billing systems will
increasingly have to become more business-driven and support an
increasing number of interconnect partners. Faster billing cycles,
greater accuracy, increased visibility of net position and functionality
to support better partner and commercial management are all
desirable features for many CSPs.
Although there are a range of types of interconnect, it is billed
according to two main variants, of the model shown in Figure 9.
Outlook
CSPs either settle directly with transiting and terminating carriers

(the direct model) or they use a cascade model whereby they pay
32
Market definition
the next partner in the chain, who in turn passes on a proportion to
the next partner and so on.
The charges for interconnect are set in a variety of ways, with
different countries using different methods. Rates may be
commercially set and based on long-run incremental costs
(calculated via a top-down, bottom-up or combined approach), or
they may be specified to a greater or lesser extent by a third-party
such as the ITU (accounting rates), OBF, EU and so on. In some
countries carriers can agree to zero rate interconnect charges
between one another resulting in a commercially-agreed billerkeeps-all agreement.
Interconnect disputes are common and cause high costs and a
slowing down of the settlement cycle. They can arise from pricing
errors, problems with information that is forwarded from one
operator to another or from contractual problems. Improving the
exchange of data records and better revenue assurance on
interconnect and partner billing are key future trends.
CABS billing and reciprocal compensation in the US market
CABS is an example of interconnect billing used in the US. It
enables local telephone companies to charge long-distance carriers
for use of the local loop. Rules are set by the ordering and billing
forum (OBF), which form the basis for the access tariffs charged by
LECs to long distance carriers. The revenue from CABS can make
up a significant proportion of a LECs total revenues, so tracking and
billing this usage can be critical. The cost of CABS has been
challenged by long-distance carriers, who argue that the charges
are too high as costs are largely sunk. They say that high charges
make it harder for them to reduce long-distance call charges to their
customers. LECs on the other hand argue that the local loop is
costly to maintain and that they need to invest in new technology to
upgrade it.
Reciprocal compensation is distinct from CABS billing in that it is
paid by a LEC to another LEC in the same local access transport
area (LATA) for terminating a call or data session on its network. If
the benefit is the same for the caller and called parties then no
money is exchanged. Rates for reciprocal compensation are set by
a states regulatory body or are set by the parties involved. In the
latter case the interconnect agreement would set the rates and their
application.
Outlook
33
Market definition
Roaming billing
Figure 10: Mobile roaming scenario
Authentication
and payment
Home Mobile CSP
Usage records
Billing
Relationship
with end
customer
Controls
customer
access to
service
Delivers the
service
Visited Mobile
CSP provides
call origination
Authentication
and payment
Usage
records
Interconnect
Interconnect
CSPs provide
Networks
Networks
call
transit and
termination
End customer
Roaming is a specialized form of interconnect used in the mobile

market and can be both intra-country and inter-country. When
roaming in an area not covered by their home CSP network, a
roaming customer can still make and receive calls by using a visited
CSP network. The visited CSP network is either automatically
selected by the handset or is manually selected by the customer.
Figure 10 shows how the general case of Figure 8 is adapted to the
roaming situation. The only role of the home CSP is to bill the end
customer and authorize service. The visited CSP controls access to
the service, provides call origination or connectivity for other
services and measures usage. As in the interconnect case (Figure
9) additional CSPs may be required to terminate a call where the
called party is not directly connected to the visited CSP network.
The roaming customer pays their home CSP for calls made and
received and the visited CSP bills the home CSP for charges for
using its network services.
With inter-country roaming, mobile users pay for both receiving and

Outlook
making calls. Roaming agreements between CSPs stipulate the

business aspects of this relationship. The GSMA outlines the
contents of these agreements in a standardized form.
Authentication, authorization and accounting controls are often
34
Market definition
minimal and tariffing is often opaque to the end customer. Roaming
rates are perceived to be high by customers.
Mobile CSPs tend to use clearinghouses at least to some extent to
handle roaming charges. Clearinghouses perform two main
functions: data clearing (DCH) and financial clearing (FCH). Many
mobile operators use clearinghouses for data clearing because this
speeds settlement and because it is very complex. The cost of using
a FCH can be substantial so many CSPs particularly larger ones prefer to perform settlement in-house. Some use a combined
approach and settle with some partners directly and others via a
clearinghouse. If the CSP uses a roaming clearinghouse for
settlement it simply funds its account; otherwise the CSP must have
bilateral settlement processes with each roaming partner.
Content and application partner billing

With the growth of content-based services, the requirement for
multi-party settlement has grown, where a single event record
(CDR, EDR) becomes the basis for settlement with multiple
wholesale partners including other CSPs and content providers.
Figure 11: Content and application partner billing
Billing CSP also controls

access to service and
provides data connection
Billing
Relationship
with end
customer
Controls
customer
access to
service
Authentication
and payment
Usage
records
3rd Party content,

application or
service provider
End customer
Delivers content,
application or service
Figure 11 shows how the general case of Figure 8 is refined for the
partner content billing situation. In this case the billing CSP also
Outlook
controls access to the service and provides connectivity for delivery
35
Market definition
of the content or application. The third party content provider is
responsible for delivering the content.
In our analysis we only consider the scenario where the end
customer is billed by a CSP we do not consider the over the top
case where the end customer has a relationship directly with the
content provider independent of the CSP.
To fully exploit the potential of complex, content-based services,
wholesale billing systems need to support data processing for a
wide variety of content types, as well as traditional traffic such as
voice. A range of scenarios need to be supported involving multistep and multi-component rating rules, and sophisticated crossproduct and cross-partner discounting, including financial, call count,
usage, tiered and threshold discounts, penalty rates and a range of
other user-defined criteria.
Content and application partner billing, and the advent of long-tail
service support, is driving the requirement for real-time, active and
Web-based partner management that is integrated with revenue
assurance solutions and supports fast on-boarding and off-boarding
of partners.

Outlook
36
Vendor summaries
Vendor summaries
Amdocs
Amdocs is a large US-based telecom software vendor that provides
a comprehensive portfolio of solutions including the Amdocs Partner
Settlement Offering. Combined with Amdocs QPass this provides an
end-to-end digital commerce solution; combined with Roam Clearing
Manager it enables in-sourced roaming clearing. Amdocs has 22
customers for its Partner Settlement Offering.
Comptel
Comptel is a Finnish OSS vendor that introduced partner settlement
solutions in 2007. These are Comptel Interconnect Billing Solution
and Comptel Roaming Management Solution. Both Comptels
partner settlement solutions build on its core expertise in mediation,
adding extra value to its 280 mediation customers.
Convergys
Convergys is a complex company offering a large number of
products and services to CSPs. Its outsourced telecom business
operations are declining, but it is building on a strong base of postpaid billing and customer care from its ICOMS cable business and
its telecommunications-focused Infinys billing and customer care
product line.
Ericsson
Ericsson is a Swedish vendor of telecommunications equipment and
related software. It is particularly strong in the mobile market.
Ericssons partner settlement solutions include products it has
developed such as the Ericsson Roaming Solution and Multimedia
Brokering (IPX), as well as those resulting from the LHS and Drutt
acquisitions. Ericsson has 15+ CSP customers for its roaming
solution, 60+ for MSDP, 500+ for IPX and 130+ for BSCS iX 2.
I-ConX
i-ConX is a Dublin-based specialist interconnect vendor. The i-ConX
System is delivered either as a licensed product or as a partially or
fully outsourced solution. I-ConX targets smaller service providers

and has had success in both its home market of Ireland as well as in
Outlook
the Middle East and Eastern Europe.
37
Intec
Intec is a UK-based provider of interconnect functionality. From its
core competence of interconnect it has expanded its product set
largely by acquisition. Intec is now a leading provider of interconnect
billing, trading and routing, roaming and mediation functionality and
a vendor of activation, real-time charging, billing, customer care and
partner management systems to a large installed base of CSPs
worldwide. It has recently integrated all of its partner settlement and
management products into the Wholesale Business Management
Solution (WBMS). Intec has about 275 customers for WBMS
worldwide.
Oracle
Oracle is a leading global enterprise software and hardware
company. The Oracle Communications Global Business Unit
markets a wide range of partner management solutions, including
Oracle's Siebel PRM, which supports the partner lifecycle through
Siebel Partner Analytics, Partner Portal and Partner Manager.
Oracle Communications Billing and Revenue Management (BRM)
functionality includes partner revenue settlement, as well as billing
for interconnect and roaming. Oracle Media Intellectual Property
Management (from the recent acquisition of Sophoi), manages the
business rights, licensing and royalties for partners. Oracle has a
global customer base for its solutions and it focuses on CSPs
moving beyond traditional services.
Sitronics
Sitronics is a large Russian telecom solutions, microelectronics, IT
systems integration and consulting vendor. Sitronics TS (previously
known as STROM Telecom) has a fully-integrated ICT business
group. Its partner settlement functionality comprises FORIS
InterPartner Interconnect billing, FORIS InterPartner Roaming
Management, FORIS InterPartner Partner Settlements and FORIS
InterPartner NRTRDE.
Subex

Outlook
Subex is an Indian provider of BSS/OSS solutions. Its Rocware

suite includes the Concilia Interconnect Billing System, Symphona
Interparty Management System and Optima Route Optimization
System. Subex target customers are mobile, residential and
enterprise service providers globally and the majority of its
38
customers are from EMEA. Its systems support both mobile

voice/data (60%) and PSTN services (40%).
Telarix
Telarix is a US-based vendor of specialist interconnect tools. Its
IXTools suite is built on a traffic-agnostic platform and supports
routing, trading, business intelligence, optimization of rates, rating
and billing, as well as audit and dispute management. Telarixs
client base includes traditional incumbents, emerging global carriers
and dominant regional players. The majority of its customers are
outside the US.
Valista
Valista provides digital commerce software that helps CSPs
generate additional revenue from content-based services combined
with traditional subscriber services in convergent networks. It was
acquired by Aepona in June 2009. Valista's software and managed
services enable CSPs to offer improved services and advanced
merchandising, process payments, process refunds, prevent fraud
and protect their investment in existing systems. Valista's primary
market is mobile operators, particularly in Europe. Most CSPs
license Valista's software but Valista offers a managed service run
out of its own data centers.

Outlook
39
Partner billing suppliers

We have identified 40 partner and interconnect billing suppliers in
Table 1. We believe these companies are sufficiently important to be
worth serious consideration by CSPs. Leadership qualities include
market penetration by region, telecom segment, and application
area. Relative market strength is categorized as either market
leader; significant player or present.
Vendors we have designated as leaders in a particular market
segment or sub-segment are those that attract the most revenue in
the segment and that we predict will continue to do so. Those we
judge to be significant have recognition in the indicated segment
due to significant sales. Those we have indicated as merely present
offer products in the indicated segment, but we have no indication of
significant sales.

Outlook
Broadband
Business
PSTN
Mobile
APAC
EMEA
CALA
NA
Overall
Company
Table 1: Comparison of partner and interconnect billing

suppliers
Amdocs
AsiaInfo
BassetLabs
CBOSS
CDG
Cerillion
CGI
Comarch
CommSoft
Comptel
Comverse
Convergys
CSG
CustomCall
Networks
40
Broadband
Business
PSTN
Mobile
APAC
EMEA
CALA
NA
Overall
Company
Dimetis
Elitecore
Ericsson
Formula
Telecom
i-conX
Intec
Kabira
Lightbridge
Martin Dawes
Martin Group
Metratech
Mind CTI
MoreMagic
Oracle
Orga Systems
Pilat Media
Quintrex
Sitronics
Sofrecom
Subex
TailorMade
Tango Telecom
Telarix
TeleSphere
Valista
WeDo
Source: Analysys Mason & company briefings

Outlook
= has a presence in the market = has a notable presence in the

market = market leader
41
Recommendations
Recommendations
Recommendations for CSPs
CSPs should recognize the strategic importance of partner and
interconnect settlement systems. The strategic importance arises
from two sources;
Settlement for interconnect and mobile roaming represent a
major cost and a major revenue source for many CSPs. This is
reason enough to look at optimizing the systems and processes
used to support the settlement process.
CSPs are increasingly dependent on non-telecom partners to
provide content and service innovation. Managing these partner
relationships is of strategic importance, and the systems and
processes used for partner settlement must provide the
flexibility to adapt quickly to competitive requirements.
These are good reasons to review current settlement solutions and
consider what business benefits can be achieved by updating or
enhancing them. CSPs have tended to develop settlement solutions
on an ad hoc basis in-house without consideration for overall
efficiency. Small percentage improvements in the efficiency of the
settlement process can have a significant impact on financial
performance.
Roaming settlements are mostly handled by clearinghouses that
provide roaming settlement as an outsourced service. Using a
clearinghouse can be very expensive for larger operators, as
payment is typically by volume of CDRs. Larger CSPs should
consider bringing the settlement process in house especially for
major partners. An alternative is to consider a hybrid approach and
use clearinghouses to settle with some partners while settling with
others using internal systems.
Partner settlement for service and content provided by non-telecom
partners is a rapidly changing and strategically important area.
CSPs need to offer content, social networking, web 2.0 services,
advertising, search, location, gaming and other innovative services
to compete as mobile broadband is rolled out. There are established
Internet and media companies that CSPs must partner with to
deliver these services. CSPs must also attract smaller innovative
Outlook
partners to meet customer expectations. Investment in partner

settlement systems based on robust product platforms is the best
approach to providing the flexibility required with this very
42
Recommendations
competitive and rapidly changing area. Some content related
partnerships are no longer necessarily with established, well known
and trusted partners, CSPs now need to monitor their partnerships
more closely to avoid the possibility of bad debt, fraud and poor
quality services affecting their own business. They therefore need to
have more visibility of current balances in order to detect problems
at an earlier stage. Legacy systems, however, were designed for a
time when partner settlement cycles were much slower and are not
optimized to deliver this type of key data in the timescales now
required.
Recommendations for vendors

Billing vendors should recognize the strategic importance of
settlement systems. This is based on the large revenue flows
through these systems. They need to emphasize the settlement
capabilities within their portfolio.
Vendors should expect more CSPs to look outside for commercial
solutions to their settlement requirements. This will create significant
opportunities for existing vendors. In the mobile roaming,
opportunities will be created as more CSPs choose to bypass
clearinghouses and settle directly with their major partners.
Vendors should evaluate the opportunities that arise as new types
of non-telecom partners become important. Partner settlement with
these new partners brings new requirements for support of
advertising, network APIs, application stores and support for
complex intellectual property agreements on content.
Vendors should find a good balance between products and
services. Most CSP telecom software spending is for customized
systems and in the interconnect and partner settlement area. Many
CSPs value the consulting and integration expertise that a vendor
can provide. However, CSPs are seeking more productized
solutions so services-centric vendors need to offer more complete
products. Product-only vendors are missing out on a big share of
CSP IT spending by foregoing services and neglecting an area that
CSPs want from their software vendors. Vendors providing a good
blend of well-defined, upgradeable products, complete product
support and training, along with operations consulting and
integration services best meet the needs of CSPs and maximizes
the revenue available to vendors.
Outlook
43
Recommendations
Overall the market for partner and interconnect software systems is
fragmented. There are still opportunities for new entrants and for
some of the less well positioned vendors to grow market share
through acquisition or targeted development of new product
capabilities.

Outlook
44

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Outlook

Interconnect and Partner Billing

Program: Billing & Customer Care

2009 Analysys Mason Ltd. All rights reserved worldwide.

Market drivers and inhibitors ...................................................................... 13

Business inhibitors ............................................................................................. 19

Business environment ................................................................................ 21

OSS Observer is part of

Interconnect settlement ...................................................................................... 21

Partner and Interconnect Billing Definition ......................................................... 27

Analysys Mason Ltd

CABS billing and reciprocal compensation in the US market ..................................... 33

Interconnect and Partner Billing

Interconnect billing ............................................................................................. 31

Vendor summaries ..................................................................................... 37

2010 Analysys Mason Ltd.

Partner billing suppliers .............................................................................. 40

Interconnect and Partner Billing

2010 Analysys Mason Ltd.

$Partner (CAGR 7%)

Source: Analysys Mason

Interconnect and Partner Billing

We identify three major areas of partner and interconnect

2010 Analysys Mason Ltd.

Interconnect and Partner Billing

2010 Analysys Mason Ltd.

Source: Analysys Mason

Intec is the long-time leader in this area by virtue of its strong

Amdocs is the leading supplier of CSP billing solutions globally.

2010 Analysys Mason Ltd.

2010 Analysys Mason Ltd.

management and optimization of CSPs interconnect businesses.

Interconnect and Partner Billing

2010 Analysys Mason Ltd.

$Partner (CAGR 7%)

Source: Analysys Mason

Forecast by communications service

as PSTN services themselves decline.

Mobile settlements growth of 9% CAGR is driven by a number of

2010 Analysys Mason Ltd.

Mobile (CAGR 9%)

PSTN (CAGR -9%)

Business (CAGR 12%)

Res BB (CAGR 10%)

Source: Analysys Mason

Figure 5 shows the partner settlement forecast by region. North

2010 Analysys Mason Ltd.

CALA (CAGR 9%)

EMEA (CAGR 7%)

APAC (CAGR 9%)

Developed areas of EMEA and Asia Pacific (APAC) are starting to

EMEA and APAC are heavily focused on mobile settlements. They

2010 Analysys Mason Ltd.

Interconnect and Partner Billing

2010 Analysys Mason Ltd.

Market drivers and

Market drivers and inhibitors

Interconnect and Partner Billing

2010 Analysys Mason Ltd.

effects will directly drive spending on partner and interconnect billing

Market drivers and

CSPs have a much better understanding of their net position with

2010 Analysys Mason Ltd.

Market drivers and