In part one of this two-part entry I pointed out that I am not a great fan of conspiracy theories. Hint: you may want to read part one before reading this. Trust me, you need to read it. Otherwise you may worry about people deliberately doing very bad things, when this post is all about people doing very bad things by accident. Unintended bad things, according to modern moral standards, are nowhere near as bad as intentional bad things, if you know what I mean. So you need to appreciate why I worry about well-intentioned goofs.

As I said before, I think conspiracy theories are daft. However, I do think people sometimes do things, sometimes as large groups, with unintended but important consequences. Those consequences may then by exploited by others in ways that had not been imagined at the outset. So Albert Einstein did not intend to revive the flagging career of Keifer Sutherland, who at one low point considered joining the rodeo. But without the work of Einstein, Niels Bohr and the rest, Sutherland would be doing something useful like roping cows instead of pretending to be agent Jack Bauer looking for terrorist nukes in the tv show "24".

So Microsoft is now using us all to gather data, in order to test its software. To do this, it has effectively developed a new paradigm for experimentation and gathering of results. Customers are effectively expected to test software - even if it goes beyond the beta stage - and are asked to permit automated feedback whenever something adverse happens. But in doing this, customers are not just helping Microsoft test software. They are also engaged in an altogether different kind of experiment, though the method of gathering data is equally sophisticated. In this experiment people do not just provide the data, they are its subject.

Science Fiction writer Isaac Asimov came up with an interesting idea in his Foundation stories. The essential premise was that a scientist, Hari Seldon, would conspire to manipulate the future, although this conspiracy was positive in that it was in the best interests of the human race. Seldon could do this using his scientific technique of “psychohistory” which was defined in the story as

"...that branch of mathematics which deals with the reactions of human conglomerates to fixed social and economic stimuli...
...Implicit in all these definitions is the assumption that the human conglomerate being dealt with is sufficiently large for valid statistical treatment..."

In other words, Seldon devises a statistical science which predicts the behaviour of very large groups of people in a way that cannot be applied to individuals. Of course, for Seldon to have generated a science of prediction, he must have amassed sufficient data to use as a basis for his calculations.

Okay, so that is science fiction. But you get my point. Right now, in a very crude way, many are trying to accumulate data about us. Some are consciously doing it with the intention of learning about our behaviour; others are doing it for other reasons. But just as Einstein’s theories started a chain of events that brings us to our current fears about the proliferation of nuclear weapons, so the mass of data accumulated about people invites research into predicting our behaviour. Such predictions may be for financial gain, or like Asimov’s fictional conspiracy for the good of all humanity, or (like the popular conception of conspiracy theories) for the good of the few at the expense of the many.

This generation is the beta generation. For the first time in history, people are able to come up with theories about the mass of human behaviour, and then actually test them out. The most basic example is to be found in marketing. To market successfully, you need to understand the market. And use that understanding to influence it. So marketing will be at the forefront of the experimentation (take a look at the depth of analysis here if you do not believe me). Traditional methods of gathering data, through questionnaires and surveys, will be increasingly replaced by the power of enforced gathering of data at the point of sale. The supermarkets have the power to track purchases and build up an understanding over time. Personal finance companies will have more and more data about someone’s credit history and spending habits. And on-line purchases will demand purchasers answer questions for the sole purpose of marketing.

Of course, you may assume that you are protected by some legal voodoo from anybody unreasonably analysing your data. If you are in the EU, forget about your rights under data protection legislation - for laws to work they have to be enforced by someone. And, thanks to global terrorism, governments have finally solved the problem of how much data is too much data for a company to keep. So, after wasting some taxpayers money debating its data protection directive back in the late 90's, the EU has since stepped up to the mark and reversed some of that by passing the data retention directive. For those of you not familiar, the basic idea of the data retention directive is that telcos must keep lots and lots of data about who made what call to whom, what was said in emails, that kind of thing, just in case governments need it to spy on their people...ahem, I mean protect good people from bad people. So, after some worrying in the 90's that companies might be tempted to keep too much data, now governments are bending over backwards to persuade or force (whichever works faster) those same companies to keep ever more. They are even going to give the telcos taxpayer's money - though nobody is sure how much yet - to keep and store all that data, just in case it turns out handy for fighting terrorism, or serious crimes, or important things like tax evasion. You know, important things. Of course, nobody in the telcos would ever misuse that data - no no no no no no no no. The fact that a few years earlier the same Eurocrats were demanding increased powers over telcos to ensure that telcos did not hold on to unnecessary data is irrelevant. A few years ago, if telcos had data they could not be trusted, and governments had to protect the people from the evil that telcos would do with all that data. Now we have global terror. So telcos can be trusted with all that data. Obvious, really. Of course, if you are outside of the EU this is all irrelevant as you never had any rights anyhow.

If you are inclined towards conspiracy theories, then this should all be troubling. One relatively benign example of how technology increases the power for monitoring human behaviour is the use of virtual communities like Second Life for research. But it can get much cleverer than crude questionnaire-based methods of researching behaviour. As well as training computers to read number plates, in order to charge drivers for using congested areas, computers can be trained to read the actual behaviour of people. Telcos have used simple neural networks to try and spot for fraudsters for a long time. The basics for this kind of approach were always in place - high degree of automation, very large volumes of data representing behaviour all in a standard format, and enough financial incentive to make it worth investing in developing the technology. But sophisticated analysis of data and even neural networks are being used for far wider automated predictions of human behaviour - just see this list of abstracts from an academic conference dedicated to fighting crime.

The recent Vodafone-Yahoo advertising deal gives an example of the increasing opportunities for assimilating data about people. Supermarkets know what you buy, but not much else about you. But suppose you know what someone buys (because you are monitoring on-line purchases) AND their movements (because of their mobile phone) AND who their friends are (because you know which numbers they call, who they email, or their activity on social networks). You know an awful lot about that person. And the potential uses are extensive. So, imagine someone appears to be a “net promoter” of a particular product, in that they would promote it to their friends. If you know Rachel is a net promoter, why wait for her to recommend the product to friends? Why not just target an offer to Rachel’s friends straight away, mentioning how happy Rachel is with her purchase. Now this could backfire – perhaps the friends will be none too happy with Rachel. But then again, if you give Rachel a credit for every friend that buys, and each friend gets an exclusive discount too, then maybe everybody feels like a winner.

Anyhow, I do not work in marketing, so maybe my scenarios are daft or maybe they make sense. But the important thing is that it will, in theory, not be necessary to speculate any more. You can try out different marketing models and steadily learn which are the ones that work best. So it seems we are destined to be increasingly manipulated, or better understood, depending on how you look at it. But my bet is that the future will not work out that way. Not because they will not try to sift through the data and test us all. But for a few very important reasons that none will care to admit.

First, the data that will be gathered will often be garbage, and chances are very few will realise how bad it is. If you read part one of this two-part entry, you got my point of view on how clever people are. They think they are cleverer than they really are. So in practice, they make mistakes, especially when there is no straightforward feedback to highlight those mistakes. Poor data is very hard to identify, if you have no source of information that highlights poor data, and no simple way of testing it. Let me give you some examples of why a lot of data will be garbage.

This week I booked a flight with Easyjet. Rather annoyingly, the jolly fat Greek’s airline portal forced me to click a box stating where I was staying at my destination. I was given no choice – either I clicked one of the options or I would not be able to book on-line (so would have had to pay more to book over the phone or else fly with another airline). The point of gathering the data is clear – to understand the kind of customer I was and the potential to sell accommodation. So I did the only sensible thing. Which was to give a dishonest answer. But instead of picking an answer at random, I made sure I picked the answer that was most misleading. Instead of clicking the box saying I was going on business and staying in a hotel, I clicked the box saying I was visiting friends and staying at their home. That way I also minimised the risk that the jolly fat Greek will spend money on yet more unwanted advertising aimed at me.

Of course, it did not stop there. Next thing I did was book my car park space at the airport on-line. This required me to explain how I knew the car park existed. So I lied again. This time I rationalised that the best lie would be say it had been a recommendation by friends.

Even supermarkets cannot totally rely on their data about who buys what. A letter printed in the Financial Times last week tells a funny story about a customer shopping at Tescos without having one of those ubiquitous loyalty cards. What does the checkout person do? The checkout person generously offers the points - and unrelated data - to the next customer in the queue, who gladly accepts.

But not all data will be garbage. If you pay for something, hopefully the record of what is bought is right. When mobile phone companies record your location, chances are they will be right. One goal of enhanced 911 in the US is to pinpoint cellphones to within 50-300 metres. This may be a boon for emergency services, but it is also a potential boon for tracking the location of people. So if the data is correct, then the next problem becomes how to use the data to make predictions.

Making predictions is in our nature. Whether it be the biblical interpretation of dreams by Joseph, the rhymes of Nostradamus, the stories of hard science fiction writers like Asimov or Clarke or the predictions of professional futurologists like BT’s Ian Pearson (yes, Ian Pearson is for real - though I agree he is more like a spoof), there seems to be an eternal and unquenchable desire for prediction. So the question will be how predictable we are. My hope is that we are like the climate, where the facts can be so readily disputed by experts like Danish scientist Bjorn Lomborg. Many predictions down the ages turned out to be very wrong, and not just by weather forecasters. The aforementioned Isaac Asimov was known as a "hard" science fiction writer because he was a proper scientist who tried to extrapolate from proper science, but he predicted we would have invented positronic brains for walking, talking robots, and populated 50 planets before we would have managed artificial insemination - so he was just a little wrong there. And in Asimov's Foundation, the character Seldon's main goal was just to compile a source of all human knowledge - the Encyclopaedia Galactica - when had Asimov predicted the rise of the internet he would have realised Wikipedia is going to get there first :)

But the power to change is not dependent on making accurate predictions. Al Gore making a film about the environment is more influential than Bjorn Lomborg writing a book. Arguably Futurama making a cartoon about global warming is more influential than proper academic research. Even father-and-son Rupert and James Murdoch take global warming seriously, screening Al Gore's film (and getting Al to come along and talk too) to News Corp execs. [The fact that the Murdochs could make Attila the Hun seem like a hippy should make it very tough for the beardy shagger Richard Branson - who finds himself outflanked by the Murdochs both commercially and ethically]. The Y2K bug may have turned into an anti-climax, with no planes falling out of the sky and everyone’s elevators still working fine, but it still motivated enormous change. Karl Marx may have inspired many changes around the world, but pretty much everyone now has given up on the worldwide communist revolution that Marx argued was inevitable. Thomas Malthus was wrong that population growth would outstrip food supply, but his name is still known because so many thought it credible. The “new paradigm” of dotcom boom evaporated along with a lot of paper profits. Confident predictions of WMD in Iraq were shown to be unjustified. So enormous changes can be inspired by bad predictions. And predictions will be accepted as fact if argued for persuasively by people in authority, even if their reasoning or data is flawed. That is the bit that really scares me. Responding to accurate predictions makes sense even if it is creepy, but responding to invalid predictions that may be harum scarum nonsense, generated by self-serving experts who only make guesses so that they can generate rewards for themselves. Disraeli had good reason to warn about “lies, damn lies and statistics.” With all this data being accumulated, the potential for bad, but persuasive statistics is great. A prediction does not have to be right to have profound consequences. The current gathering of lots data may motivate people to believe that humans are more intelligent than they really are. It is tempting to think that a poor conclusion is right, so long as it is supported by lots of data. With the current beta testing of theories being performed across the whole human race, premature conclusions may be hard to argue against. Worse still, if the data is available only to the elite, like the world’s governments, how will the rest of us be able to determine when their opinions are reasonable, and when not?

Posted by Eric on November 25, 2006 03:08 PM | Permalink | Comments (0) | TrackBacks (0)

I am not a great fan of conspiracy theories. All conspiracy theories posit that a malign group of powerful people intelligently manipulate events to attain a particular goal. The conspiracy is kept a secret from the rest of society. I think that is naive. Very few people are that intelligent. And if they were, why would they waste their time doing the things that conspiracy theories are usually meant to be about? Most importantly, intelligence is probably a serious obstacle to achieving power. Just take a look at some of the U.S. Presidents in the last 30 years: Ford, Reagon, and George W. Bush. Al Gore is clever enough to write books that are actually about things other than himself. He made a Powerpoint slide presentation about global warming that was so good that they turned it into a movie that went on general release. Pretty smart, if you ask me. Gore was always going to come second to a man like George W. Bush. Bush has no choice but to keep his messages simple, because Bush is simple. Gore instead came across as wooden and hard to like. The painfully obvious difference in intellect probably helped Bush more than Gore. Simplicity beats intelligence most of the time.

[But I suppose the conspiracy theorists would argue that Presidents and the like are not the ones really running the show. Better save that debate for another time.]

One of the biggest problems with conspiracy theories is that they are usually so convoluted that it takes lots of intelligence and persistence to get to the end. And after all that you realise it was just nonsense and you wasted your time showing any interest to begin with. So conspiracy theories are ultimately not very rewarding unless you want to suspend disbelief and live in a fantasy. All of this is going to make writing this post very hard, as it looks a bit like a conspiracy theory, but is not, although it is a complex theory. A very complex theory, and about complexity. And about how to keep things simple. So to keep it simple this post is part one of two parts. Part one makes sense on its own. But part two is the really interesting bit. You just have to read part one first to make any sense of part two. So here goes with part one...

You may have noticed that lots of businesses are offering you lots of software these days. For free. On one condition. You test it for them. They call it "beta testing". Another way of describing it would be "not sure how well this works yet" testing. Microsoft is no longer sure that releasing betas in the traditional way works that well - see here. But most software businesses do it. And betas are very popular with customers. Most of the popular new communications software gets high-profile beta releases: hotmail, messenger, skype, googlemail. Everyone does it. But even when you buy software, the testing never really ends. There is only one difference between a customer doing beta testing on Microsoft software and a customer clicking the box to email Microsoft with an error report when their paid-for software crashes. The difference is Microsoft does not want to call the latter "testing" because supposedly the software has been tested already. But all Microsoft did was to extend the idea of experimentation (aka testing) to its natural conclusion: treat all life as an experiment, treat all truths as contingent hypotheses, and then just get on with the real work of gathering as much data as possible to verify or falsify the hypotheses. I am sure the philosopher Karl Popper would have approved of this method. Continuously look for bugs on the assumption that even if the software looks like it is error-free, you never know for sure. This increased sophistication in allowing room for doubt is a positive thing, scientifically speaking. It is part of the reason why people started to talk about Einstein's Theory of Relativity, when they used to talk about Newton's Laws.

The troubling thing about needing to take a contingent approach to verifying software is that, if we cannot reach a definitive conclusion on whether software works correctly in a practical timeframe with a sensible level of resources, what chance do we have of verifying anything else complicated works properly? Okay, so software code may be complicated, but ultimately it is finite and mathematical. A line of code does the same thing each time it is executed; it is perfectly predictable. There may be very many, but ultimately there are only a finite number of logical sequences that could be executed in software in a given period of time. You could, in principle, execute every possible sequence within a period of time and so verify with certainty that it works correctly in all cases. But doing all that testing would be very slow. And costly and boring. So instead, testing involves having a reasonable go at checking that the main components work okay and then putting them together and seeing if everything works together okay for a while and then letting the customer have a play to see if they can find something wrong.

The message for revenue assurance is pretty plain. Everybody who ever claims to measure revenue loss is wrong. And always will be. And estimating loss is no better than using folklore to predict the weather. To measure revenue loss with absolute certainty you would need to know you were monitoring the outcome of every possible sequence of logical paths that might be involved in processing the data in a transaction. That would mean effective checks relevant to the execution of every line of software in every device from the network to the bill. And then some. Because losses involve much more. They involve the interaction of the software between systems (are the rules by which data is output from one system actually consistent with the expectations for the input into the next?) and physical and environmental factors (what happens if someone cuts the power to one of the systems and there is no failover? what happens even if there is a failover?) and we should not forget that, in most cases, there is also some processing done by humans. At the very least a human being is going to be involved in typing in reference data (more than one person has got the decimal point wrong when entering a new rate) and in writing the words to explain the charges to customers (the calculations described by those words need to be mathematically identical to the calculations performed in practice). So the best any revenue assurance department could come up with a contingent theory about loss. And that means the search for counter-examples must go on indefinitely. Which is rather a nuisance for revenue assurance people wanting a promotion ;)

I once wrote a paper explaining some theory and practice for metering and billing testing for T-Mobile UK. The people still working there must have forgotten about it because the original version is still up on their corporate website unchanged - even the spelling error in the URL is the same (mistakes happen everywhere). I mention it because writing the paper was a mistake. I thought I was pointing out some obvious and useful things. For example, I wanted to point out the only way you could really really be sure that a bill was accurate was to treat the whole business as a black box. You take the tariff documents that get published, then set up some services and make some calls. Finally you check that the bill was consistent with what the tariff document said and the services you received. Simple and fool-proof. And you do not need to know anything about how things work in the business in order to do it. The difficulty with that approach is plain: it would be an awful lot of work to really get confidence this way. But if you executed all varieties of calls and services at all times and locations etc etc you would eventually execute all logic paths. I contrasted that certainty of conclusion with the likely compromises that most would make in testing bill accuracy - which is to break up the tests into piecemeal components. Breaking them up makes it easier to focus on certain kinds of possible problems, but only at the cost that you totally fail to capture some kinds of error through your testing. In other words, you end like Microsoft - you trade certainty in exchange for being more cost-effective. You anticipate what might go wrong, and check for that. Sometimes you will miss something but it is a lot less work overall. But writing the paper backfired. It backfired because (a) probably no customers ever download and read this document, and (b) it upset the firms supposed to independently audit things like bill accuracy on behalf of customers. Pointing how much work would be involved to get certainty, and the real-life risks involved when deciding to compromising certainty for cost-effectiveness only upset the audit firms profiting from the work, especially as it was their job to be the clever people who would understand how to avoid mistakes. So they wrote a guide for bill accuracy approval that just said the opposite of what my T-Mobile document did. In other words, it said that following a complicated approach relying on human intelligence was less likely to be flawed than taking a simple approach which minimises reliance on human intellect. Now the document has got the regulator's name on the front so doubtless customers can read it and rest assured that lots of super-intelligent people are protecting their interests and not making any mistakes whilst doing so. Much better than trusting an error-prone dullard like me, I am sure :(

You can be pretty sure that if Microsoft just eventually gives up and hands over software for its customers to de-bug, then there is no revenue assurance team in the well that is not doing effectively the same thing. However, unlike Microsoft, many in revenue assurance are a bit silly. The responsibility is handed over to the customers but then there is a failure to listen to the customer's feedback. By feedback of course I mean the complaints the company gets about its accuracy. Most complaints may be nonsense, but if the revenue assurance department is not monitoring the valid ones, it is losing a vital source of data. But as I say, highlighting errors that revenue assurance missed only to be picked up by customers may not be the best way to get a promotion ;) This is another example of the supposed intelligence of the masses, in this case finding flaws that are not spotted by the "experts". But understandably it takes a certain kind of expert to be willing to learn from mistakes. Other experts might feel accepting mistakes undermines their authority. Which is ironic for revenue assurance - a discipline that is itself a response to human fallibility.

To avoid mistakes you have to have an open mind about your own fallibility. In other words, you have to accept that you will make mistakes in order to reduce the chances of making mistakes. But believing in fallibility just means that any belief may be shown to be wrong. There is an old philosophical contradiction that illustrates the problem. It can be best stated in terms of a conversation between two people:

"Are you always right?"
"No."
"So sometimes you believe things that turn out to be wrong?"
"Sure."
"So which of your current beliefs are untrue?"
"I do not know...."

At one telco I was lumbered with responsibility for a new revenue assurance system. The purchase had been made just before I started working for the telco. After implementation the tool kept producing reports that said there were errors in how the bills were calculated. So I drew the obvious conclusion. When I told people my conclusion, the response was they did not like my conclusion and I should change it. My conclusion was very simple. The revenue assurance tool was wrong. You can imagine how much the vendors of that system liked that conclusion. And it was not that popular with the rest of revenue assurance either. Nobody was keen to admit that lots of money had been spent on a tool that did not work properly. So there was a lot of pressure to chase around the business and try to validate if the supposed errors were in fact real. But my reasoning was simple, so in my usual stubborn fashion I ignored what everyone was telling me to do. The revenue assurance tool was cheap, unproven, new, and had not been tested much. In contrast, the systems it was being used to test were expensive, old, long-established, proven and would have been tested many many more times, not just in our telco but in others too. So I put effort into finding out what was wrong with the revenue assurance tool, until the fault was found and corrected. Admitting to a faulty revenue assurance tool was inconvenient. But it would have been more inconvenient to admit the truth only after wasting a lot of people's time chasing phantoms in other systems that were actually working fine. Of course, it would defeat the point of revenue assurance if you always assumed the revenue assurance test was flawed. But if you do not apply appropriate levels of scepticism you will waste a lot of time before you get to the truth, and it will be a lot more painful to admit the truth when you do eventually get there (if you ever do). So the message for revenue assurance teams is plain: doubt yourselves at least as much as everyone else. And make sure you keep on looking for evidence of your own failings. Some of the people who work in revenue assurance go into the role because they like to check on other people. It makes them feel superior. But the price of doing that job properly is self-doubt: they need to check on themselves just as much.

So did Al Gore learn from his mistakes? Probably. He was seen as overly wooden. His intelligence was as much a liability as an asset. So making fun of himself is positive and humanises his intelligence. What could be better for Gore than to appear on the TV cartoon series "Futurama" as a head in a fishtank making fun of your own books and environmental beliefs? He then takes the cartoon explanation of global warming in that show, and uses it in his (serious) documentary "An Inconvenient Truth". And then Gore teams up with the Futurama crew to make a (funny) trailer for his (serious) film. The success of his film has even seemingly resurrected his prospects of standing for President again. This is a man joking that he used to be the next President of the United States. Maybe jokes like that get the US electorate to laugh him all the way into the White House. And the ability to tell a joke at your own expense cannot harm if the biggest challenger for the Democratic nomination is humourless Hilary Clinton. A good example of learning from past mistakes, as well as keeping things nice and simple.

Okay, lecture over... for now. End of part one. I divided this into two posts because if you do not want to believe people are fallible and being overwhelmed by the complexity and volume of data they receive, and they sometimes lack the ability to be self-critical in a way that may counter this problem, then you sure as heck are not going to want to read what I put into part two. So those guys in the audit firms can stop here. But if you are as cynical as me, read on....

Posted by Eric on November 25, 2006 03:05 PM | Permalink | TrackBacks (0)

I am going to a couple more conferences this year, which means I have been struggling to find ways to stay awake whilst hearing people say the same things about revenue assurance that they said last year. And the year before. And the year before that.

Then it occurred to me in a flash: bingo. Select five words or phrases from the list below at random at the start of a presentation, and cross them off if the speaker uses them! If you hear all 5 you can claim your prize at the end of the presentation by asking the speaker the following question: "surely what you just said was just a lot of meaningless slogans and buzzwords strung together in a moderately grammatical way?" whilst holding your scoresheet above your head as proof. Here's the list:

> proactive
> end-to-end
> end-2-end (sic)
> revenue management
> next generation
> evolution
> optimize
> benchmark
> value chain
> best practice
> maturity
> margin enhancement
> revenue operations centre
> leading
> virtual team

If you have caught a speaker using all 5 phrases in the same sentence, I suggest you click the link below and add it as a comment. Presentation titles also count. You know the kind of thing: "Benchmarking the evolution to proactive revenue management within a mature operator by leading optimization of the next generation value chain".

(I quite like that title. I think I may use it myself for my next presentation.)

I will take all the best entries and create a special mock revenue assurance conference presentation to celebrate. Then give it at the next conference I go to. In other words, I am short of ideas and this is all I can come up with.

Posted by Eric on November 23, 2006 07:05 PM | Permalink | Comments (1) | TrackBacks (0)

I was never that attracted to cyberworlds like Second Life. I have enough trouble with finding time to manage everything and then relax in my first life without taking on a second life too. But probably I was missing the point. If you think like IBM then the point is to get people to work together in a virtual office environment - read this. Forget teleconferences and videoconferences, they are virtualconferencing in SL. The thinking is obvious, to get people to relate to each other like in the real world, except via their virtual avatars. And whilst the envrionment is virtual, the work is very very real. I have blogged before on how telcos fly people around instead of consuming their own remote communications products. And as I get older, excuses to stay home and escape the commute appeal more and more. So forget this blog - I shall have to set up a virtual speakers' corner to rant from in SL.

But as you may have noticed there is more than the real-world economy at play in SL and its ilk, because its fantasy economy is booming too. I am not just talking fantasy in the sense of the fantasy world of advertising and publicity (everyone from Toyota to Duran Duran is jumping on the virtual promotional bandwagon). So to build a speaker's corner I will have to buy some virtual land - with my real money. Of course, a virtual economy like this should be a zero-sum game as far as real-world economics is concerned. Ignoring any currency movements between virtual currencies and real currencies, then the total worth of a virtual economy should be equal to the real-world value stored in it. Assuming the real world is rational. But it is not. Which is why governments of the world, easily drawn to any source of tax revenues (or at least to stopping ways of avoiding them), are asking themselves how to tax these virtual economies. And it is why one player in the Entropia "universe" paid $100,000 (in the real universe) for rights to a virtual "space station".

Economist JM Keynes pointed out that people often invest in things not because they think they have any value, but because they think other people think they have value. Or because they think that other people will think that other people will think they have value. And so on. So if somebody else thinks a virtual space station is of value, who am I to argue? Keynes was thinking of the great Wall Street crash of the 1920's but you wonder if people ever learn. Tech-savvy punters should probably be familiar with the idea that not everyone got rich out of the flood of money in the dotcom stock market mania, though I personally would go further. I think that the so-called market economies of virtual worlds have more similarities with Albanian pyramid schemes than anything else. The great thing about running a virtual world, and the bad thing about investing in one, is that the people running the world could just cash it all in whenever they like. Which means investors would have no way to get their money back. This is what it says in the SL terms of service:

You acknowledge that the Service presently includes a component of in-world fictional currency ("Currency" or "Linden Dollars" or "L$"), which constitutes a limited license right to use a feature of our product when, as, and if allowed by Linden Lab. Linden Lab may charge fees for the right to use Linden Dollars, or may distribute Linden Dollars without charge, in its sole discretion. Regardless of terminology used, Linden Dollars represent a limited license right governed solely under the terms of this Agreement, and are not redeemable for any sum of money or monetary value from Linden Lab at any time. You agree that Linden Lab has the absolute right to manage, regulate, control, modify and/or eliminate such Currency as it sees fit in its sole discretion, and that Linden Lab will have no liability to you based on its exercise of such right.

So they can just take your money away, or make it worthless, just like that. In the real world that might lead to a riot or a revolution. But where does it leave you in a virtual world? Pretty much stuffed, unless you plan to riot outside the Linden Lab offices in the real world. But the answer to this risk to a virtual investment should be obvious, and no different to any other kind of risk management. That means having insurance, disaster recovery, backup plans, that kind of thing. And with a virtual universe, nothing could be easier. So the really savvy tech entrepreneur needs to stop wasting time collecting dung in Entropia or performing virtual strip shows in Second Life. They need to create an effective way for users to authenticate their avatar's actions to a third-party backup , so they can be reborn in another virtual universe if their second life disappears or they get ripped off. And all that they should ask in return is a reasonable real world premium. Probably a lot less than the premium on a real space station.

Posted by Eric on November 20, 2006 06:01 PM | Permalink | TrackBacks (0)

Bored with your revenue assurance career? Stuck in a rut because you lack the imagination and skill to add any more value to your business? Want to distract people so they do not notice there are lots of leakages that have been going on for years but that you missed? Here are the best ways to make yourself even more important in your own mind, if not in real life....

1. Start doing revenue "management". This used to be the job of Marketing and Commercial Finance, but obviously Marketing and Commercial Finance lack your special skills, so you are there to help by pointing out how much more money could be made. Expect a backlash when people point out that RA must have too much time on their hands and demand the elimination of a cost leakage = wasted salaries on people in RA.
2. Do SOX. Not all of SOX, just a few bits you do not understand well but nobody else fancies doing. Try not to draw attention to the fact that you claim to assure the integrity of revenues but are not familiar with the company's policy on revenue recognition. Also keep quiet on how you are able to claim to add lots more value in future when the controls were so tight last year that nothing could possibly go wrong.
3. Assure costs. Not the big interesting ones like building networks, just the ones where you reconcile revenues to directly variable costs. Do not mention that a check like that would have been a good idea just to assure your revenues in the first place.
4. Stop doing revenue management immediately after your business announces a big slump in earnings. Obviously that had nothing to do with the bit of revenue management you took responsibility for. Think of a new name for revenue management, something even vaguer than revenue management like "business assurance" or something like that.
5. Assure margins. This is a bit like revenue management but perhaps Marketing may not notice you are doing their job. Ideal way of increasing responsibility without being to blame for that slump in earnings.
6. Take on responsibility for detecting Fraud. Then think again because they would sack you if you messed this up.
7. Fly around doing conferences. Having done everything imaginable to add value to your own business, you have a lot of time on your hands to tell everyone else how successful you have been.
8. Cover revenue share with partners. Hope you spot your own screw-ups before someone in revenue assurance for your partners does. Remember, they may talk at the same conferences as you and if they boast of lots of leakages then everyone will know it was you that mucked up.
9. Do quality assurance. By definition, there are no consistent, measurable and objective targets to meet with quality assurance so it fits perfectly with your approach to revenue assurance.
10. Do business assurance. Every morning when you arrive at work, ask yourself if the business is still there and if it is, say "check" and pat yourself on the back for a job well done. Spend the rest of the day planning your sight seeing at the next exotic conference location.
10a. But seriously, assure everybody else's business decisions. They cannot be trusted. Form an underground "shadow" exec board to make the tough decisions the real execs are afraid to make. Don't tell the real execs because it might upset them. Or anyone else, just in case. Unless it is at a revenue assurance conference because the probability of that making its way back to the execs is nil.
10b. But really seriously, do business assurance and revenue management and anything else that takes your fancy. Write your own job spec and change it at will. Take a few extra days holiday because you deserve it. Give yourself free reign to second-guess any decision anyone else makes and point out all their mistakes. Unless earnings slump. That was someone else's fault. Because obviously those decisions were not your responsibility. You know your place, even if nobody else does.

Posted by Eric on November 20, 2006 02:01 AM | Permalink | Comments (0) | TrackBacks (0)

I took some bottles to be recycled last week. I must be a revenue assurance zealot because it got me thinking about revenue assurance.

Most people get the idea behind recycling, even if they are too lazy to do it. Recycle existing materials, and you save having to mine for new raw materials, save energy in producing new things, reduce the problem of waste disposal. Think global, act local, saving the world one tin can at a time. Recycling is obvious because it involves something physical, something tangible, but people also get the idea that waste in general is bad - like wasting energy or wasting water. What intrigues me is that people may be able to think coherently about these kinds of waste, but feel differently about the waste implied in a business that is inefficient or sloppy. Not only is the business wasteful in terms of money, but it wastes the human skills and abilities of its people on avoidable and unnecessary activities, and wastes the time and resources of customers when expecting them to challenge poor services, inaccurate capture of their orders, and invalid bills. If everything worked efficiently, and was correct first time, then not only money but also the time of people inside and outside the business would be released for more productive activities. Given the purpose of revenue assurance, and claims made about the size of errors it addresses, surely this makes RA a force for good?

Of course, we can go even further. If RA is a force for good, then it becomes an ethical duty to not only do it, but to do it well, and to encourage others to do it well. If some kinds of waste are obvious, and the steps to reduce them simple - like switching off the lights in an empty room - we can expect all to feel obliged and take action. But if other kinds of waste are harder to understand and to eliminate, the responsibility falls on a more select group. So RA is not just a job in the conventional sense, and not one for oriented purely for commercial gains. At least, RA is ethically equivalent to a recycling business, which also earn a profit but do something good that may not happen without the profit motive. There must have been a time when people who recycled tin cans seemed like zealots. But slowly they are converting the world, and I wish them well. They successfully persuaded me to join their cause. So, as a zealot, I am asking you to join me in spreading the good news of RA. We may be few in numbers now, but we can grow our numbers, and maybe that is our duty.

Posted by Eric on November 19, 2006 11:23 PM | Permalink | Comments (1) | TrackBacks (0)

You have to give credit to French media giants Vivendi. They know what revenue assurance is all about. Forget analysing lots of boring data and looking for exceptions to fix one at a time - if anybody tries any funny stuff, they better have some good lawyers. Vivendi demonstrated their innovative attitude to legal channels recently, when they used anti-racketeering legislation to take T-Mobile to court in the US as part of the fight for control of Poland's PTC network. Now Vivendi subsidiary Universal Music Group is taking News Corp's MySpace to court over copyright infringement - see the story here. The message is clear from Vivendi: their favourite song is "I fought the law and the law won".

Vivendi owns content, and they want their fair share from everybody who sees or hears it. If you own intellectual property, then revenue assurance boils down to things like DRM and policing abuses. One of the funny things about this story is that this fight is between two subsidiaries of large international groups that cover both content and distribution. Vivendi has scaled back its distribution holdings over the years, but as well as claiming ownership of PTC it still holds the majority stake in French mobile operator SFR (much to the annoyance of minority investor Vodafone). And News Corp is a content business also; its Fox network was helping test MySpace's improved copyright protection tool as announced earlier this week - see here. So both media groups have a vested interest in finding the right technical solutions for protecting copyright whilst enabling wider content distribution. But although MySpace had put in place enhanced tools to allow content owners to remove unauthorised content, the problem with that solution is obvious - it is classic reactive revenue assurance with the burden of the work being performed by the content owners. However, the timing of Vivendi's action is strange. Maybe it was because of the pressure of a law suit, but MySpace had already acquired the technology for an active revenue assurance solution it could implement on behalf of content holders. In October MySpace had licensed from Gracenote (the on-line music database business familiar to any iPod users) the technology to automatically read the "fingerprint" of music uploaded to its site, and so to enable a check for whether copyrights were being infringed - see here for the press release from Gracenote. The intention to incorporate the "fingerprint" (the ability to identify a song from the first few seconds of music) within the Gracenote database was first announced as a co-operative deal with Phillips only back in the middle of 2005, so this is still pretty new technology. From that point of view, MySpace has moved very quickly to take the burden off content owners. But if you are Universal, seemingly not quickly enough.

Privacy enthusiasts may have noticed a worrying outcome from all of this. We all know that controlling content comes down to the ability to enforce. And that means monitoring who is doing what with content, and stopping the unlicensed copying and distribution. The pirates take advantage of the weaknesses in that ability. But so do ordinary people - in the sense that they do not expect to have their use of content, including casual copying and lending of material to friends, monitored just in case it represents a piracy threat. But now we are seeing the first emergence of a global on-line revenue assurance technology for content, premised on the idea that if you go on-line there will be an automatic check of whether you are entitled to have a copy of it. The automatic check against the Gracenote database already occurs seamlessly for iTunes users. At present, iTunes/Gracenote is not verifying if the content is obtained legitimately, because of the hangover from old technology. Nobody would have bought an iPod if they could not copy their CDs onto it, and last time I went to a music store nobody was taking a note of my name and address in order to issue a license to use the content I had purchased. But they could. And if Sony BMG's antics are representative, they will. Remember that Sony BMG is the company that felt entitled to secretly install spyware on customer's PCs as an anti-piracy measure. If the media companies tracked licensing at the point of purchase (easier to do on-line than at a store, but surely only a matter of time before they do both) and monitor copies on devices, they will have finally solved the problem of privacy for good. It would be the ultimate in revenue assurance for content. The only downside, depending on how you look at it, is that it also means that big business knows an awful lot about the private citizen - not just what they bought, but also where they store it and even if they copy it. So if you do not like that idea, you had better keep buying CD's and paying in cash, and hope the music businesses do not phase out CD's like they did with vinyl.

Posted by Eric on November 18, 2006 12:47 PM | Permalink | Comments (0) | TrackBacks (0)

Here is a good video newsclip about inaccurate energy bills and a surge in complaints that was broadcast by the BBC a few days ago.

The thing that interests me is that UK energy bills do not get independently audited like UK phone bills. Which seems strange - is it somehow less important that customers are protected from inaccurate energy bills? No. Possibly the issue of estimation obscures things, but probably the reason why energy bills do not get audited is because the energy regulator cannot justify it, no matter how many complaints are received.

Is there something inherently more trustworthy about the energy business? You judge from the following:

1) The UK energy regulator has copied the approach of the telecoms regulator in insisting on an "alternative dispute resolution service" be provided to customers - an ombudsman. To make life easy for everyone, ex-Data Protection civil servant Elizabeth France now doubles up as an ombudsman (or should that be ombudswoman?) for both telecoms and energy, thus proving herself to be the queen bee at semi-public jobs to do with data integrity. So no difference there then. The energy ombudsman is too new to have published statistics but doubtless they will find the majority of complaints they handle relate to people complaining about being charged too much, and that the majority of customer complaints will not be upheld - although Elizabeth France was savvy enough to hide that fact in the "transparent" annual report of the telecoms ombudsman.

2) This year the UK energy industry has written a nice glossy code of practice for billing. It reads well, is simple and customer-friendly, is short on detail, has no targets and says nothing about making sure it is followed. So no audits, then. In contrast, the UK telecoms regulator has for over 20 years written the standard for UK telco billing , sometimes pretending to listen to industry whilst doing so. It is impenetrable, full of unnecessary semi-technical jargon, cannot be properly understood by anyone not also familiar with all the supplementary "interpretation", at times contradicts the legislation and regulation that gave birth to it, includes targets and is backed by independent audits. And judging from the 20 or so private citizens who responded to Ofcom's last public consultation on it, much loved by customers with time to write letters about such things.

So perhaps the energy industry is more trustworthy, or perhaps the telecoms regulator thinks the energy regulator is weak but trying to catch up after falling over 20 years behind. But we do know one thing: now that the industries have an ombudsman in common, and hence an independent and comparable source of data on trends in complaints, we will have an insight into which model for regulation - unaudited self-regulation without targets, or audits against an imposed standard with targets - actually works better at giving customers bills they are happy with. Roll on the first annual report of the Energy Ombudswoman!

Posted by Eric on November 16, 2006 10:55 AM | Permalink | Comments (0) | TrackBacks (0)

I still own lots of vinyl LP's. Big black shiny things that came in fantastic thin sleeves with great designs on the front, CD's could never be as thrilling. But like many people who bought vinyl, and people who still buy CDs, I was confused about what I was paying for. I thought I was buying a slab of plastic. In fact, I was buying a right to reproduce intellectual property - under very specific circumstances. I could reproduce the music for my personal enjoyment but not for profit or, seemingly, other people's enjoyment, unless nobody minded the reproduction. So playing the vinyl at a school disco is okay, but having it as background music in a shop is not. Ultimately the rules over reproduction are very confused. I mean, when I bought those vinyl records I would have had to be some kind of obsessive to try to make decent copies of the music to give to other people. Now with a cheap gizmo I can pipe the music from my record player, via my amp, into my laptop. Once stored in my laptop, I can clean up the sound using some freeware software, convert it to MP3 and email it to anyone I fancy. When they sold me the LP nobody was thinking about that, but you can be sure the record company bosses think a lot about copying music now.

Personal Video Recorders (PVRs) are a good example of the problems in understanding what people can own and sell. If I buy a PVR and use it to record and replay television shows when I like, that is fine. I can even invite people over to watch with me, without seemingly infringing the rules. But if I tried to copy the data so somebody could watch the show elsewhere, that would be wrong. And if someone was to remotely copy and store a show on my behalf, then that is wrong too. But someone can sell me video on demand which is technically almost identical, but has a different legal relationship in terms of who is doing what.

Of course, like all very complicated rules, it all comes down to enforcement. And rules get enforced when it suits the people trying to make money, and not otherwise. That is why the record industry did not send in a crack military squad to bust up my school disco, and nobody will get too upset if I ask someone to record a tv show just for me.

If people are confused now about what content is, they are about to get a lot more confused. Witness the uproar when Sony BMG tried to stop people copying the contents of music CDs to their digital libraries. Some got very angry, some bought the same music a second time over the internet and some just worked around the problem by writing the content to a fresh CD and then copying the content from that. But this is with CD's, where there is still something physical. People seemingly cannot imagine content without a physical instance. If you don't believe me just look at the movies. Every science fiction film has people with laser guns and spaceships that go faster than light, but somehow to get a bit of digital content from A to B everyone gets perplexed and needs to carry it in a strangely shaped bit of plastic. Given that Vinton Cerf loves telling everyone how we need IP (meaning internet protocol this time) addresses for Mars (take a look at this article in businessweek) you have to wonder why outer space heroes never just email things instead of carrying messages back and forth like homing pigeons. For classic sci-fi fans, the big question is why in Star Wars the Millennium Falcon flies back to Yavin 4 with the secret plans for the Death Star, when they know there is a tracking device attached to the ship? Talk about a high-risk strategy. Why not just email the plans instead of leading the Empire's big new weapon that can blow up whole planets right back to their secret base? For those who like their sci-fi more recent and more Joss Whedon-stylee, the same kind of nonsense occurs in Serenity, where they physically carry around a big block of plastic with the vital video recording to be broadcast by Mr.Universe. If Mr. Universe can broadcast to every planet, why can't he also receive a transmission? But the worst example occurs in Minority Report. So Tom Cruise is wearing his fancy gloves in front of his big screen, flicking through the images from the clairvoyant mutant kids in the paddling pool. His sidekick is mucking about calling up some information on the design of some houses in a certain part of town or something silly like that. So Tom wants to see the information his sidekick has called up. So how does the sidekick transfer this data across the 3 feet from his desk to Tom's big screen? He carries it. Yup, that is right. He carries the data In some kind of clear perspex block which he puts into a slot on Tom's screen. These guys are urgently trying to stop someone being murdered in the next 30 seconds but somehow they do not have the technology to wire up Tom's screen to the sidekick's desk. Geez.

The point I am making, if you are still with me, is that the average person just cannot get their head around what data is when you strip it away from any physical context. So when we talk about intellectual property, which is even more abstract, most of the world is even more confused. But sometimes good things come out of confusion. For example, intellectual property currently suits the richest people in the world - because they can afford the lawyers to fight to enforce their rights. And that is why the biggest pop stars and films come out of the richest country in the world, much to the annoyance of the French in particular. But you no longer need to be rich to distribute content. So if you cannot afford the lawyers there will be a simple alternative: give the content away. If you are a poor struggling artist, why not? The worst that can happen is that you get no money, but you were not expecting to get any in the first place. At best you make a lot more fans who maybe will pay for things in future. But you can bet that the big businesses that make money from content are not going to like that and will try to discourage and distract people in order to stop that happening.

The distribution networks have a key role in determining how intellectual property gets handled in the brave new world we are entering. On one side, the distributors can try to specifically charge for the specific content, and so will want to control that content. Buy old media stocks if you think they will win. Probably that is a safe bet - Sony and other huge corporations did not buy content companies just to find their investment undermined by file sharing geeks. On the other, the distributors could try to charge for transmission or advertising around the transmission without caring about what the content is, and spare themselves the DRM headache. And when it comes to the legality of what is going on, they may get forced to intervene, but (as any regulator can tell you) forcing a telco to do something against its will tends to lead to a lot of excuses about technical feasibility, even more foot-dragging and delays, and even the odd bogus argument about privacy. But now that Big Brother is here and we all need to be monitored and recorded 24/7 in case it turns out we are terrorists that last argument may be irrelevant. Buy Google and their ilk if you think that the value of content will be secondary to the power to freely distribute. Of course, the way the distribution network execs are currently trying to profit from intellectual property is very confused. Which I guess goes to show they are human like the rest of us. Some telco execs are wasting money on pointless own brand internet sites, whilst others are happily advocating (when no lawyers are around) that people abuse file sharing all day and night. But one thing that everyone can agree on is that vinyl, much as I love it, is not going to make a comeback.

So the only question left to ask is this. If the advertising industry hates PVRs because people skip the adverts, how long will it take before someone offers browser software that strips out adverts? And when they do, how long will it take Google to turn from being pretend new age hippies into the greedy old school corporate sharks they really are?

Posted by Eric on November 15, 2006 04:16 PM | Permalink | Comments (0) | TrackBacks (0)

Yesterday was a big news day for telecoms and I think I did a fairly good job in blogging about the biggest stories (DT's new CEO, BT in India, ntl buying ITV). But it seems you cannot keep everyone happy. Christo Kuniewicz of Level 3 has moaned at me today that I did not write about some tiny VMNO that disappeared yesterday in the UK. OK - you got me on that one. But to make up I will try to link this to (1) revenue assurance, (2) why you cannot trust entrepreneurs, and (3) the strategic stuff I blogged about yesterday.

Easymobile, the UK VMNO with 80,000 subscribers announced yesterday it will stop providing service within a month http://news.bbc.co.uk/1/hi/business/6145628.stm. TDC, the Danish network licenced to use the "easy" brand in the UK will pull the plug on 13th December. The motivation behind TDC's decision is obvious - it will invest in activities where it can actually make some decent money. But whilst the news is full of reassurance that customers will be fully refunded for any excess credits, the question in my mind is who is going to make sure this really does happen?

Anyone with a passing knowledge of revenue assurance might suspect that a business closure would be just the time for a meltdown in handling customers and correctly managing customer accounts. Even if there are enough employees to sort out the mess whilst handling the deluge of customers that will be trying to get in touch, there is no guarantee that these employees will feel motivated to do their job properly because some of them will be more worried about their next job than their current one. Unfortunately, the extreme over-regulation of billing accuracy in the UK also manages to provide no meaningful protection to any of those 80,000 Easymobile customers. When confronted with a choice in 2001 about whether to implement broad and simple controls over the whole industry very quickly, or to implement extremely demanding and deep controls and to roll them out across the industry at a snail's pace, the UK regulator opted for as slow a process as possible. The last time they did research on the topic, the regulator concluded that 7% of the UK public (after prompting) were aware of the regulations to protect customers from incorrect charging - so presumably Ofcom can be looking forward to 80,000*7% = 5,600 Easymobile customers getting in touch today to find out why they have not been protected so far and asking how they will be protected now. I wonder if Ofcom has a good answer ;)

For those of you not familiar with the British love of self-promoting entrepreneurs, I need to tell you a little about the "brains" behind Easymobile. Stelios Haji-Ioannou describes himself as a serial entrepreneur. I would describe him as a fat Greek man who always seems to be smiling, was born very rich and has got a lot richer by selling things more cheaply than rivals whilst pretending to be a consumer champion. He is very popular because of the success of his low-fare airline, which was very successful in busting up that market. His other ventures, of which there are many, have not been as successful, and often have generated very many complaints despite Stelio's insistence that he is a consumer champion. But all have a few things in common: they are all called Easy-something, everything tends to be painted bright orange and there are many pictures of Stelios smiling and promising to be a consumer champion and lower prices. Presumably the reason why TDC have pulled out of this venture is that calling giving a phone service the name Easy-mobile, colouring it orange, selling it cheap and having Stelios smile a lot is just not enough to persuade many customers to swap suppliers. Because unlike airlines, Stelios was this time launching a service into a market that was already highly competitive whilst having absolutely nothing new to offer. I suspect that Stelios' claims in the newspapers that he will find alternative partners to help him relaunch his Easymobile brand will come to nothing. If he had an alternative partner he would have lined them up already, and I cannot see why anyone would want a partner whose best chance at growth is through cannibalising revenues on the same network. So Stelios, the self-styled consumer champion, has let his customers down by promising them services he could not deliver. Lucky for him that nobody is looking over his shoulder to check if he keeps his other promises to pay everyone back promptly. Stelios kept pointing out in the news he was intending to sue TDC. So that explains how he intends to make some money out of this mess - but I am not sure how this helps his customers or makes him more likely to keep his promises :|

All of this must come as a relief to Orange, of course. After getting mighty upset and probably paying big fees to its lawyers, it seems they will not be needing to continue their fight with Stelios over whether Easymobile is allowed to use the colour orange as well :)

I had the misfortune to hear Stelios speak on the topic of telecoms once. It was unfortunate because the man obviously knew nothing about telecoms. Please understand this point carefully. It was not just that he knew nothing about how telcos worked - lots of telco execs know nothing about how telcos work. Energis recruited a team of execs because none of them knew how telcos worked, and the Cable & Wireless board thought that was such a good idea they recruited the same bunch at the cost of buying the whole of Energis (presumably the C&W board thought it would be too hard to get random people who knew nothing about how telcos worked and wanted to pick a team within a proven track record of not knowing how telcos work). The C&W share price has gone up since so obviously shareholders agree that not knowing how telcos work is the way forward. So not knowing how telcos work is not what I am complaining about. Stelios obviously knew nothing about telecoms at all. I mean, he had nothing to say on the topic at all, not even about strategy or a marketing vision or something like that. I mean literally nothing. He must be a very eager salesman to have the guts to get in front of an audience of thousands of telco workers when all he has to say is that he likes running businesses, he is keen on the colour orange and was going to beat Orange if they went to court, he has been very successful running an airline and wanted a show of hands on who had flown to the conference on his airline - that kind of thing. Even then, he only had material for half of his slot, kept making excuses that he would need to leave early and ended up taking questions from the floor to fill out the remaining time. Not surprisingly most of these questions had something to do with why people were at the conference - telecoms. And not surprisingly he was unable to answer the questions. My advice is never ever go to a TeleManagement World conference on the strength of the speakers they get. You get some boring techie people and you get some boring sales people but never anyone worth listening to. Apart from when I speak, of course ;) Anyhow, Keith Willetts deserves to be shot for trying to sell conference tickets on the strength of that Stelios speaking at TeleManagement World Nice earlier this year. I thought the point of TeleManagement World was promoting lean operations for sustained results. A few months on, and Easymobile has taken lean to a new level - by not even existing :)

The good news for Easymobile customers is that they have the option to switch to Carphone Warehouse's "Fresh" mobile service. I have no idea why this option is preferable to swapping to any other supplier, but that is what Easymobile are offering anyhow. In the notes provided to Easymobile customers it says that they will be able to migrate customers to Carphone Warehouse, but they only promise to "do our best" when it comes to porting to another provider. Hopefully their best is enough to comply with their obligation to do so - so why pretend they are doing the customer a favour when the regulator compells them to do this? :| But those customers that do migrate to Carphone Warehouse had better be on guard. Because if a mistake is made whilst transferring the account balance, nobody will be checking because - you guessed it - Carphone Warehouse's Fresh mobile is not covered by the UK regulations on charging accuracy either. On top of that Carphone Warehouse also fails to comply with the UK regulation on comparable indicators. This means they fail to provide the public with 5 simple measures of performance, one of which - can you guess? - is the number complaints they get about the accuracy of billing :| On the plus side, the good people at Carphone Warehouse are at least sane. They kindly pointed out earlier this year that the charging accuracy expectations in the UK were nonsense - take a look at pages 3 and 4 of this: http://www.ofcom.org.uk/consult/condocs/metering/responses/cpwh. I am glad they are sane, because they are in for a big challenge. On top of migrating a lot of extra customers in a short period they were already planning a UK£30m project (US$57m) to consolidate their billing - see http://www.financeweek.co.uk/cgi-bin/item.cgi?id=4501&d=11&h=24&f=254.

So coming back to yesterday's topic, the question remains whether you can make good money by selling telcos like a commodity. If anyone is able to do it, it should be Stelios. His entire Easygroup is predicated on the idea of selling basic no-frills services to a mass market and making a profit by keeping costs ultra low whilst beating competitors on price. But despite the very high public recognition factor for Stelios, and his personal popularity as one of the best recognised and most loved businessmen in Britain, his low-cost mobile offering simply never got any meaningful market penetration. And his failure may well discourage some of the other unrealistic marketing plans being dreamt other by other businesses wanting to turn a fast buck from leveraging their brands as virtual operators. Even the most successful virtual network in the UK, Virgin, got bought by ntl more because of their overall value as a brand (compared to ntl's dismal reputation for poor customer service) than because of the relatively low number and value of customers they had actually signed up. That is why ntl are intending to spend again and buy a TV network. In Herzberg terms, good customer service, good brand etc is just hygiene - you need content to really motivate customers to move in large numbers or to remain loyal in the face of cheaper competitors. In contrast, DT have been using mobile as a cash cow for a long time now, without worrying about the inevitable erosion to their market from the entrance of players who can offer a lot more than commodity communications. Promoting the head of T-Mobile to CEO just shows how short of ideas they are. If DT's play is to be best at offering a commodity, the question remains as to how they will compete with those who opt for vertical integration. To take another example, 3 are incredibly cheap, and have taken the ultimate step in selling voice as a commodity - to the point of paying customers a share of the revenues they receive from call termination - but they also earn very high ARPUs because they sell so much additional content. So the question for all businesses right now is whether they intend to make money from just being a commodity provider, or will offer the commodity as a loss leader and instead try to make money from selling the extra content on top. Remember, if there is ever insufficient competition, then the price of communications is regulated in a way the price of content never will be. The problem for those providers that go down the commodity-only route, is how to adapt their strategy when their rivals can afford to charge rock-bottom prices for commodity products because they have the vertical integration to make their real money from the selling of additional content. Every time the commodity-only providers cut their costs, they will be in danger of destroying their value through poor service, damaged reputation or direct loss of revenues. So if your only advantage is cutting costs, it means balancing the returns of the business on a razor's edge.

Posted by Eric on November 14, 2006 04:44 PM | Permalink | Comments (2) | TrackBacks (0)

So Deutsche Telekom has forced out one CEO, Kai-Uwe Ricke, and replaced him with a new one, Rene Obermann. What does this tell us? It tells us that the German government has learned nothing from last time they changed a DT CEO. Last time the change was motivated by minor improvements to a badly flawed strategy, and the same is happening again. According to this article http://www.euro2day.gr/articlesfna/23879803/ the point is that the German government is fearful of reducing the number of German workers. Somebody should give them some advice on how taking a protectionist attitude to telecommunications is bound to fail.

I guess being big does not mean being clever. Take a look at the dinosaurs. Huge beasts that could eat up little mammals but brains the size of peas. And they all died out because they could not change; and the mammals got to rule the earth in the end. There has been a lot of speculation about DT buying BT, but that just shows how few options DT really has. BT is getting the point by speeding its growth in India http://news.bbc.co.uk/1/hi/business/6142496.stm on the back of successfully outsourcing a lot of jobs to the sub-continent, and pushing hard its broadband tv proposition. Meantime, DT is stuck on yesterday's news about the mobile success story. Whilst big mobile rivals Vodafone and Orange/FT are slowly starting to realise they need to offer fixed-line services to the home to stay competitive, DT struggles to see beyond the consequences of losing its monopoly status in Germany. The irony here is that BT is a target because its home market was far more successfully liberalised than Germany's.

What DT's conservative backers fail to realise is that the money will never be in distribution, because ultimately USPs are few and far between. Apply Michael Porter's thinking to telecoms and it all becomes clear - you either best your competitors on price (and so drive down your own costs) or your have something unique to your sales proposition. So where does DT's strategy fit into this model? It does not. They are going to keep a high cost base by retaining most of their staff in Germany (and paradoxically try to offset this by reducing staff in operations in countries where labour is cheaper). And they have no meaningful way of differentiating their product.

The best way to differentiate your product, as everybody is starting to realise, is through content. 2-way communications may set the world free and empower us all, but ultimately with 2-way communications there are hardly any ways to differentiate your offering. The only consistent reason to chose one provider over another will be cost. On the other hand, access to exclusive content will enable distribution networks to charge a premium and build loyalty. That is why football will be a big part of BT's new television offering. That is also why ntl is planning to buy the UK's ITV network. That is why Rupert Murdoch has an investment strategy that matches his content to his distribution channels. That is why Apple do not just make iPods they also provide iTunes, and will gladly automatically convert your MP3's to their format to help persuade you to switch to their supply line. And the incredible thing about content is that the big winners will be able to sell their content all over the world - which means the biggest players will come to the fore in dominating distribution of content in the three most popular languages: English, Spanish and Chinese. That is what sat behind Telefonica's strategy for expansion in South America and that is what sits behind BT's plans for expansion in India.

And, I will go further by making another bet. You should be familiar with the $100 laptop group, who now call themselves the One Laptop Per Child group http://www.laptop.org/. Most of the high-end mobile revenues are premised on the fact that they offer more sophisticated handsets than fixed-line providers do. Think of them as relatively fat clients in the client-server architecture, if you like. But despite their massive handset subsidies, that advantage is going to decay steadily. Laptops with wireless capability that can roam on and off local wlans, BT's bluephone, set-top boxes of increasing sophistication with larger and larger hard drives, and ultimately the $100 laptop for the developing world, will challenge the assumption that there is a link between wireless connection and high-spec clients. In fact, if people pay a premium for content, my bet is that they will mostly want to enjoy it at home, not on the move, and so will want a device that can store and replay on to a large screen, not a small one. And if you pay for the content, not the distribution, why not just download to a device with a hard drive using the cheapest distribution channel (fixed line) and then copy that data to whatever device you want to reproduce the content with? Why would you want to pay extra for mobile transfer if you do not need it? After all, iPods have been so successful because people are happy to acquire and reproduce content from their fixed line in their home base, so why would they want to pay extra to download on the move?

By the way, if you do not see a link in all these things, may I point out the following about News Corp:
- they own a lot of content (Fox network, movies, newspapers etc)
- they set the precedent for big investments to get sporting rights
- they have been trying very hard to get into the Chinese market
- they were leaders in new distribution networks (satellite etc)
- they were leaders in putting hard drives into set-top boxes in people's homes
- they are one of the backers of the $100 laptop group

So if you do not trust me, trust Rupert Murdoch. He seems to know how to make a buck or two, and seems to have a flair for making long-term bets that pay off.

I think the Murdoch's of the world are the survivors, and the German government's parochial vision of the telecommunications industry is doomed like the dinosaurs. Germany's telco giant - and its government - is struggling to adapt to new conditions. It looks like they are focusing on being best at distribution, especially over wireless, in the hope of covering their high cost base. Instead, they should be following the commercial vision of focusing on securing content and a way to pipe that content cheaply to homes, whilst keeping costs low by taking a global view on where to locate your staff. Worst of all, their first language is not that popular world-wide. At least they all speak good English....

Posted by Eric on November 13, 2006 01:47 PM | Permalink | Comments (1) | TrackBacks (0)

At the moment it seems all the news in revenue assurance is about how big the market is. Perhaps all those speculative investors who have been backing revenue assurance vendors are starting to ask more questions about when they get to exit the market and take their returns.

It says here http://www.mindbranch.com/products/R70-32.html that

Dittberner sizes the market at $531 million in 2005. Roughly 60% of the market is software (including customization, maintenance, and service bureau work) and the remainder is consulting, everything from helping a carrier establish a revenue assurance and fraud management organization to auditing operations and create effective business processes.

Furthermore, it says here http://www.xchangemag.com/hotnews/6ah30162652.html (quoting the same report) that the revenue assurance market will be worth US$562m by 2010. The logic for growth seems pretty weak though - that telcos will need to eliminate leakages to succeed in next gen markets. Presumably the people who wrote the report forgot to notice that (a) eliminating leakages would be just as important when competing in boring old last gen markets, and (b) most of the products offered by today's software vendors address issues of decreasing relevance in the next gen world. You also have to wonder about what gets included in this "revenue assurance" market, as part of the problem appears to be standard bad debt management, something that equally applies to lots of retail sectors other than telcos, as well as applying just as much to last gen as next gen. So I will not be paying the US$5,000 asking price for this report. If Dittberner sells 1,000 copies of this report then their revenues alone would account for 1% of the total revenue assurance market :)

In contrast, the SubexAzure-Analysys estimates of global loss are US$176 billion. In other words, this implies that the total amount spent on revenue assurance is 0.3% of the total amount being lost. That does not seem that plausible to me. Simple demand and supply would suggest that if there is US$176bn to be made from a market, then people are going to invest more than US$0.5bn to chase that market. Talk about setting demanding targets for returns on investment! If the same targets were applied to all telcos as a whole, they would look ridiculous. For example, Ofcom said the UK telecoms market was worth £46.6bn ($88.5bn) in 2005. 0.3% of £46.6bn would imply UK telcos only spend about £150m ($280m) each year.

But it gets worse. Over here, http://www.billingworld.com/rev2/main/featureArticle.cfm?featureID=7795 it seems to imply that people need to move on from revenue assurance to a vaguely-defined "business assurance". Presumably this is justified because they have realised all the returns possible from revenue assurance. Do not get me wrong, this article is not all bad, but nobody has applied much scepticism to some of the half-truths that were being offered by people interviewed. For example, one might equally well ask if the perceived need to shift from revenue assurance to a broader business intelligence-cum-strategic business assurance is in fact motivated by two rather more old-fashioned factors: (1) people finding that there is a glass ceiling to their revenue assurance careers and wanting to expand their power bases or move into other areas, and (2) it is quite embarrassing to be talking about the same old revenue leakages year after year, especially if you have not actually fixed them (and may have been given a few million $ previously to spend on revenue assurance tools to do just that) ;)

So, on one side, we are expected to believe that basic revenue assurance is failing to deliver the US$76 billion on offer. On the other side, people are supposedly moving on from the old revenue assurance problems because they have been solved. Something is wrong here. Of course, it gets even worse when people try to link revenue assurance to Sarbanes-Oxley as they do in the Billing World article above. I very much look forward to the business that first publicly explains how it can be both Sarbanes-Oxley compliant and estimate its revenue loss to be any more than a fraction of 1%. Given the Analysys survey results, there must already be some companies where this seeming contradiction occurs. Of course, there is no contradiction at all - because the amount of revenue loss has nothing to do with whether the accounts are right or not, and the goal of Sarbanes-Oxley is accurate accounts, not well-run businesses. A company that "loses" revenue is doing no such thing in accounting terms: all businesses should be prudent when recognising revenues, meaning you can only book revenues if you reasonably expect to get the money with a high level of certainty. "Revenue leakage" by definition is the kind of thing where there is little or no confidence that you will ever see that money and so should never be reflected in the accounts. So you can lose lots of money and comply with SOX, so long as you do not pretend that the revenue loss has anything to do with the revenue figure in your accounts. Which only begs the question of why people try to link the two in their businesses.

Finally, I might as well share some advice I received this week from cVidya's venture capital backers. They emailed me and told me about this beguiling proposition:

if operator has 5M lines and his ARPU $15/subscriber/month meaning he has revenues of $900/year; if operator has Revenue Leakage of 8% (average) meaning $72M/year; cVidya platform will detect more then 80% of that leakage meaning $57.6M/year!

So, in other words, a typical cVidya customer with typical leakage generates $57.6m of returns in one year, or more than 10% of the total value of the global revenue assurance market. Presumably the average cVidya customer employs people in revenue assurance who are too busy to worry about moving on to business assurance quite yet ;) On the other hand, when their leakage is reduced to 1.6% or $14.4m/year immediately after they implement cVidya's solutions it might be time for them to move on to another job - resolving the remaining revenue leakage will be too slow and boring after such a big early success. Perhaps that is why you find so many revenue assurance big shots leaving their jobs immediately after managing multi-million dollar tool purchases. The fact they so often leave to get a job with the vendor they just bought the system from is obviously just a coincidence ;) Anyhow, I would be happy to take on the boring job these big shots leave behind, so long as I keep a modest 10% of any leakage that I save ;) And then I could also comment that cVidya resolves 80% of the "average" revenue leakage of 8% without even trying to deal with any of those exotic debt collection and fraud leakages that Analysys have to include in order to get their estimates to be so large. If I was allowed to keep 10% of leakage I fix for those areas as well I would be making pretty good money ;)

The funny thing about the revenue assurance market is that it is supposed to employ people with superior skills in analysing numerical data and finding anomalies. Why do none of those people ever question some of the incredible numbers quoted for the revenue assurance industry as a whole? And if the numbers they claim are for real, then why how do they explain why they do not make more money in the first place? Perhaps if they made more money the venture capitalists would be able to exit and the revenue assurance people so well paid that they will not care about getting a promotion to business assurance or a new job with a vendor....

Posted by Eric on November 11, 2006 03:37 PM | Permalink | Comments (1) | TrackBacks (0)

It says here http://deadpresident.blogspot.com/2006/11/reliance-money-stock-of-week.html that SubexAzure is undervalued and you should invest in them. Now, the old maxim goes that you should invest in things you know about, so that would imply people who work in revenue assurance should be thinking about investing in SubexAzure, but are they?

Clearly Subash Menon is one heck of a businessman. I met him a few years back at a conference in China and he clearly had a global vision to make his business the dominant force in revenue assurance. With an army of developers working in India, the logic seemed irrefutable: eventually they would pour out so much code that their software would inevitably outperform everyone else's.

But to buy this stock you also have to believe that they can make a profit from what they do. Reported 25% market share and "exponential" growth expected for the next 2 years would both seem to be good signs. But my bet is that the growth in revenue assurance stocks like this will result in a mini dotcom boom. Take a quick look at the financials for SubexAzure http://www.indiainfoline.com/company/compsnap.asp?co_code=14155&lmn=4 and you see not everything adds up. It has 25% market share, and its valuations are boosted by estimates of revenue loss that presumably place them at upwards of US$100bn. Presumably this would mean SubexAzure already has market penetration into telcos suffering upwards of US$25bn of revenue loss. But its revenues and market cap are a drop in the ocean compared to this number. If it is generating strong revenues for its customers, it should be in a position to earn more from them. But its average revenue per contract is less than US$1m per year, suggesting its customers do not believe the hype about the values that can be generated by using SubexAzure's products. And if they do not believe, then the true value of this market is far less than the estimates of loss would have us believe.

Posted by Eric on November 7, 2006 02:02 PM | Permalink | Comments (0) | TrackBacks (0)

If you are like me, you had a warm feeling when Dr. Muhammad Yunus and Grameen Bank won the Nobel Peace Prize. It showed that great ideas that help poor people do not involve charity and pop stars trying to get publicity - they involve giving hard-working energetic people new opportunities. You probably also (should) know about Dr Yunus' Village Phone project, which also shows how important communications can be to changing the lives of the poorest. And those guys over at Wikipedia also deserve a regular pat on the back for trying to give everyone in the world a very good free encyclopedia.

I think any telecoms professional should take note of the valuable research work being done by my old pal Pippa Biggs at the ITU http://www.itu.int/wisr/ . If, like me, you think access to communications is vital to increasing quality of life and chances for the world's poorest, as well as being a cornerstone for liberty, you will want to understand how the cost and difficulty of getting access to communications varies across the globe.

However, I sometimes also wonder about the morality of the big international telcos. Take a look at their financial accounts and you often see something rather depressing - the world's poor are subsidising the world's rich. Take a look at the financial accounts of C&W and for many years you would see the same pattern - significant losses and failed investments in the UK which were repeatedly bailed out by the big profits and cash inflows from their operations in the developing world. The Bulldog fiasco was the very last example of an investment folly funded by the world's poor before they split C&W's business into UK and rest of the world (presumably to force the UK management to really deal with its problems in its biggest market). The money poured into Bulldog's LLU program came out of the pockets of customers in the Caribbean, Panama and Asia - customers who often had little or no choice of supplier. Just remember that when you read how C&W's management describe their plans to turn around the business when they announce their interim results this week. They will not be mentioning how much worse it would have been without taking a subsidy from the world's poor.

Posted by Eric on November 5, 2006 06:56 PM | Permalink | Comments (0) | TrackBacks (0)

Here are a couple of recent news stories about real revenue loss for once. The question is, everyone tends to know who is responsible for counting the cost of security and the equipment that needs to be replaced, but is somebody keeping a tally of the loss of revenues? Not being able to provide a service or giving customers credits because of missed SLAs is the kind of revenue loss that often gets ignored.

http://www.theregister.co.uk/2006/11/01/level3_robbery/

http://www.theregister.co.uk/2006/10/23/vodafone_network_outage/

Posted by Eric on November 4, 2006 03:38 PM | Permalink | Comments (0) | TrackBacks (0)

Inter