The consolidation of revenue assurance vendors continues apace. Portugese business WeDo Consulting has acquired Irish firm Cape Technologies for EUR17m (US$24.3m), rising to EUR20m (US$28.6m) if performance targets are met. Read the press release from WeDo here. This ends a long spell of rumours about the future for the Dublin-headquartered Cape. One of Cape's largest customers commented today: "I wasn't surprised." WeDo is boasting it will become the world leader in revenue assurance thanks to its 370 employees, though it remains to be seen whether the "merger" as the parties are describing it, really will have no impact on headcount in the long run.

Posted by Eric on September 29, 2007 01:52 PM | Permalink | Comments (0) | TrackBacks (0)

I see the consultants behind the Global Revenue Assurance Professional's Association (GRAPA) are still up to their old tricks. Whilst promising their members they are "vendor-free" and that "only employees of telcos can join" they conveniently forget to mention that the staff of the association are identical to the staff of the XiT consulting business founded by GRAPA's president, Rob Mattison. So it is no surprise to see one of the questions they ask prospective members:

Do you have consulting projects? (in the past, currently, in the future)

It would be pretty funny if it was not so shameless. Why would an association that does not sell anything need to know about whether telcos intend to buy consulting? Only because it helps XiT with its marketing, that is why.

Next up from GRAPA is a benchmarking project. Guess what they will be asking - how big the telco is, what products it offers etc. In other words, the questions are identical to the ones that marketeers go through when getting information about their sales prospects. How convenient that GRAPA members will be asked to supply all the information in the name of "benchmarking", saving XiT the trouble of doing any sales research.

Posted by Eric on September 16, 2007 11:15 AM | Permalink | Comments (0) | TrackBacks (0)

Power line communication is the use of electricity lines to convey electronic communications. Though there are technical difficulties, the potential benefits are enormous. Instead of rolling out separate telecoms infrastructure, PLC means remote places already connected to the electricity grid might quickly and easily be connected. In addition, the power lines within a house mean that you could communicate with virtually any device plugged into the wall. As well as making 1950's "house of tomorrow" predictions come true - imagine your fridge going on-line and ordering you food from the supermarket - that would have immediate and significant benefits in terms of metering electricity use, balancing load, and hence reducing electricity consumption and carbon emissions. The potential benefits for the developing world are also great. Whilst they are leapfrogging to mobile technology, and hence seeing huge growth in the wireless sector, internet penetration is not growing as fast. If the internet could be supplied via existing power lines, then even remote parts of the developing world would have access to all the information resources that the internet has to offer. Look here for an excellent overview of the status and potential of PLC, written by a Kenyan author.

Posted by Eric on September 16, 2007 10:59 AM | Permalink | Comments (0) | TrackBacks (0)

In some ways, revenue assurance people are sceptics. They assume the worst is always happening at every telco they work. In other ways, revenue assurance people are optimists. They believe that only they have the skills and belief to find what is going wrong and fix it, that they will find what is going wrong, that they will fix it, and that they will make everybody plenty of money in the process. But are they sometimes over-optimistic? This LinkedIn question is looking for investors to help an Asian revenue assurance business enter the European market. A supplier in the growth region of Asia wanting to build market share in the saturated market of Europe? European operators have been the biggest purchasers of revenue assurance over the years. You would think their appetite for more spend on revenue assurance would be limited; that is my impression. So how much return on investment can be gained by a new player entering this most mature, most saturated, most competitive of markets?

Posted by Eric on September 15, 2007 02:36 PM | Permalink | Comments (0) | TrackBacks (0)

In my last blog, I made fun at the annual operator attitudes survey conducted by Analysys on behalf of Subex Azure. But sometimes I wonder why I bother. Why make fun when the experts do such a good job themselves. Take a look at this article "explaining" the results. It seems that revenue loss has increased is "because every time new services come along they bring with them a whole new set of revenue assurance challenges” .

Erm, excuse me? I mean, of course new services bring new problems. But then again, they mostly earn bugger all in revenues. Ignore the marketing hype - boring old voice products still represent a huge share of revenues for almost all telcos. If revenue leakage is as high as is claimed, then it must be because nobody has done anything much about fixing the leaks for boring old products. Blaming high estimates of revenue leakage on new products is daft. If the leakage was due to new products, you would have to believe that they all suffered extraordinary levels of leakage relative to the revenues they generate. Which might sound plausible except that the basics of revenue assurance for new products really are little different to the basics for boring old products. Check that you generate some data when a sale is made. Check the data is actually right. Check it gets from one place to another. Check that you take orders correctly and actually put them into service correctly. Check that what seems to be happening in the network is consistent with what you have in the billing system. Check that the price you told everyone is the price you set. All very boring. You can do it manually, if you have time and can be bothered. For several hundred % of leakage, it would be worth doing simple manual checks on tiny samples, and you would very quickly find things wrong. But then you would not need multi-million pound software tools, would you? ;)

Posted by Eric on September 15, 2007 01:50 PM | Permalink | Comments (0) | TrackBacks (0)

It is that time of the year again. Subex Azure and Analysys have issued their 2007 attitudes survey. The word attitude is important, because although the survey asked people to tell them numbers, as far as we can tell most of them are just opinions, not hard fact. But they get quoted as if they are derived from solid, irrefutable data. Which if you think about it, would make no sense. If you had solid data about this level of leaks, then you would be more effective at fixing the leaks! Despite the reservations that people like me have about the survey, Subex Azure, who have continued the survey that was started by Azure, know they are on to a good thing. The survey is regularly quoted all over the place, earning them plenty of kudos and helping to reinforce the strength of their brand in revenue assurance circles.

Here are the highlights that they picked out. The bits in italics are me interpreting the data (in my own inimitably sarcastic style).

The survey findings are based on responses from 96 operators from around the world.

Subex Azure boasts over 150 "installations" in over 60 countries, so a fair few of the operators must be Subex Azure customers.

Average revenue leakage has increased dramatically from 12.1% to 13.6% of turnover.

Oh dear! Does this mean leakage is going up for Subex Azure's customers too? But surely if you buy their products then leakage should go down?

If 13.6% of turnover is the mean average, then that means for every telco with 0% leakage, there is another losing over a quarter of all revenues. But hang on... no CEO ever got sacked because of revenue leakage. Does this mean shareholders do not share the same attitudes as people working in revenue assurance?

Operators’ beliefs about what is an ‘acceptable’ amount of revenue loss has risen to 1.8% from 1.1% last year.

That explains 0.7% of the rise in leakage then. Some telco revenue assurance departments just decided to make their own targets easier. Perhaps shareholders should sack the CEOs that let revenue assurance departments decide what is and what is not acceptable.

The increases in revenue leakage are predominantly due to external fraud, internal fraud and fraud by other operators.

Operator-to-operator fraud - nice to see someone admitting it takes place. But presumably none of the operators that responded to the survey volunteered figures on how much they made by committing fraud. For the purposes of the survey, should the money operators make from defrauding others be netted off against the money they lose from being the victim of fraud?

Average fraud losses have grown to 4.5% this year from 2.9% of turnover last year.

Very interesting. So these telcos can confidently measure how much money they allow somebody else to steal from them. If they are so good at measuring the theft, which means they can detect it when it has happened, then why are they not better at preventing theft from happening again?

Subex Azure makes a lot of money from selling fraud detection systems. Perhaps some Subex Azure customers do not know how to set up the fraud detection systems they purchased...

In this year’s survey, we specifically asked about the impact of convergence. We found that increased network convergence means that more revenue assurance managers have responsibilities for both fixed and mobile networks

Increased network convergence? This does not sound like anything to do with convergence to me. It sounds like more revenue assurance managers are finding they cannot continue to put off the big chunks of work they previously never had time for.

One final trend is that the mid-size operators (between 100k – 1m subscribers) tend to lose the most revenue. Smaller operators tend to have simple products and processes which result in lower losses, whilst large operators have the resources to approach the problems systematically.

There is some sloppy language here, and my guess is it leads to sloppy maths. When they say that mid-size operators lose the "most" revenue, they probably mean they have the highest proportionate losses i.e. stated as a % of revenues. This is different to saying that they have the highest absolute losses i.e. stated in numbers of dollars. Chances are that the headline "average" leakage for the industry is also misleading. You cannot take an "average" of different %'s of revenue leaked. 5% of a big telco's revenues may be a lot more money than 15% of a mid-size telco's revenues. So you cannot say the "average" loss of the two companies is 10% of the total revenues. But that error is made over and over again - taking the industry average % leakage quoted by this survey, multiplying it by the total industry revenues, and claiming the answer is the total absolute leakage in dollars. That is bad maths. If large operators leak lower proportions of revenue, then the mean average leakage across the whole telco industry may well be a lot less than the attention-grabbing headline stated here. Instead of just employing Analysys to ask people's opinions, they should also employ someone to do some proper stats.

By the way, it says on the survey webpage that if I discuss the numbers, I have to give credit by stating these exact words: “Source: Subex Azure Operator Attitudes to Revenue Management Survey 2007." Now that I have, I assume there is little danger of a law suit. So in case you missed it before, it is the Subex Azure survey I am making fun of ;) I hope that is clear to everyone!

Posted by Eric on September 15, 2007 01:49 PM | Permalink | Comments (0) | TrackBacks (0)

Subex Azure has slashed its revenue and profits forecast. For the financial year ending March 2008, the business is now forecasting profits after tax of US$26m, down from US$38m. Revenues are now expected to be US$130m; previously the advice had been US$150m. See here for the details from Subex Azure. The drop is blamed on the delay of US$20m sales to a single customer.

This manifest dependence on a few big customers belies the rosy stories that analysts give about the growth of the revenue assurance market. If Subex Azure, which boasts of having 32 of the 50 biggest operators amongst its clients, can be this vulnerable to the decisions of a single operator then their rival suppliers are at even more risk of erratic swings in earnings. But the information that even Subex Azure is dependent on a very few big contracts is already out there. Their Q1 advice made that plain: 20% of revenues from a single customer, over two thirds of revenues from just five customers.

The good news, depending on who you are, is that Subex Azure is going at full speed with shifting jobs to India. Aggressively cutting costs is one way to generate shareholder value, but is pretty depressing for an industry that likes to promise it can deliver sky-high returns on minimal investment. Whilst cost management is the message for shareholders it was not enough to stop a 13% drop in its stock.

For now, buying into revenue assurance is risky. Whether you are a telco buying tools and services, or an investor looking for good picks in the software industry, be warned that the returns on revenue assurance may not be as great as promised.

Posted by Eric on September 15, 2007 12:12 PM | Permalink | Comments (0) | TrackBacks (0)

Here is the fourth and final part of the series of blogs about net neutrality. In parts one, two and three I discussed the implications if the net stopped being neutral. But there is reason to believe the US Government will support neutrality.

The US Department of Justice's submission to the FCC may have landed a hard blow in support of allowing telcos to put short-term profits ahead of everything else - including long-term profits and the good of the wider economy. But the submission is by no means the end of the line for the net neutrality argument. The FCC may well pay more heed to the arguments raised by internet founders like Vint Cerf, one of the men who created the TCP/IP protocols, than they do to ideologically dogmatic lawyers in a cushy government job. Cerf recently gave an excellent summary of the net neutrality hazards, amongst other things, whilst speaking to the Financial Times - watch the video here. Though even if the FCC screws up, it may not mean the complete end for US domination of the internet. Cerf is also one of the most outspoken advocates for the transition from IPv4 to IPv6. By having a lot more capacity for IP addresses, migrating to IPv6 will avoid a rapidly-emerging bottleneck as all the possible IPv4 addresses get used up. This is vital for the developing world, which will need an increasing share of IP addresses in line with its rapid and increasing take up of internet devices, including mobile phones. Access to the internet will be key to enabling their economies to communicate, access information, and compete fairly with the rest of the world, hence fueling growth and prosperity. So a conspiracy theorist might fear that a laggardly approach to IPv6 migration may help the US to continue to dominate the internet. There is little cause to entertain conspiracies yet. In fact, the US government set June 2008 as its deadline for when all US government agencies must have transitioned to IPv6. How ironic that whilst one branch of the US government helps to open up the internet all around the world, another branch, if it gets its way, would impede the benefits the internet brings to US citizens.

Posted by Eric on September 12, 2007 09:51 PM | Permalink | Comments (0) | TrackBacks (0)

This blog continues the response, in parts one and two, to the US Department of Justice's recent arguments that net neutrality should not be protected.

Paying so that certain kinds of traffic get a higher class of service on the internet is like paying extra to be the first passenger to get off a plane. That may save a few minutes, but as the hostess in Snakes On A Plane points out, economy customers land at the same time as the ones in first class. If you keep getting off planes and boarding new ones, then maybe those saved minutes can add up to something significant (ignoring the fact that the next plane may be delayed or leave without you... but you get the idea.) However, as soon as you change to a carrier where you have not paid for priority treatment, or to one which treats all customers the same, then you stop getting any advantage. So how much is priority treatment on a network really worth to the customer? Probably not that much. It only becomes worthwhile if the standard level of service becomes so shabby, so slow and unreliable that nobody wants to suffer it unless there is a very large price differential, and if customer's traffic stays on the one or few networks where the customer is prepared to pay for priority treatment. If the price differential is small, or if the traffic goes elsewhere, it all becomes rather uncompelling as a sales proposition. If the differentials are small, then everyone can pay for priority treatment. Which means everybody just paid a little bit more for the same class of service they would have got if nobody paid a little bit more. Remember, the only thing worth paying for here is the right to jump ahead in the queue. If everybody has the right to jump ahead in the queue, then everyone just ends up in the same place in the queue. So the price differential has to be severe enough that some will not be prepared to pay it, and are willing to wait whilst others go first. On the other hand, the value of jumping ahead is exactly determined by how many people you jump ahead of. To be worth a lot, you need to jump ahead of a lot. Which means not many customers will be paying for premium treatment. That only begs the question of just how much extra revenue can be generated for network carriers this way.

Think of the possible class of service price differentials that networks could introduce much like the price differentials between flying first class or economy. Introducing that kind of differential to pricing and service may help the network carriers make more money, but it would be overall negative for the economy. Commerce thrives on open lines of communication, which is why the internet plays host to big business. Damaging those lines of communication through inefficient economic models for distributing resources and encouraging investment, would ultimately hurt the wealth and standard of living enjoyed by all citizens. The damage will be two-fold if it discourages new entrepreneurs to enter the market and encourages entrepreneurial businesses to establish themselves in other countries offering a high standard of undifferentiated internet service. Throughout history, relying on unfettered free markets to deliver an efficient communication and transport infrastructure, be it roads, rail, telegraph, mail, airlines, telephony or the internet, has failed as often as it has succeeded. In these sectors, even government monopolies can be more efficient than free market competitors. The lack of innovation and of a competitive spur is offset by how a comprehensive and reliable service encourages more total throughput. Not many people travel on US trains any more because they do not join up, do not run many services and do not go to many destinations. In contrast, a high quality telephone service that is always available encourages people to make many more calls than would a service which worked well only sporadically or where the quality depends on who you call. The internet is popular because it consistently works well and is consistently getting better. If, on the other hand, the internet fails customers sometimes, chances are the customers will use it less often in general, and not discriminate between which parties are poorly supported and which are well supported. So the short-term advantages enjoyed by network operators that differentiate service may well be outweighed by the reduction in long-term growth.

The relative importance placed on short-term over long-term profits is one of the reasons why free markets are sometimes poor at providing adequate investment to large infrastructure projects. This is where governments, with their overriding concern for the health of the whole economy, and not just of one business, often need to intervene. That does not mean the US government needs to start paying for network investment straight from taxpayer's pockets. But it does mean that the FCC needs to consider the interests of its nation, the USA, and not just of some businesses, when reviewing the arguments for and against a neutral net. The FCC needs the freedom to judge that there may be no overall harm in forcing the network operators to carry the burden of investment, especially if all that means is that customers pay higher for a top-grade undifferentiated internet. That price will be worth paying if those same customers also benefit from lower prices for everything else - movies, food, accounting services, information, shoes... anything that can be sold over the internet - as a result of fostering a more efficient marketplace. The danger is that the FCC will look at the costs to telcos and to customers from a narrow perspective. If they look at internet services in isolation from the goods and services sold over the internet, then they may help to force down the cost of internet services, but force up the price of everything sold over the internet.

Whole nations suffer the cost of poor infrastructure, which slows the pace of economic growth and encourages entrepreneurs to move to more lucrative parts of the world. The US DoJ is right to focus its concern on the level of investment in the internet, as higher levels of investment should help the economy at large. However, the DoJ is wrong to assume that a hands-off approach from government automatically leads to the highest levels of investment. Part of the DoJ argument is that the lobby for net neutrality is not able to show a current need for intervention. The argument is entirely circular; as nobody currently differentiates service, the net is currently neutral. That hardly demonstrates that there is no need to intervene to keep it neutral. Net neutrality is an argument to ensure the status quo, of undifferentiated service, does not change. The DoJ is capricious when it argues a change to differentiated services would be good for the customer and for investment, whilst also arguing that there is no need to intervene because there have been no problems with the undifferentiated services so far. That is like saying the current scenario works well, so things will be better if we change it! I much prefer the argument that if it ain't broke, don't fix it.

Governments should be willing to intervene to ensure the best possible infrastructure, as was the case with the US Postal Service, and its founder, Benjamin Franklin. In the case of net neutrality, the best decision for the US economy would be to enforce it, irrespective of the way this distorts the market for the network carriers. Free market ideology does not always guarantee the best financial returns - just look at Enron. If the US turns its back on net neutrality, it risks making an error that will erode the economic advantage it has gained from its pre-eminence on the internet. It may further reinforce a shift in the worldwide balance of power and wealth already being driven by dwindling energy resources, off-shoring, and the flight of capital due to simultaneous over-regulation (think Sarbanes-Oxley) and under-regulation (think subprime crisis). The US can ill-afford to also lose its dominance over the 21st century marketplace for communication, media and trade that is the internet. However, narrow considerations in the debate over the neutral net pose just that threat to the economic well-being of the USA.

The next blog will be the fourth and final part of this series on the neutral net. It discusses why a healthy and neutral internet is vital not just for the US economy, but for the whole world.

Posted by Eric on September 12, 2007 09:51 PM | Permalink | Comments (0) | TrackBacks (0)

Yesterday's blog covered why the US Department of Justice (DoJ) had got it completely wrong by arguing that neutral net laws might stifle investment and hurt customers. Today we should take a look at why they came to the wrong conclusion.

If you read the full DoJ submission to the FCC on net neutrality it is not hard to find the main principle that sits behind all their arguments. Unfortunately, it is a crude example of political ideology, rather than a well-considered economic analysis befitting an institution supposedly working for the best interests of the populous. Here is the key paragraph in full:

"The Department submits, however, that free market competition, unfettered by unnecessary governmental regulatory restraints, is the best way to foster innovation and development of the Internet. Free market competition drives scarce resources to their fullest and most efficient use, spurring businesses to invest in and sell as efficiently as possible the kinds and quality of goods and services that consumers desire. Past experience has demonstrated that, absent actual market failure, the operation of a free market is a far superior alternative to regulatory restraints."

There you go. Simple really. Free market good, regulation bad. There is no need to do any fancy maths or economics equations, or take into account the views of free market champions like Google, Amazon and eBay ;) Do not get me wrong. I am no communist. The free market is the right answer, most of the time. Not all of the time. Here are some examples where the free market was not so successful for the US economy:

1. The biggest mobile handset manufacturer in the world, Nokia, comes from Finland, not the US. The reasons why are pretty simple: Finland is an affluent society with high levels of education but where people are geographically distributed, and Europe got its act together and agreed excellent common standards and rules for mobile networks whilst the U.S. was encouraging an unfettered free market.
2. The smartest guys in the room, the ones running Enron, loved the free market. Kenneth Lay, CEO and Chairman of Enron, was a fervent campaigner for deregulation of the energy market, despite being employed in the 1970's by the federal energy regulator. He was so keen on trading in free markets that Enron diversified from trading energy into trading communications bandwidth. Their free market instincts won them many accolades in the US; Fortune magazine named Enron as "America's Most Innovative Company" for six years in a row. Only one thing was wrong: the Enron business model was based on a complete fiction. Cue blackouts in California, financial collapse and many workers who lost their pensions.
3. The US Postal Service... whoops, no, that is a government monopoly.

How peverse, then, that the DoJ cites the US Postal Service as an example of the benefits of being unregulated:

"The U.S. Postal Service, for example, allows consumers to send packages with a variety of different delivery guarantees and speeds, from bulk mail to overnight delivery. These differentiated services respond to market demand and expand consumer choice."

Well, for a start, this rather seems to contradict the DoJ's own mantra that the free market is best. The US postal market is highly regulated. The US Postal Service is a monopoly for many the services it provides and is a branch of the US government. However, it is easy to understand the DoJ's analogy. They are equating packets of data sent over a network with the physical packets sent through the post. The DoJ hence concludes that offering a variety of classes of service, at a variety of different prices, is best for the customers sending and receiving those packets, whether they be physical or data. There is only one thing wrong with the analogy. The US Postal Service is a network. It can control the quality of service from the time a letter is posted to the time it is delivered. The internet is not a network. It is an inter-network (the clue is in the name). No one network can control the quality of service experienced by a user of the internet any more than the US Postal Service can punish the Postal Corporation of Kenya for losing a letter sent from New York to Nairobi.

Crude political ideology and inappropriate argument by analogy: these are tell-tale signs that the US Department of Justice lacks the competence to understand the implications of its recommendations. But perhaps that is no surprise. Should we really expect lawyers to think hard about what works well in practice, as opposed to what words provide the best cover for legal backsides? The DoJ is probably more concerned with the fact that it lacks the competence to argue with the big network players. The strange thing here, though, is that they do not need to. All they need to do is to balance the arguments of the big network players with the arguments of the big business that favours intervention to preserve a neutral net. For some reason, those arguments, from the Googles and Amazons who also have a lot at stake, have not been held in high regard. One aspect of this is strange. If the DoJ has a political motivation, it is clearly not just erring on the side some big business interests versus other big business interests. It is also erring against the consumer. Like it or not, network carriers are not popular with customers in the way that the Googles and Amazons are. That is hardly reason to believe that the networks are automatically wrong, but it does play into the hands of cynics who accuse government agencies of serving narrow interest groups instead of society as a whole. That argument is simplistic, but in this case I think it is pretty straightforward to show how it is right.

In the next part of this multi-part blog, it is time to discuss the wider economic implications of making some internet traffic appear faster by putting the brakes on other internet traffic.

Posted by Eric on September 12, 2007 09:50 PM | Permalink | Comments (0) | TrackBacks (0)

People who read my blog must love long entries. They hardly have a choice ;) But even I balk at trying to write a single entry on the economics of a neutral internet vs. a differentiated internet. The brief version for those of you who cannot be bothered with reading it all is that the short-term benefit of differentiated traffic is trivial compared to the value gained by fostering the long-term growth of that traffic. Put another way, telcos wanting to de-neutralize the net are in danger of killing the goose that laid the golden egg. "That is too brief", I hear you cry. Okay, so instead here is part one of the low-down on why the neutral net is in everyone's best economic interests, and why that may not be enough reason to persuade everyone to keep the net neutral. Look forward to parts two, three and four over the next few days.

Politicians and lawyers run most of the world. Technology makes the world a better place. Politicians and lawyers usually have no understanding of technology. Draw your own conclusions on whether politicians and lawyers make the world a better place...

Is it a good or a bad thing that the US Department of Justice has argued against net neutrality regulation in its submission to the US Federal Communications Commission? Well, the answer depends on whether you want a vibrant or decaying US economy. If you want a vibrant US economy, it is a bad mistake. If you want to see the US economy continue to slip and slide, then the DoJ has just given it another little push in that direction.

The DoJ press release trumpets the risks of reduced consumer choice and reduced investment in networks. Let us stand back for a minute and just think about what that means, beginning with consumer choice. Consumer choice is measured in the variety of suppliers they can pick from. The power of the internet is that it has given people choice on a scale like never before. Today, anyone with internet access has a range of choice that would have been incredible just twenty years ago. Information, entertainment, retail products, news... the list of areas where the internet has opened up choice goes on and on. Think of them all as suppliers. Some supply content, some services, some goods, and you can find and access them all because of the internet. You can even compare the prices and hence make the free market even more efficient - in other words keep prices down. So if the concern is with choice, then anything which maximizes the number of suppliers on the internet - whatever it is they seek to supply - is in the best interests of the consumer. Net neutrality, by seeking to prohibit preferential treatment of one kind of supplier over another, helps to maximize the number of suppliers. It denies the opportunity for any supplier to get preferential treatment over another, which helps to ensure the maximum real choice for the customer. So the DoJ logic that net neutrality might inhibit consumer choice sees the world upside-down.

The other concern of the DoJ was with investment in networks. To understand the concern here, we should just recap on what the issue is. The issue is whether networks get to differentiate between different kinds of traffic. What does "differentiate" mean in this context? It means (a) set grades of priority for, and (b) set prices accordingly. When exactly would a prioritized network make any noticeable difference to anyone? Well, most of the time it would not. Think of packets on a network like cars on a road. If there is spare capacity (i.e. the roads are clear) it makes no difference whatsoever if one packet has priority over another. They both travel down the road at their own good pace and arrive at their destination at the same time either way. The only time it makes a difference is if the network has a bottleneck - the equivalent of a junction using our road metaphor. On a net neutral network, the first packet to arrive at the junction is the first packet to leave it. On a differentiated network, higher priority packets get to jump ahead of lower priority packets at the junction. This would be like having to let high-priority drivers go first every time you stopped at a red light. Does that make a difference to performance? Yes, of course it does. The higher-priority packets will get to their destination first. But the extent of the difference depends on the load and number of bottlenecks. If there is plenty of spare capacity, then resorting the queue at every junction makes very little difference. If, on the other hand, you have gridlock, then jumping ahead makes a big difference. So there is very little economic incentive to pay for higher-priority unless you think the network is going to be clogged up. Which begs the question of why the DoJ is convinced that allowing networks to set differential rates will encourage investment. On a simple economic analysis, it should do the opposite: there is no reward for building spare capacity into the network and potentially significant rewards for trying to maximize network usage, as this would justify higher differentials in price for different grades of traffic.

This last argument is not scare tactics from a net obsessive. Just take a look at some of the arguments being pushed by networks to justify differential pricing. AT&T helped produce scientific research that argued undifferentiated networks need extra capacity. Or at least, that is the rather simplistic headline that was generated from the research. Why anyone bothered to research this is beyond me - anybody with an intuitive grasp of mathematics would have jumped to the same conclusions as the researchers did without even bothering to do the sums. If you read the academic paper the research team wrote on why differentiated networks would be more cost-effective, the maths fundamentals are so simple that I can explain them in a few sentences. Imagine my driving scenario as above, where we compare what happens depending on whether high-priority cars get to go to the front at red lights, or whether it is first-in, first-out. Then set a target duration for the total journey. In the prioritized scenario, only the high-priority cars have to arrive within the target duration. In the unprioritized FIFO scenario, all cars have to arrive within the target duration (because that is the only way to be sure that the most important drivers do). Imagine then you have steadily more traffic on your road/network and that delays at red lights get longer as a result. Guess what? It turns out you need to spend less on building extra road/network capacity to compensate for increased traffic if you only care about whether the priority cars arrive on time. What a surprise. I cannot argue it is science fiction but it definitely is science phooey. If this argument is right, which of course it indisputably is, then it follows that networks can save money on network investment if they can prioritize traffic. But this completely contradicts the DoJ argument, which was that not prioritizing traffic might lead to less network investment. The only way to interpret this is that networks will simply not bother to improve their network unless they can get specific users to pay for specific improvements. Presumably the DoJ have completely discounted the need to improve the general level of service in order to stay competitive with rival networks.

Read tomorrow for part two and the logic behind the DoJ's arguments.

Posted by Eric on September 8, 2007 06:07 PM | Permalink | Comments (0) | TrackBacks (0)

The television show Fonejacker will doubtless turn its star, Kayvan Novak, into an international comedy phenomenon like Sacha Baron Cohen. But on the surface, it appears that its basic premise - recording prank calls made to unsuspecting members of the public - breaks a host of broadcasting and privacy rules. Whilst being very funny at times, and hence popular, Fonejacker has also generated its fair share of complaints to Ofcom, the UK regulator. None of these complaints have so far been upheld. How does Fonejacker comply with the privacy regulations that prevent the secret recording of telephone conversations? Dig a little deeper into the regulations, and the explanation is easy to find: comedy broadcasts are simply exempt from those requirements. Here is what the relevant clause of the Ofcom Broadcasting Code says:

8.15 Surreptitious filming or recording, doorstepping or recorded ‘wind-up’ calls to obtain material for entertainment purposes may be warranted if it is intrinsic to the entertainment and does not amount to a significant infringement of privacy such as to cause significant annoyance, distress or embarrassment. The resulting material should not be broadcast without the consent of those involved. However if the individual and/or organisation is not identifiable in the programme then consent for broadcast will not be required.

That means Fonejacker has to skirt a fine line. For example, reeling off sexual double entendres at an unsuspecting old lady may seem pretty funny to some people, but is wrong if it causes the victim distress. Now we all know that what upsets some people will be shrugged off as harmless fun by others, so that seems like a pretty vague rule. Fonejacker can also avoid the need to ask for consent if the victim cannot be identified. Which is another vague rule: who can say for certain whether anybody listening will recognize the voice of the victim?

The regulator obviously gave this rule some thought. The minutes of their content board noted "a long standing broadcasting tradition of set ups, wind ups and other forms of surreptitious filming and recording for entertainment purposes which relied on this technique". So the argument was that if secret recordings for entertainment were acceptable in the past, they must be acceptable in the future. It must be hard work being a regulator ;) If Fonejacker continues to grow in popularity, there will doubtless be a craze of copy-cat shows and wannabe individuals uploading their efforts straight to YouTube. Some of those are bound to step over on to the wrong side of the regulator's vaguely-defined line. Dealing with that mess will really mean some hard work for the regulator. So if you want to have a laugh, call the regulator and ask them some stupid questions about what they do and how they justify their pay packets. Just be sure to tape the conversation and share it with the rest of us over the internet. Then we can all join in the fun - at their expense ;) Trust me, there has been plenty of times that I have laughed at what the regulator comes out with (usually it is a case of laugh or cry, and I prefer to laugh). It seems to me that I should secretly record any future conversations with them. There is always entertainment value in the nonsense the regulator spouts, and if I recorded it, I could share it with all of you. I wonder if they would see the funny side of that...

Posted by Eric on September 8, 2007 01:34 PM | Permalink | Comments (0) | TrackBacks (0)

Anyone keeping an eye on press releases must have noticed that SubexAzure have had a hot streak of sales. Recent announcements involving revenue assurance have covered the following regions:

• North America
• Nigeria and the Democratic Republic of Congo
• The Middle East and Africa

If you apply a Boston Consulting Group matrix analysis to the revenue assurance software market, over time we should see the choice of suppliers thin down to SubexAzure, one major competitor, and a few others that will struggle to survive. At present, SubexAzure is the Coca-Cola of revenue assurance software. I dare not guess who best deserves to be described as the Pepsi to their Coke. If SubexAzure continue to exploit their market lead, then eventually we should end up in a situation where most people working in revenue assurance are either employed by SubexAzure or use their software at work. When that happens you get a Windows-like domination of a market; people struggle to imagine why they would opt for a competitor's offering. The software market for revenue assurance is very niche and a lot less mature than it is for other software, but it should eventually exhibit the same patterns that turned OS/2, WordPerfect and Lotus 1-2-3 into the also rans of history.

You might have guessed that SubexAzure was going to dominate the market as the merger between Subex and Azure was taking place. Subex had an army of developers which few were likely to be able to compete with. Azure had already adopted a marketing strategy akin to that of Subex, making the growth of market share the top priority. SubexAzure has simply out-developed most of their smaller rivals, whilst benefiting from the efficiencies of selling the same products to a higher number of customers than most rivals. Having the highest market share should lead to a virtuous circle, as higher profits can be reinvested into maintaining a lead over rivals, and as perceived success translates into a more appealing sales proposition. One challenge might be how SubexAzure copes as their cost advantages are eroded. A higher standard of living in India will translate into increased costs and there is nothing to stop another part of the world emerging over time as a cheaper alternative. But that might take too long to pose any real risk. On a simple BCG-type analysis, SubexAzure should be able to retain their position in the revenue assurance market for the foreseeable future.

Over time, another kind of competitor may emerge to take on SubexAzure. Open source software often becomes the major competitor to the supplier that dominates a software market, in part because businesses that are failing might well open up their intellectual property. Doing so allows their existing customers the opportunity to gang together and maintain their existing software. There is also an emotional reason to free up intellectual property: the hope that it will save countless hours of work from becoming an evolutionary dead end. Open source should makes lots of sense for telecoms revenue assurance, as there is always plenty of work in tailoring each tool to the specifics of the business that uses it. Rather than making money from the code, you could see secondary entrepreneurs trying to profit from the implementation and integration, whilst not charging for the code itself. The reasons for and against acquiring open source revenue assurance software would be little different to the reasons for and against telcos developing their software in-house. Many of them have done that. So there are plenty of developers around the world who have some experience of writing code for revenue assurance. Add to them the many more developers who have worked for small businesses that lack the marketing power and hence cost efficiencies to compete with a SubexAzure. If open source gives those people a chance to gang together, and of competing with SubexAzure, I would not be surprised if they take it.

Posted by Eric on September 4, 2007 03:18 PM | Permalink | Comments (0) | TrackBacks (0)

Sorry to anyone who searched the blogosphere to look for a new job and found this entry. I am not offering any jobs in revenue assurance. I am also sorry that you are searching for a job in revenue assurance. Do not get me wrong, I think RA is a noble line of work. Good on you for also knowing that your line of work is called "revenue assurance". Plenty of people actually doing it have no idea what it is called. The reason I say I am sorry is because, unfortunately, you might find jobs in your search that are labeled "revenue assurance" but have absolutely nothing to do with your revenue assurance skills and experience. Some revenue assurance jobs are about a rarefied accounting discipline where the objective is to ensure that revenues are correctly recognized in the accounts. That is especially common in businesses and groups headquartered in the US, where correctly following the exact wording of the accounting policy is a very big deal. Other revenue assurance jobs are all about niche kinds of IT development. They want people to do wonderful things with code and databases and such, creating new tools and products that, when switched on, will automatically put the world to rights. Now, do not get me wrong. I think that clever revenue recognition accountants and clever IT developers are all smashing lovely people, with an important job to do and who add a lot of value to their business. But you could hardly think they do the same thing. I would bet good money that there is not a single person on the planet who could honestly claim to have done both jobs. There is no point trying to do it all, because if you try to be a jack of all trades, you end up being master of none.

It gets worse. Most jobs ask for umpteen years of experience in telecoms businesses. Yeah, right. Because all telcos are just the same as all other telcos, yeah? Of course not. Trust me, everyone thinks like that until they try working for a completely different kind of telco. At that point, they get a nasty shock about just how different those businesses are. The similarities between, say, a voice reseller, a wholesale carrier, an ISP, and a wireless virtual network operator are pretty abstract. There is a world of difference between being the kind of telco that buys its services from the incumbent and sells it to domestic customers and, say, the kind of telco that is the incumbent. So you would think that, when asking for experience in revenue assurance, people might be more specific about what kinds of telcos they want the candidates to have experience of. They rarely do. Which either means that people from different telcos background are either wasting their time, or, are successfully competing for jobs that arguably you might as well offer to people who have never stepped inside a telco before. I mean, how many years do you need to spend working in telcos before you know enough about US GAAP to do a decent job of working out what can be accounted for as revenues? And why is IT development experience inside a telco so much different to IT development experience gained outside of telcos?

Of course, the real problem is not with the candidates for revenue assurance jobs. It is with the people who offer the revenue assurance jobs in the first place. If only they knew what revenue assurance is, knew what they wanted, and knew what a good candidate looked like. To do that takes sufficient experience to write a good revenue assurance role profile and identify the appropriate candidate. The problem is, most of them do not have that experience...

Posted by Eric on September 2, 2007 01:23 PM | Permalink | Comments (0) | TrackBacks (0)