Billing Billing in mobile

Billing parameters

With the advent of high-speed mobile data services, the traditional elements used by operators for billing purposes are gradually losing their relevance. The notion of “time” on a network is fading as network connections move towards an “always on” platform. The idea of “distance” is also on the way out, particularly in a world where IP addresses are ubiquitous and always “local”. Billing strategies are therefore migrating towards concepts such as “volume-based”, “data type” and “flat-rate”.

In a 2002 report, the UMTS Forum identifies a number of parameters that can be used to determine the price of a given 3G or mobile Internet service: subscription, duration, destination, location, volume, network, device capabilities, quality of service, service termination indicator, event, transaction type, transaction value and content. These parameters are defined as follows:

• Subscription: A great number of services will be based on a monthly subscription (or a recurring charge) giving unlimited access to a specific service. In some cases, a cap may be imposed on usage, with additional charges payable by high-volume users.

• Duration: Services can be billed in terms of the length of time (minutes) associated with the delivery of a service. This is a fairly transparent billing mechanism for users and has been used in traditional circuit-switched networks for voice billing as well as data billing. This may continue to be used in future data networks for low-bandwidth applications.

• Destination: In some cases, billing may be related to the termination of access. This is the traditional charging method for long-distance and international telephony. This type of charging will be rare for accessing digital content over high-speed mobile networks. The Internet, for instance, has no distance-dependent tariffs.

• Location: The location, from which the user is accessing the network, can also play a role in user billing. For instance, it can be used to impose preferential or premium rates for access in certain congested areas, e.g. urban areas, airports.

• Volume: Volume will become one of the most crucial parameters for mobile data billing. Services requiring the delivery of large amounts of data could be charged according to the volume of data requested by the user, e.g. video streaming, gaming. The exact measure of volume to be used can vary (e.g. in Japan, “packets” are used and early GPRS services bill per megabyte). This is a much less transparent billing system for users, who may find it rather difficult to evaluate or predict the volume of data transferred in any given event.

• Network: Like in the case of GSM, high-speed mobile data providers plan to offer global roaming. This will no doubt come at a premium price, depending on which network is being accessed.

• Device capabilities: According to the UMTS Forum, billing systems should be developed in order to allow service providers to bill users based on the capabilities of devices, notably in terms of the amount of data a given terminal is equipped to download.

• Quality of service (QoS): In simple terms, quality of service can include five elements: peak bandwidth, average bandwidth, delay or latency, reliability or error rate, priority or precedence. Certain services require higher or lower quality of service. Service providers may be able to charge according to the quality of service required for a particular service, or give rebates when that quality of service was not achieved.

• Service termination indicator: If a service is terminated abnormally, users could be compensated through a reduction in charges.

• Event: An “event” is one of the newer concepts for data service billing. An event can consist of an e-mail or a short message resulting in a product or service being ordered. Events can be charged either in terms of quantity, or in terms of value or quality (for example, transaction type and value, or content type). Billing according the actual content being accessed is perhaps one of the most complex billing methods. Examples include artist-dependent MP3 downloading, and timely stock pricing.

Since always-on 2.5G and 3G services are not yet widely available on the market, billing models for a converged environment have not been fully developed. Current mobile Internet pricing schemes tend to take the four following elements into account: subscription cost (typically per month), airtime cost (per minute), data volume cost (typically per packet) and the cost of specific content. In the transition from low-speed to high-speed data services, service providers tread a fine line between pricing a new service too cheaply (and risk undercutting older and established low-speed data services) and pricing it at too high a level (thus stifling the market). In order to address this, operators have been attempting to differentiate their prices according to service type.

Billing for connectivity

In the 2G GSM world, billing for data has not been significantly different than billing for voice: users have been charged for WAP services according the amount of time spent online. This meant that users were punished for the slow downloads imposed upon them by the 9.6 kbit/s transmission speed of the circuit-switched network. This was one of the main reasons for low user adoption. The best examples of evolved data billing in the 2G world are i-mode and similar services in Japan, such as EZweb. The i-mode billing model is straightforward and fairly equitable. Because i-mode uses a packet-based network for data transmission, mobile phone users are billed according to the volume of data they download: each packet, or 128 bytes, costs 0.2 US cents. In addition, they are charged a subscription fee of USD 2.41 per month for access to official sites. Some content providers charge an additional fee of JPY 200–300 per month. In the case of official sites, NTT DoCoMo bills the user directly and keeps a 9 per cent commission fee, while forwarding the rest to content and application developers. This has helped spur the content market.

With the arrival of higher-speed always-on networks, operators in other parts of the world are beginning to re-evaluate their billing strategies. Upon launch, 2.5G services such as GPRS were billed according to the total volume of data downloaded, rather than the time spent online (unlike WAP over GSM which was typically billed in the same manner as a per-minute voice call). However, tariffs differ significantly from operator to operator and from country to country.

In Western Europe, the average GPRS consumer tariff is USD 6.37 for monthly access and USD 3.60 per megabyte. But users can pay up to USD 100 on E-Plus (Germany), Swisscom Mobile (Switzerland) and Omnitel Vodafone (Italy) networks. One megabyte is roughly equivalent to downloading 800 WAP pages, but only 20 standard HTML pages on a mobile device.

It is not surprising, therefore, that service providers have looked towards flat-rate pricing in an effort to render service costs less prohibitive and tariff plans more transparent, particularly in North America. In Europe, Austria seems to have the most favourable flat-rate tariff plan, and is one of the larger markets for GPRS, reporting a total of 35 000 GPRS subscribed users out of 60 000 GPRS device owners.In India, BPL Mobile is imposing a flat fee of USD 15.40 per month for unlimited use (plus an activation fee of USD 24.6). More recently, in May 2002, Orange launched a flat-rate mobile Internet service in France. The service will cost USD 5.68 on launch and should be available in other European countries by the end of the third quarter of 2002. The flat rate will be available to customers with either GPRS or WAP-enabled 2G handsets. For an introductory period (until September 2002), users will have unlimited access to websites. After that date, a cap of 10 megabyte per month will be imposed.

Billing for messaging services

At present, incoming SMS messages are free and the average charge for sending an SMS message in Europe is around USD 0.19, providing the mobile phone user is on the home network. Nearly all GSM handsets on the market today are SMS-enabled. In Asia, the cost is typically lower due to the availability of bundled messaging offerings. Web-based SMS (sending a text message from the Internet to a mobile phone) is typically free of charge and service providers earn revenues through advertising. Industry observers argue that compared to the low-cost of SMS, the retail charge per message is in some cases excessive. In fact, European operators have been seen to increase their charges for the low-cost technology since they became aware of its success with users. In addition, the non-transparency of mobile roaming charges in Europe has been carried over to this early data service: it remains unclear to the average user what the cost of receiving or sending a message to and within a foreign network will be.

In the United Kingdom, the four carrier network operators, O2, Orange, T-Mobile and Vodafone all plan to launch MMS by December 2002 — a move which is likely to provoke a price war. T-Mobile revealed that it plans to charge USD 30 per month for its MMS services and also plans to subsidize the Sony Ericsson T68i (the handset comes with a snap-on camera) by half. The cost of the handset will still be USD 298, but will compare favourably to Nokia’s 7650, priced at USD 600 prior to its launch in July 2002. The Portuguese market, which already has two competing operators, also provides a good indication of pricing for MMS services. Both TMN and Vodafone Telecel charge USD 0.41 per multimedia message. To encourage early adopters, TMN is offering twenty free MMS per month until 31 October 2002, but will not be offering the service to prepaid users. Unlike T-Mobile, the operator does not plan to subsidize the T68i handset, which will cost around USD 756. TMN’s handset and Telecel’s handset are priced at USD 434.69 and 470.72, respectively.

In the United Kingdom, T-mobile is offering MMS on a flat-fee basis, charging USD 29.00 per month in addition to the monthly subscription tariff, allowing users to send a maximum of 10 Megabytes of MMS messages per month. In the United Kingdom, the T68i handset with camera is priced at USD 290.21. Nokia has favoured a per-message billing system, rather than a flat rate, charging 47 US cents per message. Though initial billing methods may differ, outcries from user groups regarding the cost-orientation and transparency of messaging rates, combined with the high take-up of messaging services, will probably drive operators to resort to flat-rate billing.