For cable operators, the world has changed dramatically in the past decade. They can no longer rely on a stable revenue stream from television subscriptions: Competition from telecom operator's IPTV services and over-the-top services, together with regulated and low-cost broadcast services, is eroding their TV subscriber base. As a result, revenue growth is becoming more challenging every year.
In response, cable operators are striving to expand their income base and increase ARPU by offering additional lines of business, such as voice telephony, broadband, video-on-demand, enhanced video services, interactive television, gaming, interconnect and mobile content. Triple play (offering TV, Internet, telephony) and even quad play (also offering mobile) cable operators are becoming commonplace.
To improve their competitive position, cable operators are also adapting their business models and adjusting their pricing. They are under pressure to keep margins high by continually reducing both capital spending on infrastructure and operational spending, while reducing revenue losses due to errors, inconsistencies and fraud.
At the same time, in many markets, the cable industry is consolidating as operators seek economies of scale in both procurement and in marketing. In short, cable operators' world is far more complex, dynamic, fast moving and competitive than it used to be.
Time for change
As they battle telcos and OTT players for both mind share and market share, cable operators need to become more innovative, more proactive, and more effective, achieving more with less. They have to move fast. Yet they can't afford to make major mistakes.
To achieve these objectives, cable operators need much more sophisticated tools. They need to assess the potential risks associated with new services and products before launch and adopt a far more methodical approach to preventing revenue leakage.
The majority of cable operators around the world are at the same stage as telecoms operators were 10 years ago - they are just beginning to understand the need for Revenue Assurance. A decade on, every telco has a Revenue Assurance department.
In a triple play or quad play world, the Revenue Assurance department has to assure the interface between core business units, such as sales, marketing, customer service, and multiple billing systems and network systems dedicated to each service. Mergers and acquisitions can compound these challenges by introducing new services underpinned by new systems. Beyond Quality Assurance, Revenue Assurance is the only department that checks end-to-end new processes and the integration of new and legacy systems.
Revenue can leak for many different reasons, such as provisioning failures, missing events and rating errors. Industry figures show that a typical communications service provider is leaking between 2% and 5% of its revenue at any given time.
Cable operators are also particularly vulnerable to so-called cost leakage in which they are overcharged by a third party. As cable companies buy content from an array of suppliers, using a range of different pricing mechanisms, errors can easily creep in.
Some cable operators provide an a-la-carte service, in which the consumer can buy channels and discrete chunks of content individually. Although consumers like this flexibility, a-la-carte offerings dramatically increase billing complexity and the risk of errors. At the same time, the deployment of set-top boxes, which, once activated, can be moved from house to house, also increase cable operators' exposure to errors and fraud.
Revenue Assurance systems are designed to detect, correct and prevent both revenue and cost leakage, boosting both the top and bottom lines.
Rapid return on investment
A quad play operator in Western Europe that deployed cVidya's MoneyMap® Revenue Assurance solution achieved a return on investment just five months after deployment. For example, the solution detected revenue leakages caused by a mismatch between subscribers' details, ordered services, TV channel/packs codes and the operator's OSS/BSS and network systems. MoneyMap was able to recover 28% of the missing revenue in the TV channels and video-on-demand line of business, and 42% in the broadband line of business.
MoneyMap also detected several other major causes of revenue leakage, including mismatches between usage events and head-end volumes and usage events and billing. It revealed that approximately one in ten of the operator's customers had obtained an unjustified discount, while a similar proportion had not been charged for installation.
As this example illustrates very clearly, there is a strong business case for cable operators to act on revenue and cost leakages. The growing complexity of their business and competitive intensity of their markets demand a systematic and sophisticated approach to Revenue Assurance. The days of simply collecting recurring subscription fees are long gone.