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July 2013

CABS Revenue Assurance: How Rural LECs can Recover $284 Million in Revenue Shortfalls

CABS Revenue Assurance: How Rural LECs can Recover $284 Million in Revenue Shortfalls

After a decade or more of industry turmoil, the telecoms who operate in the U.S. market today are battle-scarred veterans.

Of course, dozens of operators failed to adapt to the times and were forced to exit the business: that’s history.  But the hardy firms that remain have survived a host of competitive threats, ground-shifting regulations, and technology shocks.

So considering this battle-tested culture of prudent risk-taking, it’s curious that most independent rural LECs still rely on the AMA/EMI billing formats for CABS billing.  And that’s even after the AMA/EMI format has proven to be less and less accurate in inter-carrier records used for CABS, reciprocal compensation, and spoofed call discovery.

The problem was explained quite clearly in a 2011 Black Swan interview I held with Darrell Merschak, national sales manager at Carrier Management Systems Inc. (CMSI).  The reasons the AMA/EMI records are no longer adequate boil down to these:

  • Non-Bellcore-compliant switches are being deployed everywhere -- in both fixed and mobile networks.
  • Wireless traffic is increasingly hard to identify, and inter-carrier records are often sent with multiple missing fields.
  • The tandems no longer produce high quality records for CABS billing: they deliver only “best effort” records
  • The large carriers can rely on SS7 to validate their AMA/EMI records, but rural LECs who lack SS7 probe technology are stuck with the inaccurate AMA/EMI records for CABS billing.

Recently Darrell gave me a call and he told me that his message about this AMA/EMI issue is still not understood or resolved: he suggested we publish another article. “Fine,” I told him, “but this time: help me put together some industry numbers that show how much money they are leaving on the table”.

So that’s precisely what we did.  Last week I peppered Darrell with a bunch of questions, gathered some industry data on my own, and came up with the following Excel computation which you are welcome to download, scrutinize,and tweak on your own:

Annual CABS Revenue Recovery

Here’s the bottom line of the analysis above: independent rural LECs in the U.S. alone are losing $95 million a year because of inaccurate or missing AMA/EMI records.  What’s more, since a rural LEC can back-bill for 24 months for missing or faulty CABS records, there’s another $189 million in potential savings rural LECs can go after too.

Now here’s a further conversation with Darrell and Kelly Cannon, CMSI’s Executive Vice President, to discuss the strategies rural LECs should pursue.

Dan Baker: What’s your solution to this problem, Darrell?

Darrell Merschak: Dan, the biggest trouble is the carriers are not receiving the revenue from the damaged EMI records.  The only way to correct the damaged EMI records and find the missing ones is to bounce the EMI records against the gold standard, SS7.

CMSI’s product, NAMS Firefly, is a combined SS7 probe and software solution that sits on top to create the EMI records that are missing -- the ones that should have been created but were not, or alternately it corrects the EMI records that were damaged.

With SS7 you can often directly determine the originator of calls by examining the OPC (originating point code) data to arrive at an interconnect ID.  Many times if a field in the EMI record is stripped, it may still be available in SS7.  Also, SS7 has additional fields that can be queried as surrogates for EMI’s calling party number such as the charge number, the originating LRN, etc.

On day one of system installation, a carrier could have our solution increasing their revenue.  Then they can go in and back-bill up to 24 months to get even more revenue.

My recommendation: get SS7 monitoring technology in place and correlate that data to your EMI exchange record data.  See where the holes are, and start collecting the revenue you deserve.

Kelly, why are so many rural LECs sitting on the bench and not moving to SS7 for a direct source of billing data?

Kelly: Dan, AMA/EMI has been king for so many years that customers hesitate to move away from it, and while the role of SS7/SIP is known, applying that technology to billing records is still not widely accepted due to convention.

Even the CABS billing companies are sticking with history.  You’ve got a lot of billers serving the market -- but each of them is using the same corrupted data input.

Unfortunately when you add up the license cost, integration, training and so forth, your average billing change out costs are more than a $1 million dollars.

The operator is looking for a better billing widget, but if the systems can‘t deliver accurate billing records, you’re broken from the beginning.  The operator may be looking at new billing systems when what they really need is SS7 for billing.  Please understand: I’m not saying the Telcordia AMA/EMI standard itself is in error, rather it’s the methods at the switches where billing records are being created that are in error.

So what strategy do you recommend in billing?

Kelly: With our system, operators don‘t need to buy a new CABS billing system.  They can get greater accuracy and increased revenues by merely correcting the bad records and adding the ones that are missing.

For example, when you have 100,000 SS7 billable calls on a certain trunk group and you only have 80,000 EMI records that means there are 20,000 records the tandem didn‘t send you.  That’s real revenue. to recover.

Also, SS7 detects and corrects the spoofed calls, changing the incorrect calling party number to the originating ANI, or even ByPass calls which NECA refers to as Access Avoidance.  Finally there’s the value of interstate and reciprocal compensation revenue that can be found.

But without SS7, you’re never quite sure what actually happened in the network: were the declining MOUs due to cellular telephone substitution, a carrier partner using a new delivery technology, a least cost carrier router, etc.?  Moreover, because you can‘t verify the billing data accurately, your case for getting paid is weak.

In many cases I’m sure the retail and CABS billers are being changed out at the same time -- it’s a bundled deal.

Kelly: Well, in that case, the smart thing to do is to insert our solution in the front of both billing systems as their mediation device.  If all you are worried about is CABS and you’re satisfied with your retail billing, then just put the NAMS system as the mediation and visibility platform before that and let NAMS mediate them to your billing via SS7.

Darrell, what are the costs involved?  I know that SS7 probes are expensive.  Where does the ROI come from?

Darrell: Dan, our business model allows us to offer a highly competitive price for our SS7 probes.  We have a couple things working for us here.  First, we have 150 operators using our SS7 probes and software today.  In addition we enjoy long term OEM relationships with top industry vendors who leverage our software solutions and deploy our technology in carrier networks.

To give you an idea on price: a tier 3 ILEC typically pays in the low $50Ks for the complete base platform system and we structure our system so additional software modules can be added a la carte, a carrier can choose exactly what software they need and upgrade at any time with no penalty.  Overall, that’s a fraction of the cost of changing out a billing system.

Our success rate and customer experience has been very good.  For example, one customer found that 24% of its traffic was unbilled and employed our revenue assurance techniques to recover a major amount of that revenue leakage.

As far as an ROI, our customers generally find the solution pays for itself in a few months.

The FCC has recently ruled that in seven years the U.S. market will move to bill-and-keep, meaning the whole world of inter-carrier charging will be turned upside down.  What will be the impact of that ruling, Darrell?

Darrell:  Well, there’s a good chance that the 10th district court will overturn at least a portion of the FCC’s NPRM mandate.  I certainly want to see the FCC lose because I believe that bill and keep will be devastating even for the big carriers who ironically are lobbying for it.

Bandwidth hungry devices, gaming and video downloads -- all of that is going to put big burdens on our networks.  With accurate billing records, handling more traffic is not a problem because carriers are compensated.  But if bill and keep becomes the law, then traffic dumping on other carriers‘ networks will be rampant.

Unfortunately, net neutrality prevents carriers from blocking traffic.  However, what carriers can do is monitor network traffic with SS7/SIP technology to determine who is exceeding thresholds and deliver the traffic that has to be delivered under an SLA (Service Level Agreement) contract.

Therefore, the need to do more accurate network traffic monitoring is another reason why an SS7/SIP technology investment makes sense.  SIP will also be important in retail billing for capturing uniform source billing data from multiple softswitches and routers.  Otherwise, in IP telephony, all kinds of devices will burst packets into your network and you’ll have no idea who to bill.  You will also need to scan your billing data to see who your large bandwidth users are, those who are exceeding their thresholds and invoice as necessary.

Thanks, Darrell and Kelly.  The future may not simply take care of itself, but good planning and wise investments will take 90% of the worry and hardship away.

Copyright 2013 Black Swan Telecom Journal

 

About the Experts

Kelly Cannon

Kelly Cannon

Kelly Cannon has been with CMSI for 9 years starting out as the Director of Sales& Marketing and rising to Executive Vice President.  Prior to the telecom industry Kelly spent 12 years working in the automotive industry with her last position  being a Systems & Process Consultant at Gulf States Toyota.  She holds a BBA in Finance from Hardin-Simmons University.   Contact Kelly via

Darrell Merschak

Darrell Merschak

Darrell G.  Merschak is National Sales Manager for CMSI (Carrier Management Systems Inc.). and has worked in the telecom industry for 25 years in jobs such as: director of revenue, director of billing operations, revenue assurance manager, and regulatory and rates manager.  He has worked for AT&T, SBC, Ameritech, MCI, Pathnet, Looking Glass Networks, Tekno Telecom.  Darrell has an MBA in Finance and Economics form Loyola University of Chicago and a BA in Economics from Knox College.   Contact Darrell via

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  • CABS Revenue Assurance: How Rural LECs can Recover $284 Million in Revenue Shortfalls interview with Kelly Cannon & Darrell Merschak — Independent rural LECs in the U.S. still rely on the AMA/EMI billing formats for CABS billing, even as that format has proven to be highly inaccurate as a source of inter-carrier records.  This interview includes an analysis and discussion of revenue recovery techniques ILECs can use by leveraging SS7 probes.  Also discussed are billing strategies, traffic dumping threats, and the possible fallout from the FCC’s bill-and-keep mandate.
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