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August 2011

Real-Time Network Intelligence: The New Way to Read Telecom Tea Leaves

Real-Time Network Intelligence: The New Way to Read Telecom Tea Leaves

When a fortune-teller “reads the tea leaves,“ she looks at the pattern of tea leaves in the cup.  In the business world, we use the slightly more reliable forecasting method of looking at current financial numbers to predict the future.

Now I said, “slightly more reliable“ for good reason.  We are now in the midst of a global financial crisis where bankers, regulators, and politicians have all grossly misread the financial tea leaves.

In fact, only last week the U.S.  Federal Housing Finance Agency (the overseer of mortgage lenders Fannie Mae and Freddie Mac) announced that it is suing a dozen banks for $198 billion, accusing them of misrepresenting the quality of mortgage securities they sold during the housing bubble.

For the moment we’ll overlook the irony that the same regulator who pressured the banks to approve the loans is the same agency bringing the lawsuits.  Bottom line: The banks are in big trouble.  Many of them may not survive the many crises they now face.

Business outcomes today are harder than ever to predict.  As surely as you and I think we understand today’s telecom climate, two years from now we’ll look back and notice unforeseen market and technology shifts that spelled the difference between success or failure for particular operators.

The Need for Real-Time Network Intelligence

So this raises the key question: What steps can I take today to ensure that my telecom business properly reads the tea leaves and sails smoothly amid unpredictable sea-change?

If I were to compress my answer to that question in a single phrase, it would be “get your hands on real-time network intelligence.“

Real-time network intelligence is a strong, keenly insightful new tool.  Day to day, you make decisions on which products to launch, facilities to lease, and routes to send your traffic to.  And it doesn’t matter how clever you are at negotiating rates or how carefully you calculate your least-cost routing algorithms.  If you’re not constantly testing your assumptions against errors and real world profitability, you are doomed to make big mistakes.  Why?  Because that’s the kind of telecom market we live in today.  The complexities of the business outstrip our ability to forecast it with consistent accuracy.

Rise of the Enhanced Service Provider

Legacy assurance solutions were designed for the highly regulated era where you sorted FCC regulated tariffs or PUC-based rates and calculated the differences between intra-LATA, inter-LATA and LD jurisdictions.

The TDM world is getting smaller every day.  In fact, the fastest growing service provider space is not the RLEC, CLEC or ILEC anymore — not even wireless.  In terms of percentage growth, the telecom leaders today are the enhanced services and VoIP providers.  It’s the enhanced service providers who are coming in with their cloud-based IP solutions and broadband networks and steadily replacing the old CLEC model of selling T1s to connect to an office PBX and its 100 telephone sets.

The enhanced service providers play by a different set of rules.  They are not bound by regulated rates, so a new generation of domestic termination carriers has arisen to serve them — companies like Level 3 and Global Crossing, who say: “Let me take your traffic and terminate it for you because I have behind-the-scene agreements with all the ILECs and CLECs.“

A few years ago there were just a few voice terminators.  Today there are dozens of them.

A similar trend is happening on the international front.  Aggregators have grown to offer to terminate traffic in various countries.  So the retail carrier has the option of choosing A, B or C wholesaler to route traffic based on a multitude of factors.

Sorting Out Complexity, Then Analyzing the Bottom Line

From what we discussed so far, I think you can see why legacy assurance solutions are no longer the best fit for today’s fast-moving scene.

Today’s environment feels more like a Wild West shootout between voice terminators.  And those wholesalers offer a bewildering array of  NPA-, NXX-, and/or OCN-based pricing combined with volume discounts, special deals, and — in the international LD space at least — prices that can change with only seven days’ notice.

For many operators, an automated Least Cost Routing (LCR) solution will be an attractive way to manage the real-time selection of wholesale/terminator routes.  However, in that realm, telecoms should note that LCR is only a partial solution because it doesn’t tell you anything about your voice revenue.  It chooses the routes, but it doesn’t calculate your product margins.

And that’s vital added intelligence.  If for every dollar of revenue, 50 cents goes to pay for cost of goods, then it’s vital to track that margin in fine detail because a sudden shift in demand or price could drastically alter profitability.

So this is how assurance solutions are evolving today.  Razorsight is working with a partner to deploy a solution that gathers usage/routing data in from the switches, then compares that to the contracts and customer revenue associated with the phone number in use, so telecom service providers can arrive at actual margins on a call by call basis in real time.  The beauty of this new platform is its ability to track the health of your voice traffic on a daily basis.

Taking Action

If you’re a service provider whose business relies on significant amounts of consumption-based prices and variable wholesale rates, it’s very important to equip yourself with the intelligence to operate safely and smartly in the today’s highly complex business climate.

Here are my recommendations:

  1. Choose Real-time, not “I’ll Wait for the Monthly Bill“

    Real-time, call by call margin analysis is not just nice to have anymore, it is a must have for many operators.

    Today’s market is about tracking usage-based prices and changing your strategy on the fly to take advantage of new opportunities.  Ideally, you are using an LCR solution from a company like GCS who dynamically routes traffic for you in the network.  But you need to audit those solutions on the back-end.  Are they delivering the cost savings or quality decisions you expect them to?  Only real-time analysis will give you the comfort level of knowing for sure.

    Plus, if things are going wrong, you don‘t want to wait till the billing cycle completes to figure that out.  With a portal, you can log in, look at your profile, and get a running average of your margin cost and revenue for your voice platform.You can also slice and dice the data by geography, by terminating location, or whatever other segments you find useful.

  2. Choose a Solution that’s Simple, Moderately Priced and Avoids IT Headaches

    As a competitive or enhanced service provider, the kind of solution you require is totally different from that required by traditional carriers with fancy in-house B/OSS solutions and big staffs to run them.  If your strategy is to stay close to the customers, offer attractive packages, and stay lean, the last thing you need is to pay big license and maintenance fees and go through the trouble of having IT get involved.

    The better course is to choose a SaaS portal you can log onto and track the margins of your products on a continuous basis.

So drink in the telecom tea, the choicest blend of any industry on the planet.  And for your financial health, don’t forget to read the tea leaves — and do it often.

This article first appeared in Billing and OSS World.

Copyright 2011 Black Swan Telecom Journal

Suren Nathan

Suren Nathan

Suren Nathan is an 18-year veteran of telecom and the chief technology officer of Razorsight.  Previously, Suren was a founding partner at SingleTusk solutions, which served many large and small service providers with innovative cost, revenue and margin analytics solutions.  Prior to that he was a co-founder and CTO of Step 9 Software, selling order management to CLECs.

Razorsight provides SaaS business intelligence and profit analytics for the communications industry, managing both the buy side and sell side of carrier-to-carrier relationships.

Black Swan Solution Guides & Papers

cSwans of a Feather

  • Network Asset Choreography: Subex Teaches Analytics to Dance with Discovery & Life Cycle Management interview with John Brooks — Network provisioning and asset life cycle management is a foreign world to most business assurance professionals because it’s a domain that lives outside the order-to-cash stream.  This article explains how new analytics and network discovery techniques are enabling operators to better track assets, plan capacity, and pave the way for strategic network deployments and decommissioning.
  • Wireless Backhaul: Preparing for the Cleanup When the Dust Settles by Charlie Thomas — Wireless backhaul represents perhaps the largest telecom build-out in the last decade.  This article lays out a strategy for operators as they sooner or later must groom, optimize and re-engineer their backhaul networks based on actual capacity needs, new pricing and improved supplier agreements.  The article lays out a 6-point plan for ensuring success.
  • Real-Time Network Intelligence: The New Way to Read Telecom Tea Leaves by Suren Nathan — Real-time network intelligence is the key to deciding which products to launch, whose facilities to lease, and where to route traffic.  The article explains why telecoms — and especially enhanced service providers --  should ideally be equipped with both a fine-grained margin analysis solution and a SaaS platform, offering an upgrade path that requires no internat IT support.
  • Network Inventory Integrity: Taking Cost Management to a Higher Level interview with Suren Nathan — Recovering stranded assets and capacity is essential for minimizing CAPEX and leasing costs.  This article makes the case for reconciling network inventory through the many ordering, billing, and other systems that interact with that inventory.

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