wks6 parkinson

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Prepaid Wireless 1 Past, Present and Future PTC 2004 Workshop #6 January 11, 2004 Gary D. Brown, Chief Technology Officer Brett Parkinson, VP Business Development NACT Telecommunications Inc.

Agenda: 

Agenda The Prepaid Wireless Market Opportunity: Prepaid wireless is fast becoming the most popular way for consumers to pay for wireless services! Vocabulary: What do all those acronyms mean? Implementation Strategies: What implementation strategies are used to provide prepaid wireless services? Challenges of Prepaid Wireless Resale Business: What types of services and “back-office” features are needed by prepaid wireless resellers? 2

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The Prepaid Wireless Market Opportunity 3

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Prepaid Mobile Revenues/Subscribers 4 Source: The Pelorus Group 2002

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Forecast Prepaid Revenue Components 5 Source: The Pelorus Group 2002

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Consumer Credit Problems 25-35% of consumers are unable to obtain credit for mobile phones More Acceptable/Mainstream to Consumers Prepaid parking, telecom, utilities, services Prepayment available via kiosks, retail stores, and the web Control monthly telephone expenses Control costs and usage when traveling Quickly obtain and use telephony services Benefit of mobility with anonymity Build prepaid mobile products that mimic prepaid calling card products International termination at competitive rates Why are prepaid wireless markets growing? 6

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Advantages for Business Eliminate postpaid fraud and billing issues Reduce collection problems Less costly way to conduct business Web-based account management tools Higher customer loyalty than prepaid calling card products Why are prepaid wireless markets growing? 7

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Prepaid Wireless Industry Vocabulary 8

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Wireless Phone, Mobile Phone, Cell Phone Terms used interchangeably to refer to a wireless device, regardless of the wireless technology used. All such devices are based on radio technology, hence they are “wireless”. Postpaid Service The phone owner pays for services after they have been used. This service requires a credit check, which about 25-30% of U.S. consumers fail. Prepaid Service The phone owner pays for services before they are used. This service does not require a credit check, but is often more expensive than postpaid service. 9

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ESN – Electronic Serial Number The unique number assigned by each manufacturer to a mobile phone. It is transmitted by the phone to the MSC. MIN – Mobile Identification Number The telephone number assigned to a mobile phone that is transmitted to the MSC. It is assigned based on the “home” network where the consumer resides and where the phone will be used the most. MSID – Mobile Station Identification Number The number programmed in a mobile phone that is used by the wireless carrier’s network to route the phone’s calls. On phone activation, it is the same as the MIN. When the phone is “ported” to another carrier (started November 24, 2003 in the U.S.A.), it is changed to a different routing number required by the new carrier’s network. 10

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MSC – Mobile Switching Center The equivalent of the wire-line Central Office Switch, only for mobile phones. It controls a network of cellular antennas (towers) and base station controllers. MTSO – Mobile Telephone Switching Office Older term for MSC. BSC – Base Station Controller A device controlled by the MSC that interfaces with one or more cell tower antennas and converts the calls from wire-line to wireless (radio) transmission. 11

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Roaming Using a mobile phone on a wireless carrier’s network different from the mobile phone’s subscribed wireless carrier network. Traveling Using a mobile phone outside of its “home” network or MSA but still on its subscribed wireless carrier network. Metropolitan Service Area (MSA) The portion of the wireless “home” network that corresponds to a wire-line “local” calling area. CSA – Calling Service Area Synonym for MSA. 12

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HLR – Home Location Register The computer database of a wireless carrier that contains ESN, MIN, MSID, privileges, restrictions, etc. for all of its subscribed mobile phones VLR – Visitor Location Register The computer database of a wireless carrier that contains a “roaming” mobile phone’s ESN, MIN, privileges, restrictions, etc. The information is obtained from the roaming phone’s subscribed carrier’s HLR and is held until the phone leaves the area. SIM – Subscriber Identity Module A “smart card” inserted in a mobile phone that identifies the subscriber to a mobile network. 13

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WLNP – Wireless Local Number Portability Permits a mobile phone owner to change to a different subscribed wireless carrier and keep the MIN from the original subscribed wireless carrier Able to assign wire-line number to mobile phone Started November 24, 2003 in the United States OSS – Operational Support System Wireless carrier’s system that provisions mobile phones in wireless carrier’s MSC switches, HLR, other network elements, and in billing systems with the cell phone ESN, MIN and MSID numbers 14

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SSP – Service Switching Point SS7 network element that handles the voice circuits, often called a switch SCP – Service Control Point SS7 network element that performs database lookups, number translations, call routing, etc. Used to implement the SS7 IN or AIN concept STP – Service Transfer Point SS7 network element that passes or routes SS7 messages between SSPs and SCPs ISUP – Integrated Services User Part Call processing (setup and teardown) via SS7 messages Model where the voice call passes through the switch 15

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IN – Intelligent Network A concept for providing a specific number service (800, 900) for a switch without performing the service in the switch itself SCP handles the service logic Trigger point is destination number analysis (CO switch recognizes number and hands off to IN application in SCP) AIN – Advanced Intelligent Network A concept for providing advanced or enhanced services for a switch through the SS7 network without performing the service in the switch itself All calls passed to AIN application in SCP Trigger points are off-hook, digit collection and analysis, and routing 16

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AMPS – Advanced Mobile Phone Service The original analog radio technology that uses frequencies to separate callers using the cellular network. TDMA – Time-Division Multiple Access A digital radio technology that uses time and frequency to separate callers. Better capacity and security versus AMPS. Used in North America. GSM – Global System for Mobile communications A digital radio technology that uses time and frequencies to separate callers, basically an improved TDMA. Used mainly in Europe, Middle East, and Asia but available everywhere. CDMA – Code Division Multiple Access A digital radio technology that uses time, frequency, and digital codes to separate callers. Increased capacity and security over TDMA or GSM. Used mainly in North America, but also in China, Brazil, and other countries. 17

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Wireless Network Architecture 18

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20 Cell towers can determine direction of cell phone relative to tower Cell tower can determine distance by power level of cell phone signal BSC determines when cell phone is about to leave cell and notifies MSC about direction MSC sets up next cell tower via its BSC MSC instructs cell phone to change frequency, which is picked up by new cell tower

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21 Cell phone travels across cell and nears cell edge (signal strength is weak) Current BSC notifies MSC of weak signal and signal direction MSC locates adjacent cell and instructs next BSC to allocate frequency for cell phone MSC instructs phone to change to new frequency Next cell tower and BSC now handle call Subscriber never knows cell handoff occurred Brown line = Active voice path Purple line = New voice path

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22 Cell phone handoff occurs again across cells controlled by the same MSC Note call still travels from original MSC to tandem network and out to PSTN Brown line = Active voice path Purple line = New voice path

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23 Cell phone travels across cell and nears cell edge (signal strength is weak) Current BSC notifies MSC of weak signal and signal direction MSC cannot locate an adjacent cell and does nothing Cell phone signal drops below threshold Cell phone drops call and subscriber is cut off Brown dashed line = Dropped voice path

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24 Subscriber must reestablish call New cell tower, BSC and MSC pick up new call Subscriber resumes talking Brown line = New active voice path

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Prepaid Wireless Implementation Strategies 25

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Prepaid Wireless Implementations Phone-based Architecture SS7 Network-based Architecture (AIN Model) Prepaid Platform-based Architecture (ISUP Model) 26

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Phone-based Implementation The wireless phone implements the prepaid function, often through a “SIM” card Advantages Can be used with any wireless network Disadvantages Expensive point-of-sale recharge terminals Extensive Fraud potential May require extra programming of phone Few or no prepaid features available No prepaid call records showing amounts No control over cost of wireless calls (fixed cost) No way to audit wireless network provider bills Loss of phone or SIM card means lost balance 27

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SS7 Network-based Implementation Prepaid system uses SS7 messages with wireless network provider to implement prepaid function (AIN Model) Advantages Only SS7 TCAP messages passed between prepaid platform and wireless network Balance maintained in prepaid platform—less fraud potential Does not require extra switching ports in wireless network Call records may be generated by prepaid platform Disadvantages Less control over calls if prepaid and call management systems are not interconnected Fewer features available No voice interaction with caller (without media gateways) Must use wireless provider’s terminating carriers Requires additional/custom software in wireless provider’s entire network 28

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29 When the call disconnects, the tandem switch sends an SS7 message to the prepaid platform, which rates the call and deducts its cost from the balance. A prepaid cell phone places an outbound call. The call is routed through the wireless network to a tandem switch. The call triggers an SS7 message that is sent to the prepaid platform, which checks the balance and permits or denies the call. If the call is permitted, it is routed by the tandem switch to a terminating carrier.

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Prepaid Platform-based Implementation Wireless call voice passes through prepaid platform (ISUP Model) Advantages Interact with caller using voice prompts and DTMF tones Balance maintained in prepaid platform Total control over features Prepaid features implemented in prepaid platform No changes to wireless provider’s network Very flexible rating and fee options Total control over calls and their termination costs Least-cost routing to multiple terminating carriers Call records contain all call and feature information Disadvantages May use more wireless network ports (inbound only) Voice back-hauled from wireless network provider 30

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31 Prepaid Wireless Outbound Call A prepaid cell phone places an outbound call. The call is “hot-lined” by the wireless network through its tandem switch to the prepaid platform. The prepaid platform checks the balance, interacts with the caller (if necessary), routes the call to the least-costly carrier for termination, and rates and monitors the call for cutoff. When the call disconnects, the prepaid platform rates the call, deducts its cost from the balance, and generates a call record.

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32 Prepaid Wireless Inbound Call A consumer places an inbound call to a prepaid wireless phone. The call is routed by the wireless network to the prepaid platform. It identifies the prepaid cell phone by the destination number of the call. The prepaid platform checks the balance, interacts with the caller (insufficient balance), routes the call through the wireless network to the cell phone, and rates and monitors the call for cutoff. When the call disconnects, the prepaid platform rates the call, deducts its cost from the balance, and generates a call record.

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Prepaid Wireless Reseller Business Challenges 33

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Inventory Management Cellular Phones Mobile Identification Numbers (MIN) Recharge PINs Mobile Phone Provisioning Activation Recharge Common Consumer Situations Management Reports Inventory Transactions Fraud Call Traffic Financial Business Challenges 34

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Cellular Phones Manage by Electronic Serial Number (ESN) or SIM number Record phone characteristics (make, model, etc.) Track from vendor or manufacturer through distribution channels to retail partners Track inventory changes by individual employee, wholesale distributor, and retail partner for reporting and fraud detection Shipped (when, to who, by whom, etc.) Received (when, from whom, by whom, etc.) Inventory Management 36

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Mobile Identification Numbers (MIN) Telephone number of mobile phone (ANI or CLI) Pool MINs by Metropolitan Service Area (MSA) or home network Reclaim and recycle inactive MINs Interface with wireless provider’s Operations Support System (OSS) 37

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Recharge PINs Generate PINs with batch and sequence numbers Label all physical packaging with batch number and sequence number ranges Card, pack, carton, pallet Track distribution from manufacturer to retail partners using batch number and sequence ranges Track and handle loss, damage, and theft Track inventory changes by individual employee, wholesale distributor, and retail partner for reporting and fraud detection Treat inventory the same as cash 38

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Activation Permit activation by retail merchant, customer service operator, or consumer via web interface Real-time operation Assign MIN from MSA (home network) to ESN Dynamic ESN assignment Set initial balance Cash, credit card, recharge PIN Retail partner, customer service operator, web Provision MIN/ESN/MSID through wireless provider’s OSS Generate transactions for tracking, management, reporting, and fraud detection 39

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Recharge Permit recharge by retail merchant, customer service operator, or consumer via web interface or cell phone Real-time operation Recharge balance added to mobile phone using cash, credit card, or recharge PIN Generate transactions for tracking, management, and reporting Track (in real-time) recharges by mobile phone, credit card, customer service operator, retail merchant, etc. for fraud control and management 40

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Common Consumer Situations Mobile phone owner moves to another MSA (new MIN needed for “swap MIN” operation) MIN reissued to another mobile phone ESN (new phone needed for “swap ESN” operation) Reactivate or deactivate a mobile phone Real-time operation Permit changes by customer service operator via web interface Generate transactions for tracking, management, and reporting Track changes by mobile phone ESN, MIN, customer service operator, retail merchant, etc. 41

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Inventory Reports Cell phones (ESN) In stock, in transit, at wholesale distributors and retailers Sales rates (distributors and retailers) Profit/loss Telephone numbers (MIN) Assigned, recycling, available Churn rate Total and by Metropolitan Service Area (MSA) Recharge PINs Generated, manufacturing, in stock, in transit, at wholesale distributors and retailers Damage and theft losses Sales rates (distributors and retailers) 42

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Transaction Reports Activations Total initial balances and average balance Activation trends (weekly/monthly) Retailers, wholesale distributors, web interface, customer service Products and markets (MSA) Recharges Total recharges and average recharge amount Recharge trends (weekly/monthly) Retailer, wholesale distributors, web interface, customer service Products and markets (MSA) 43

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Transaction Reports Consumer changes New MIN for existing cell phone (ESN) New cell phone (ESN) for existing MIN Reactivations Products and markets (MSA) Deactivations Total recycled MINs and recycle rate Total deactivations and balances Products and markets (MSA) Trends over time 44

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Fraud Reports Activations and recharges Employees and customer service operators Wholesale distributors and retail partners and their employees Loss due to damage or accidents (might be theft) Shipping companies Employees Wholesale distributors and retail partners Credits For phone calls, etc. Employees and customer service operators Know business flows, patterns, and trends Investigate any deviations using reports 45

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Call Traffic Reports Call Counts Minutes Inbound, outbound and answered By origination and destination By Metropolitan Service Area (MSA) Answer-to-Seize Ratio (ASR) Post-dial Delay (PDD) By destination and terminating carrier (outbound) By Metropolitan Service Area (inbound) Know call traffic flows, patterns, and trends Investigate any deviations using reports 46

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Financial Reports Revenue Calls Recharge Fees One-time and Recurring Service Fees Costs Network (wireless provider and terminating carriers) Cell Phones Mobile Identification Numbers Recharge PIN manufacturing and distribution Commissions Profit and Loss Track and MANAGE all aspects of the business using reports 47

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Prepaid Wireless Products: How do I stand out in the Crowd?? 48

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Customers like the Prepaid Calling Card offerings Features include: Easy to understand service plans World wide termination at competitive rates Easy balance retrieval Easy balance refilling and purchasing 24 x 7 customer service Access to Call Detail Records Voice Mail Upgradeable for new innovations (SMS, Internet) 49

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Available Minutes Pooled monthly minutes Destination rate minutes Rates Comparable to Prepaid Calling Cards Web-based accessible, CSR quotable Competitive!!!! Options Voice Mail Short Message Service (SMS) E-mail and Internet access 50

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Balance Retrieval Customer wants to know their balance at any time Voice quotation or SMS delivery Web-based tools Balance Increase Refill cards with many points of sale (kiosks, store fronts, web) Automated, voice prompted refill (cards) Web-based tools (credit cards) Centralized refill card repository History of balance 51

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Customer Service 24 X 7 Real-time credits and CDR access Rate quotations Miscellaneous Voice prompts for balance and call durations Web site for customer CDR look-up and history Web site for rates and service plans Refill reminders (voice prompts, SMS, e-mail) Web site for service plan options and migration 52

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The Prepaid Wireless Market is growing and will for the foreseeable future with many opportunities for business. The more operational aspects a reseller can control, the more control the reseller will have over its business and future. A successful business requires attention to many details and strict management of the entire operation. This requires reporting and management control over all aspects of the business. A reseller must select a hardware/software vendor it can trust as the vendor will be its new business partner. Manage the entire business!!!! 53

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Questions? 54