Mike Frayne, Executive Chairman, Intec Telecom Systems

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Interconnect billing- Making Telecommunications Work for Africa

by Mike Frayne, Executive Chairman, Intec Telecom Systems

Article Abstract Charges to carriers for using the networks of others, or interconnect, is relatively new to many in Africa. Interconnect billing is a primary income source for many. Africa's favourable balance of traffic generates US$ 4 billion annually from interconnections, providing operators with vital foreign exchange revenue. Mediation platforms interface between the network and systems such as revenue assurance and fraud management allowing operators to collect information about their network traffic and helps operators support voice, IP and data for billing.

Africa does not fit an investor's profile of a safe bet. Political instability, poverty, and struggling economies are usually the first things that come to mind for many Westerners. This view, though, belies the dynamic business climate that currently shapes the continent. Africa has many challenges to overcome but it offers more opportunities than setbacks, especially for telecommunications operators.

The statistics surrounding Africa's potential are very attractive. According to the United Nations' International Telecommunication Union, more than 30 million people in Africa have access to mobile phones today compared to 2 million in 1998. By the end of 2003 that number will triple to 100 million, with many new subscribers in the North African and Southern region. The most advanced area for mobile communications is Southern Africa, which now supports 13 million users. The least developed country for the telecoms sector is Nigeria, which maintains the lowest tele-density rate and the largest population of any African nation. However, things are changing quickly with the rise of wireless communications and the government's decision to award mobile licenses to several international carriers. For example, Nigeria's subscriber base is expected to reach 30 million out of a population of 120 million by 2004, compared to only 2 million today.

Although African countries are in different stages of development, telecom operators still require the same network infrastructure and commercial models to attain profitability. Among the investments that operators must carefully consider are billing systems. Charging end users for accessing telephone services seems like the obvious way for companies to make money. Still, this in not the only type of billing that is important. Carrier-to-carrier billing, or interconnect as it is referred to in the telecoms world, is also vital to maximising revenue and profitability. Interconnect billing is a concept that is relatively new to many carriers in Africa, but is already an essential business discipline for many of the world's leading telecoms companies. Simply put, interconnect is the process of enabling a carrier to charge other carriers for using its network to pass traffic and support services. For a major PTT, interconnect billing is the first or second source of income. In Africa, interconnection fees provide a vital source of foreign exchange revenue for operators, especially for international calls, as the balance of traffic is very much in their favour. Approximately 4 billion dollars (US) are generated each year as a result of interconnection agreements in Africa - vital income that all African countries can reinvest into their infrastructure.

Interconnect Billing and Mediation

Most carriers need similar features from their billing systems even if their network priorities are different. First, the system must be easy to install and require the least amount of effort to generate the bill. It should make billing uncomplicated and support other operational support systems such as revenue assurance and fraud management. Scalability to manage growing call volumes is critical, as is flexibility to support new services on any type of network, especially when you consider the competitive advantages of fast time to market. Most importantly, operators need a system that meets its business needs anytime, whether its today or tomorrow - a platform that can be supported for as long as a user plans on running it.

Complementing any interconnect billing system is the mediation platform, which is the interface installed between the network and other operations support systems (OSS). Mediation allows operators to collect, process and deliver information on the traffic passing through their networks and can help operators support the growth of voice, IP and data for billing purposes without fear of losing vital information or duplicating call records.

African companies have already started to realise the benefits of interconnect, including Senegal's Sonatel, Telecom Maroc and South Africa Telekom, all having recently purchased new systems in response to a growing volume of call traffic. Meanwhile, Egypt Telecom has recently installed new interconnect and mediation platforms to ease interconnect partnership agreements with content and Internet service providers. The company provides the infrastructure for 60 different ISP providers throughout the country and the billing system will help to handle the growing volume of network traffic generated by these new content-oriented partnerships.

Accessible services

Installing better interconnect billing systems creates a new way for operators to generate money instead of alienating end users with higher tariffs for telephony services. Indeed, making telephony accessible is an imperative requirement for many countries in Africa where mobile and fixed-line services are already prohibitively costly for most subscribers. According to the African Telecommunications Indicators report, fixed line access in countries such as Nigeria, Chad and Ethiopia are among the lowest in the world due to cost, while 80% of African mobile users chose to use pre-paid phone cards, twice the world average, because people cannot afford more expensive contracts. Raising rates to support operational expenses will further prevent users from accessing many services, thereby undermining the success of Africa's telecommunications industry.

Interconnect billing can also generate information that will help identify losses related to fraud - a major problem for operators in Africa. The global telecommunications industry currently loses half a million dollars to common fraud schemes each day, and the numbers are increasing in areas such as Africa. Operators in South Africa, for example, have already experienced major setbacks to innovative services as a result of fraud. In 2001 half a million-fixed lines in South Africa were disconnected, many as a result of fraudulent activities. This caused the country to drop from third to fifth on the list of African countries with the highest level of tele-density. It also cast a shadow over the future growth of the computer and mobile Internet market in South Africa. North African countries such as Morocco, Tunisia, Egypt and Nigeria have also been identified as high-fraud areas for communications companies such as AT&T, which have lost millions to phone scams in the region. As a result, the US based company now offers restricted international calling cards that enable users to call anywhere in the world except these targeted countries.

Government support

Billing systems are important, but the role of government legislation is equally vital to ensure effective interconnect billing between partners in Africa. In many advanced telecoms markets, interconnect charges are regulated to encourage competition by making sure that the charge imposed on a carrier is the same as that used internally by the incumbent. Understandably, many PTTs are reluctant to push interconnect agreements that take away their revenue stronghold, but opening the African markets is a crucial requirement for advancing the telecoms industry and governments must be proactive to ensure that interconnect is adopted by all the carriers. Furthermore, the rise in joint ventures in the region is forcing companies to comply with international telecommunications union (ITU) regulations, which call for open markets and competitive interconnect agreements.

Among the countries pushing ahead with reform is Egypt. The government has drafted an important Telecoms Act that outlines the requirements for ensuring a strong and competitive market. Interconnect is one of the topics identified in the legislation as a precursor to developing a strong economy and the country's leading telecoms operators are preparing for change by upgrading their billing platforms. The lack of telecoms competition in Egypt had kept consumer prices artificially high and subscriber numbers low. The Telecoms Act and a national regulatory body have quickly changed this reality. There are 3 million mobile phone subscribers today, opposed to 900,000 last year, and over 6 million fixed line users, an increase of 30 percent since 2000.

The telecoms future in Africa looks promising. Foreign operators are continuing to invest including France Telecom, which maintains a strong presence on the continent with its subsidiaries Cote d'Ivoire Telecom, Sonatel in Senegal and Mauritius Telecom. Emerging markets such as Morocco and Nigeria are also moving ahead by adding new GSM operators to help heighten competition. Meanwhile, International IP Telephony wholesaler ITXC has seen an 1111% increase in voice traffic to and from Africa in the past year. The company, which enables operators to interconnect with its Internet-based global network to deliver and receive international traffic, currently has agreements with Zimbabwe PTC, Ghana Telecom, Senegal's Sonatel, SotelTchad in Chad and Telekom South Africa. Through ITXC's interconnection capabilities, operators are quickly gaining access to an international network, new revenue and very competitive outbound rates. By investing in a solid network infrastructure, and by implementing good interconnect policies and the best billing systems, Africa's carriers will have an opportunity to maximise their earning potential and to increase the continent's low teledensity numbers. Billing operators have a responsibility to offer a higher level of technical and educational support with reference to the business benefits of the OSS solutions and other products that African operators purchase. There is a substantial knowledge gap between the West and Africa that must be filled and vendors should be willing to transcend the role of supplier to become a teacher as well. Information so gained by the operator, can help enhance overall network performance as well as improve communication with investors interested in new business ventures.

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