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Revenue Assurance Overview

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“Revenue assurance” is a broad umbrella term. It is used both to describe an activity performed within telecommunications service providers, and is a common name for a small business unit associated with that activity. Revenue assurance is a practical response to perceived or actual issues with operational underperformance, most commonly relating to billing and collection of revenue. Some of the procedures associated with identifying, remedying or preventing errors may be undertaken by a dedicated Revenue Assurance department, though responsibility for revenue assurance is often diffuse and varies greatly with the organizational structure of the provider. Assuming a provider with a typical organizational split, responsibilities for revenue assurance primarily sit between the Finance and Technology directorates, however, revenue assurance initiatives are often started in a business unit or marketing group.

The project scope defined by revenue assurance varies greatly between telecommunications service providers, but is usually closely related to back office and network operations functions where small errors may have a disproportionately large impact on revenues or costs. The processing of transaction data in modern telecommunications providers exhibits many attributes akin to a complex system. However, there is significant disagreement about the ultimate aims and legitimate scope of revenue assurance teams. This is in part caused by:

  1. The cross-functional nature of the activity and the consequent need for a variety of skills from IT, network, finance, et al.
  2. The difficulty of generalizing across businesses with different objectives and business models.
  3. Political infighting within each telco about responsibility for revenue leakages and assurance.
  4. The difficulty in reliably measuring the value added by revenue assurance as separable from underlying performance.

There is high-level agreement between practitioners about the goals and methods of revenue assurance, though reaching a consensus on defining the boundaries of revenue assurance has proved elusive. The goals relate to improving the financial performance by eliminating mistakes in the generation and processing of transaction data. For example, in decreasing order of frequency, revenue assurance may cover:

  1. Revenues from retail and corporate sales.
  2. Revenues and costs from interconnect and wholesale contracts.
  3. Margins and profitability of investment in networks and information systems.

Other markets have different or more refined priorities. For example, in the U.S.A. management of wholesale contracts has often been the first objective because of the complexity of the domestic market resulting from the Federal Communications Commission's regulatory framework. In contrast, telcos in developing countries may prioritize management of international interconnect arrangements because of the risks posed by fraud and arbitrage.

The rationale for why revenue assurance has come to be considered particularly important in telecommunications include:

  1. The fast pace of change and intense commercial competition increase the likelihood of mistakes.
  2. There is significant complexity in determining the combined effect of interacting systems and processes.
  3. The high-volume, low-value nature of transactions amplifies the financial implications of "small" errors.

Another aspect of revenue assurance is a response to changing market conditions. The thinking is that as markets reach saturation and growth potential falls off, so the value of maximizing returns from existing sales increases. This observation has some merit but does not explain the increasing popularity of revenue assurance in telcos serving growth markets. It also in part contradicts the assumption of a compelling costs versus benefits argument for revenue assurance, which would be enhanced in businesses undergoing rapid change. It is also important to recognize that there is a long history of revenue assurance activities in some telcos that predates the coining of the term "revenue assurance".

The revenue assurance techniques applied in practice cover a broad spectrum, from analysis and implementation of business controls to automated data interrogation. At one end of the spectrum, revenue assurance can appear very similar to the kinds of review and process mapping techniques applied for other financial controlling objectives like accounting integrity, as exemplified by those derived from clause 404 of the Sarbanes-Oxley Act. This form of revenue assurance is most commonly promoted by consultancies. The size of such consultancies covers the entire range; the Big 4 all offer some form of revenue assurance consulting, but there are also niche specialist consultancies.

At the other end of the spectrum, revenue assurance is treated as a form of reactive automated data interrogation, seeking to find anomalies in transaction data that may indicate errors and potential revenue loss. This form of revenue assurance is most commonly promoted by software houses that aim to provide databases and configurable tools to extract and interrogate a telco's source data.  An example of an automated assurance solution involves using both software and specialized hardware as a means of extracting additional data on transactions. This solution involves installing an SS7 Probe to collect transaction data directly from the telco’s network. The software component of this approach correlates the SS7 data to the telco’s billing data to identify missing billing transactions. As with consultancies, IT-oriented revenue assurance solutions are offered by both large vendors like providers of billing and mediation software, and by specialized niche providers.

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