A Changing Market

For many years traditional common carrier switching equipment was provided by national monopolies. AT&T (Network Systems/Western Electric), Ericsson, Nortel, Alcatel, Siemens, and NEC all supplied the equipment, and the monopoly common carrier lived with whatever transmission and operational support systems (OSSes) their manufacturing unit provided. When customer service and billing systems were considered at all, they were built around the requirements of switch output, corporate management, and a regulatory environment that dictated the boundaries of the management information systems (MIS). Life cycle management in the monopoly era provided 60 years of market stability. Indeed, in monopoly environments, the words "customer service" were hardly ever uttered.

Competition has ripped the lid off infrastructure and MIS life cycle management. The concerns of a competitive marketplace are driving OSS investment, and customer care is taking an increasingly larger slice of the pie.

Traditional common carriers are investing billions of dollar in each OSS functional area: planning and engineering, network management, service management, and business management systems. However, on a dollar for dollar basis, customer care and billing (CC&B) systems are getting a larger slice of the pie. For example, there is a profound shift from the monopoly focus on the OAM&P (operations, administration, maintenance, and provisioning) view of the network in the days of monopoly to the industry`s current preoccupation with the customer in the area of customer care and billing applications software. Looking at just the revenues produced by application software, customer care and billing system expenditures are increasing relative to the total OSS application software revenues. CC&B will constitute 42.4 percent of the total OSS application software expenditures in 2002, up from 36.5 percent in 1997.

The post monopoly competitive environment is forcing carriers to appreciate the value of customer care as the primary tool at the forefront of the battle to acquire, retain, and win back customers, and the pivotal role played by the call center in the acquisition and retention of customers. In this context, the call center is one of the fundamental experiences that define the provider to an individual customer. The call center is being used as a strategic weapon to enhance market share, revenues, margins, and mind share. It is also the front line sales force and primary sales tool for all mass market (residential) and small business customers.

A major thesis of our study is that since the majority of carrier`s customers are not under contract, the carrier must essentially win back each customer every month in order to reduce overall churn rates. This situation is true today in the US market, and it will become increasingly true in Europe--and to a lesser degree in Asia--over the next thirty-six months. We have chosen to profile the top tier US interexchange carriers (IXCs) to show how companies with huge customer bases are building a new generation of OSSes in order to cope with continually increasing levels of competition.

This report focuses on customer care case studies of some of the leading providers of customer care in the industry. Customer service is studied because process reengineering and competitive pressures put customer service in the forefront of profitability, management tools, and competitive strength. Customer service is also the way to ensure long-term deregulation of the market.

Insight found that what differentiated the carriers` approaches to customer care often sprang from the carrier`s respective position in the marketplace. In the long distance market, for example, AT&T has the largest customer base. AT&T has roughly half of all domestic long distance revenues and 60-70 percent of the market in terms of minutes of use and number of customers. AT&T wants to expand their customer base, but their primary goal remains to preserve their advantage through customer retention. Their main marketing and advertising emphasis is on projecting an image of quality and reliable service. Their advertising spots attempt to inspire doubt in their competitors` capabilities and discount programs.

Sprint, on the other hand, has the most to gain from growth. Since Sprint`s base is roughly 10 percent of the market, it is easier to target and control. Because Sprint has a smaller, more tightly integrated, and segmented base, they can afford to target with a high degree of customer care.

MCI has roughly 20 percent of the market. They have always been more entrepreneurial, more flexible in their approach, and more oriented towards pleasing their stockholders. MCI is more acquisition-oriented by culture, but they are starting to develop a large enough base of customers so that retention is becoming increasingly important to them.

AT&T has been slower to introduce new products and programs and is more reactionary to the market--a conservatism that stems, in part, from the company`s relationship with its unions. Sprint on the other hand has been able to segment their call centers for more control over their smaller and more well-defined markets. MCI is well-known for their flexibility in marketing and can rely on their outsourcing horsepower to bridge any gaps. Their considerable call center outsourcing service provides them with a good deal of excess capacity that they can resell to their call center customers, such as Ford Motor and Microsoft.

Although the respective organizational structures of the top tier IXCs remain fluid as they attempt to continuously refine those structures to meet the demands of a changing market, some general trends can be delineated:

• Call center functions are being attached to standalone business units
  dedicated to segments (residential/consumer and small business).
  Any given call center, however, may house teams supporting multiple
  segments and customer life cycle stages.

• Business units are being assigned individual revenue plans.

• These business units have their own associated product marketing,
  promotions, finance, and administration modules.

• Medium size business accounts are being moved from the direct sales
  channel into the indirect call center channel.

Within their call centers, the three top tier IXCs are leading the way to using client/server customer care systems architecture. Because of the large base of legacy systems in the MIS centers of most wireline carriers, state of the art customer care centers are being created--though there is a heavy dependency on systems integration to link the desktop to the legacy systems. Because it is much too difficult and expensive to replace all the legacy systems, systems integration has become the crucial element needed to migrate customer care and billing operations to client/server architecture. Once implemented, the client/server architecture can simultaneously provide agents with access to customer, product, competitor information and network data found in the carriers` mainline OSSes on corporate mainframes and other hosts.

Customer service reps are using powerful workstation-based systems; the operative design concept is that the more information a rep can quickly and easily access the better. AT&T and MCI are moving to a Windows NT workstation system, which provides reps integrated access to information about products, pricing, trouble tickets, and their competitors` offerings. Sprint uses a Lotus Notes-based system. Today all three carriers reserve the most state of the art systems for those reps who handle the much coveted high-spending consumer and small office/home office (SOHO) markets. The systems will be expanded slowly to the rest of the organization as they prove useful and become less expensive.

The Forecast

The worldwide expenditures for OSSes related to customer care and billing almost doubles in annual sales between 1997 and 2002. This rate of growth is almost twice that of telecommunications service providers` revenue over the same period. Their customer-centric view of business is driven by privatization, competition, convergence, and the explosive growth in new service offerings.

The faster growth rate comes from an increased focus on both the business and residential customer. Many factors are causing telecommunications service providers to adopt this customer-centric view of their businesses:

• Worldwide privatization of state owned monopolies are typically
  concurrent with the entrance of competition in areas of
  poor service quality and pent-up demand.

• As many countries deregulate their industries, the overall entrance
  barrier has tended to be lowered for new service providers.

• Wireless technologies, such as wireless loops and direct broadcast
  satellite, are reducing the infrastructure cost barriers for new entrants
  into each market. Wireless is stimulating competition in areas with
  well-defined high-value customer segments.

• Regulatory changes and the convergence of transmission
  technologies and network architectures are making direct
  competitors out service providers not previously competing on a
  service basis. One example is the head-to-head competition
  between traditional local exchange carriers (LECs) and IXCs for
  local, long distance, and Internet access services.

• The rapid growth of new service offerings covering mobile,
  broadband, and data communications based on increasingly flexible
  technologies places a premium on customer service. The service
  offering itself must be supported with activation and billing.
  Sophisticated customer expectations must then be met (or exceeded)
  so that multiple services offerings can be packaged and contracted.
  At the same time, more hand-holding is required because less
  knowledgeable customers are bewildered by the vast array of
  technologies and service options.

In the increasingly harsh world of competition, telecom carriers are putting a premium on identifying, attracting, signing-up, and keeping a customer. When the majority of carrier`s customers are not under contract, carriers must be ready to win back each customer every month or watch business move to the competition--and customer care and billing systems have become the key to maintaining and growing the customer base.

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