It's All in the Delivery

Billing just might be the least glamorous of carrier responsibilities; it is, though, one of the most important. The statement that’s sent to thousands, if not millions, of people each month puts a face to a company. The last thing a carrier needs is for a customer to view someone else’s sensitive account information or to discover another business gets lower phone rates. Either faux pas could prove not only embarrassing, but also costly. As one option, carriers are turning to specialized service bureaus to help them maximize the use and reduce the cost of this regular customer interface.

“That bill that you mail out every day has more value than just, ‘You owe me,'” says Larry Warthin of EUR Systems. “It has significant [additional] value if you have a well-groomed marketing department and you give them an area of the document and say, ‘What do you want to deliver to our clients?'”

Billing service bureaus say the monthly bill is an ideal vehicle to shore up customer loyalty by reinforcing savings or service advantages. Most also advise carriers to use their bills as advertising tools to promote new services or self-service options.

This can be in the form of “intelligent insertion,” a bill stuffer tailored to customers based on their usage profile. Alternatively, messages on the bill can communicate special offers. Ron Whaley, vice president of marketing and sales for OSG Billing Services, says graphics can draw extra attention to a message (see sample right). Moreover, many companies offer color options to highlight important information.

COMTEC Inc. provides red, green and blue inks while Profitec Inc. offers color laser printing (see sample below).

While carriers say they are hopeful their marketing messages will prompt sales, the resulting increase in delivered services necessarily adds bulk to the billing statement.

This means increased postage costs over and above regular rate increases. Fortunately, there are ways to reduce the cost of delivery. For its part, COMTEC places four pages’ worth of information onto one page using its QuadPlex software (see sample below).

For Integra Telecom Inc., “we cut the total number of pages they’re putting into an envelope by half,” says Jim Nash, vice president of sales and marketing for COMTEC.

Amdocs, a company that creates bill printing and production software, also sees demand for statement consolidation. Fernando Bortman, marketing manager for the billing division, says Amdocs’ software allows operators to consolidate a customer’s multiple services information on one bill. “Obviously, it takes a lot of resources; it takes a lot of paper and ink,” he says.

“It’s reducing the operator’s cost to produce one convergent bill.” Aside from format changes, carriers can push part or all of the information to electronic format. “[Business customers] still are always going to require a printed bill to handle through accounts payable,” says Randy Minervino, vice president of sales and marketing for billing service bureau Profitec Inc. “But more and more of that bill is looking like a summary invoice with management reporting, and the detail is delivered electronically.” Profitec notes that more than 10 percent of its consumer base is opting to receive detailed bill information over the Internet.

The adoption rate for full e-billing falls far below what analysts had predicted. Still, a small percentage of residential and commercial consumers opts to pay bills online. Billing vendor CSG Systems, for example, reports about a 3 percent e-billing adoption rate. “Customers still tend to want to have the paper bill that they can touch and feel and pay, but we are able to accommodate both,” says Pam Vanlandingham, senior vice president and general manager of CSG Systems’ statement processing center.

Another way billing companies serve customers is to help them reduce direct costs. For example, OSG conducts regular postal analyses to pinpoint areas for cost savings. The company also reviews invoices quarterly to identify where any changes might add value or save money, and evaluates customers’ bill production formats for additional, beneficial capabilities.

Similarly, CSG executives say the company absorbs many of the direct costs of running the business because it owns all of the equipment and supplies associated with billing. Executive Director Teresa Zwiener adds, “With 51 million statements running through our statement processing center on average each month, our business model doesn’t require us to pass on significant direct costs to individual customers.”

CSG does provide bundled services that include billing and customer care software and services, and statement processing; Zwiener says the difference is customers pay only for what they use. “In other words, we work with them to design a package of services that exactly fits their business requirements, so they aren’t paying for functionality that they aren’t using,” she says. “As a result, we can charge our customers pennies on the dollar for billing and statement processing.”

And, carriers looking to project billing expenses more accurately might want to look into DCA Services’ new $3 Bill program. Each bill costs $3, and signing up does not require an implementation or data conversion fee. “We really don’t care what your volume is, which is really counter to what a lot of the industry is doing right now, considering most other bureaus bill by the drink,” says Craig Brooks, vice president of corporate development.

Of course, carriers can, for more money, add services to the $3 price. The extra expense usually adds up to cents on the dollar, DCA says. For $3, the company includes all hard costs such as paper, postage and processing. Plus, customers have at their disposal “every stitch of software that DCA has ever developed,” Brooks says, adding, “We’ve really flipped the pricing model for our industry, we think, on its ear. And what we like to consider a disruptive innovation.”

The caveat, if it can be called that, is that a customer must commit to spending a monthly minimum of $25,000 with DCA, in any sector of the services the company offers. For larger clients, DCA Services can negotiate discounts off the $3 Bill. The minimum commitment reflects the per-bill charge that a medium carrier, with approximately 8,000 monthly bills, would pay.

The $3 Bill contract runs just three pages. And, if a client decides to stop using DCA, that company needs to give only 120 days’ notice. DCA also has re-instituted its 24- Hour Ironclad Guarantee, which commits to a customer that its bills will go out in 24 hours or the client does not pay that month’s billing fee. “Our systems are so fast [they] allow us to accommodate throughput without any additional staffing requirements,” Brooks explains. “The processes take a short period of time to run, which allows us to make accommodations for just about anything that can be thrown at us and still get a bill out on time.”

Beyond the direct costs of billing, service bureaus are helping providers with their call center costs. Nash COMTEC uses the U.S. Postal Service’s barcode system to follow the bill through its life cycle including customer payment. This shows carriers whether a check truly is in the mail.

It also means they reduce churn by not making collections calls if payments are en route. Nash points out the plant codes help call center staff predict when customers will receive bills to manage the influx of customer service calls.

Like COMTEC, DCA is able to gauge reactions to certain conditions, figuring out whether there is a pattern across the industry, or if a reaction is unique to one customer. First, Brooks says, DCA tracks the number of accounts a carrier lists, looking for changes in customer counts. Then, “we can make dynamic staff allocations,” Brooks explains. And when DCA operates as a customer’s call center, it can determine which callers are existing customers and which are inquiring into a certain carrier’s offerings. “We can actually give them meter readings on the kinds of responses we’re getting from a particular campaign,” Brooks says of DCA’s telecom customers. DCA also uses USPS bar codes to predict call volume increases and to market specific messages to customers.

LEC Clearinghouse Merger Springboard for Full-Service Billing Outsourcer

Four months after the industry’s top two LEC clearinghouses were combined under the Billing Services Group LLC banner, the company’s Chairman and CEO Patrick J. Haynes III says the combination of Billing Concepts Inc. and ACI Billing Services Inc. “is going to be our platform and our engine to proceed in making this a full-service firm.”

The transaction, which was announced in mid-December 2003, involves the acquisition of both Billing Concepts and ACI by ABRY Partners LLC, a Boston-based venture capital fund specializing in consolidations. Billing Concepts, which included the USBI, ESBI and ZPDI operating units, was purchased from Platinum Equity LLC, which had owned the company since late 2000. ACI, which represented the assets of clearinghouses HBS and OAN, was bought from Avery Communications Inc. Avery’s owner, merchant bank Thurston Group Inc., as well as Thurston Group principal Haynes, former Chairman and CEO of Avery, maintain shares in the new company. Additional stock will be made available to officers and other staff, says Haynes, who might be best known in the telecom industry for founding CLEC American Communications Services Inc., which later became e.spire.

Billing Concepts will be the surviving operating company under the newly formed holding company, Billing Services Group. Operations are being consolidated at Billing Concepts’ San Antonio facilities, and ACI’s facilities in Northridge, Calif., will be closed. The integration is expected to be completed by fourth quarter. Billing Concepts’ President Joe Webb and COO Don Philbin will retain their posts with the new company. ACI officers, such as industry veterans President Mike Labedz or Vice President Harvey Berge, will be seeking new opportunities.

A handful of ACI staff, including a few in the IT group and a few in sales, will join the San Antonio crew.

Haynes says the new owners told Billing Concepts that nothing would change except the philosophy of the holding company. Rather than extract cash for other ventures, the holding company will invest in growing the business, he says.

“We are optimistic about the future as we see more outsourcing opportunities arise,” Haynes says. “We think we have a platform here that in our three- to five-year horizon will be a significant company and one that will be in a number of different industries.”

Billing Concepts is finalizing a rewrite of its software - the basis of the platform - by the end of April. The software has been in production mode and is just being tweaked,” Haynes says. “We are optimistic about our future and that we can use this engine and bolt other things on it,” he says. “It also was designed for that, not just as a LEC billing platform; it was designed to be multidimensional.”

Haynes says ACI was about a third the size of Billing Concepts, so it will be a significant addition to the joint venture. The combined entity expects to process more than $1 billion in transactions in 2004. “What we have is a significant engine there that has the ability to process millions of transactions daily, accurately and efficiently,” says Haynes. “That’s the reason we bought the company - to give us a platform to start hanging other branches on.”

One of these other branches, logically, is direct billing. “We already are in the direct billing business now to a small degree [through Billing Concepts’ existing platform],” says Haynes. “I really don’t want to hype this now, but I will say that we are going to be in that business in a significant way, and it’s going to be a bigger and bigger part of our solution package.”

Another line of business could be credit card clearing, he says. At the same time, the company is working to grow its LEC billing services by billing for 900-number services, such as help desk or account information, offered from business to business. Haynes says that opportunity, seized by ACI little more than a year ago following AT&T Corp.’s exit, has resulted in winning key accounts like Hewlett Packard and Bank of America. Haynes says the clearinghouse also is partnering with its telco customers like Sprint Corp. to sell the billing service to enterprise customers.

Haynes says the company’s investor ABRY Partners also brings a plethora of contacts to the table in the form of companies - cable TV, telco, alarm companies to name a few - that are potential customers for billing services offered under Billing Services Group.

“Between the integration of our companies and these other business opportunities from our big brother, we are pretty excited about the ’04 forecast,” Haynes says.

-By Khali Henderson