Pushing the Billing Envelope...Aside

By Khali Henderson

Posted: 04/1998

Pushing the Billing Envelope…Aside

Internet Invoicing Has Telecom Companies
Reconsidering the Paper Chase

By Khali Henderson

As if Tel-Save’s high-profile, exclusive 9-cent
long distance offering through America Online wasn’t enough to
compete with, the company is giving its residential and small
business converts something they probably never had: an
interactive bill, accessible 24 hours a day via its website. Talk
about a tough act to follow.

But follow they will. Competitive telecommunications service
providers have long relied on billing innovations–smaller
increments, management reports, electronic output formats, data
analysis tools and convergent billing–to differentiate
themselves from their larger, less agile competitors.
Internet-based bill presentment and payment systems are next.
Unlike previous innovations, even the electronic ones, invoicing
over the World Wide Web seems to offer telecom companies
unprecedented utility, financial benefit and marketing
opportunity.

Internet bill presentment is an end-to-end electronic billing
process that begins with creating electronic statements and ends
with processing payment transactions. It allows consumers or, in
this case, telephone service subscribers to retrieve their bills
through standard web browsers and securely pay them over the
Internet with a credit card or checking account funds.

Although much of the development in Internet bill presentment
has been driven by the financial industry, recurring billers such
as utilities, insurance companies and telephone companies are
among the likely adopters. MCI Communications Corp., AirTouch
Communi-cations Paging and BellSouth Corp. are a few pioneers
from the telecom sector. Several telecom industry billing
software and services companies, such as InfoDirections
(www.infodir.com), Profitec (www.profitecbilling.com), Macrologic
Inc. (www.macrologic.com), International Billing Services
(www.billing.com) and Billing Concepts Corp.
(www.billingconcepts.com), have introduced or are planning to
introduce web-based billing tools. Still other products will come
from telecom industry newcomers such as eDocs Inc.
(www.edocs.com), Princeton Telecom Corp. (www.princetontele.com),
Computer Concepts Corp. (www.computerconcepts.com) and Just In
Time Solutions Inc. (www.justintime.com)–all which specialize in
Internet-based bill presentment technologies.

Why Internet Billing

In their August 1997 report, "The Emerging Electronic
Bill Presentment Industry," industry analysts Gary Craft and
Wayne Johnson of Bancamerica Robertson, Stephens & Co.,
contend that Internet bill presentment will be driven by
recurring billers such as telephone companies that are interested
in reducing billing float–a trend that has been in place since
the early 1970s when wholesale lockbox systems were first
started.

"Electronic bill presentment involves the reduction of
billing cycle float–not just mailing but processing time and
funds availability. In the overall economy, this total cycle
float amounts to between two and 10 days and averages six days. A
one-day reduction in float, quite achievable in our estimation,
would enhance interest income by more than $200 million per
annum. For some individual companies, several million dollars
could be at stake, representing a driving force for action,"
the analysts state. "In sum, we believe the electronic bill
presentment market should be viewed as an extension of the
evolution in corporate cash management."

Graph: Who Is In Control? A Comparison of Billing Chains

Improved Cash Flow/Reduced Float: One of the
primary reasons for telephone companies to consider offering
Internet bill presentment and payment is its impact on cash flow.
No more waiting 30, 45 or 90 days to receive payment. The option
of accepting credit card payments also can hasten receipt of
funds.

Reduced Costs: U.S. companies spend more than
$10 billion a year–40 cents to 60 cents per bill–just for
printing and mailing. Telephone companies sending multipage (and
multibox) bills spend even more. Macrologics’s Ken Orashan says
his clients spend anywhere from 20 percent to 40 percent of total
billing costs on paper, postage and printing. With Internet
billing, a telephone company can reduce that cost significantly.
According to Just In Time Solutions, a San Francisco-based
Internet bill presentment company, here are some of the areas
where costs are trimmed or eliminated:

Increased Revenues: In-bill advertising for
complementary products and services can bring in additional
revenues. Since the sale is just a point-and-click away,
telephone companies can capitalize on a customer’s interest by
being able to close the sale immediately with no need to mail
back a glossy insert.

Increased Marketing Opportunities: Internet
billers can use the data behind the billing statement or analysis
of the customer’s click stream at their websites to drive ads
based on a subscriber’s preferences for true one-to-one
marketing. Reduced lead times for Internet marketing campaigns
vs. print ones means fewer opportunities to promote a company’s
products and services will be missed.

Improved Image: Internet bill presentment can
set a company apart from competitors that don’t offer such an
option. It also makes a statement about that company’s commitment
to technology, a concern for telecommunications service providers
in an increasingly high technology industry.

In contrast to previous electronic billing programs,
Internet-based bill presentment offers several other advantages
to telephone companies, according to Jim Cannavino, president of
Bohemia, N.Y.-based Computer Concepts Corp. and former No. 2 man
at IBM Corp. These include:

Internet Bill Delivery Channels

"Until 1997, Internet-based billing experienced a classic
chicken-and-egg problem," according to Mike Lanza, president
and CEO of Just In Time Solutions. "Customers would not
start using it until many billers were online and they could pay
several bills at once; billers, on the other hand, would not
implement it until there was a large customer base."

The logjam was broken in 1997 with the introduction of the
Open Financial Exchange (OFX) standard for electronic bill
presentation published jointly by CheckFree Corp., Microsoft
Corp. and Intuit Inc.–companies with existing customer bases
that could serve as billing concentrators. OFX streamlines the
way billers communicate with bill concentrators without requiring
the biller to relinquish control of valuable customer
information. In implementing its E-bill electronic bill delivery
system to its existing customer base in March 1997, CheckFree
counted among its partners several energy companies, a mortgage
company, a financial services firm and a telephone company
(BellSouth).

While billing concentrators such as CheckFree, Intuit,
Microsoft/First Data Corp. and many banks could be credited with
bringing Internet bill presentment to the masses, not all billers
want to use their services, instead opting for greater control of
the customer interface (and marketing opportunities) through bill
presentment at their website. Under direct management, billers
perform all functions of an electronic billing service, including
signing up customers for service, presenting bills, transmitting
billing summary information and marketing products and services.
Alternately, under the outsourcing model, billers send customer
information to a concentrator that compiles bills from several
companies and provides end users a single interface to multiple
bills.

There are pros and cons to either method, but both seem to
agree on the need for consolidation. International Billing
Services, an El Dorado Hills, Calif.-based billing service bureau
serving communications companies and one of the proponents of the
concentrator method, argues that consolidation is critical for
widespread acceptance of Internet bill presentment.

"Consumers must receive their bills at one location on
their PC just as they do in their mailbox today. Individually
hosted bill payment websites that require consumers to browse
from site to site collecting their bills are not viable long-term
solutions.

"Asking consumers to search the World Wide Web for bills
is the digital equivalent to requiring them to drive their car
around town to pick up bills," the company states in its
white paper, "Billing Enters the Bit Stream."

On the other side of the debate, Richard K. Crone, general
manager of CyberCash Inc., a provider of secure electronic
payment solutions based in Redwood City, Calif., says that
features, such as bookmarks, in leading web browsers make it easy
for consumers to gather their payment obligations on their own
computer desktops rather than relying on a third party.

"When it comes time to pay some bills, it is simply a
matter of going to the ‘bill payment folder’ and opening the
obligations you want to meet at that time," he says.

Even newer browser technology allows web users to
"subscribe" to specific websites, Crone notes.

"Once subscribed, bills can be downloaded at
predetermined intervals so you can receive and review all your
bills once a day, once a week, once a month or whenever you
specify. In this way, credit card and cellular phone bills can,
for example, appear every Friday morning as you prepare your
weekly expense report."

According to Craft and Johnson, the choice between direct
billing and using a service bureau in the Internet billing
scenario is driven by the biller’s view of the billing process on
a scale ranging from pure commodity to extremely strategic. They
say the reasons for using a service bureau include:

Reasons a company would provide Internet billing directly,
they say, are:

Internet Bill Presentment Options

Internet bill presentment basically takes advantage of the
familiar leading-edge web browsers such as Netscape Navigator and
Microsoft Internet Explorer as a graphical user interface to
present bill summaries and call detail records along with web
content in hypertext markup language (HTML) or Java format. A
server at the telephone company site handles composition of the
bill and subsequent sorting and analysis queries. Customer data
remains on the telephone company server; there is no lengthy file
downloading required.

By incorporating secure payment technology from companies such
as IC Verify Inc. or CyberCash, or bill concentrators such as
CheckFree, customers can automatically debit from their checking
or credit card accounts. Posting files are created to match the
telephone company’s unique accounts receivable system.

Vendors are a bit reluctant to reveal costs for implementing
an Internet bill presentment system. Computer Concepts, for
example, explains that it offers many options to its telephone
company customers from revenue shares to licensing agreements to
outsourcing. For eDocs BillDirect system, expect to spend $50,000
to $175,000.

Concerns

Although Internet bill presentment seems to offer little in
the way of a downside for telephone companies, there are a few
considerations that should be addressed, including:

Investment Preservation: Additionally, most
systems enable telephone companies to preserve their investment
in technology to one degree or another. BillDirect from eDocs,
for example, uses the telephone company’s existing billing system
to extract or print files to drive the Internet bill presentment
process without writing custom data formatting programs.

Speed: One of the potential problems with
electronic billing is that end users will not use the analysis
tools because data manipulation is too time-consuming. The low
bandwidth of the Internet presents limitations, then, for
high-volume accounts with thousands or millions of records.
Computer Concepts has developed a patented indexing tool that it
claims will "drill down" into individual detail records
in seconds rather than hours. Because the data remains on the
telephone company’s server, there is no annoying delay due to
limitations of the Internet pipeline.

Security: Internet bill presentment
applications employ secure socket layer (SSL) encryption
technology to ensure that customer data is secure when sent over
the Internet. Additionally, new standards adopted by MasterCard
and VISA have been put in place by many electronic payment
processors to ensure the privacy and integrity of real-time
credit card payment transactions over the Internet. The Secure
Electronic Transactions protocol is based on the issuance of
digital certificates which validate the identity of each
participant in the payment transaction so consumers are assured
their credit card data cannot be stolen and merchants can be
assured of cardholder identities.

End User Pricing: At this juncture, it does
not appear that there is an industry standard developing as to
pricing the provision of an Internet bill presentment option.
While in other industries the service is provided free, some
telecommunications providers are planning to charge their
subscribers (at least the larger ones) for the convenience and
provision of data analysis tools. It stands to reason that
low-usage residential customers would resist a charge, although
they are used to paying $15 a month for the privilege of
home-banking. The larger clients that require data storage
services are likelier targets for premium-priced service.
However, they too might balk, given already hefty transport
bills.

A frequent contributor to PHONE+, Khali Henderson is a
principal with Marcom Support Services, a Phoenix-based firm
providing marketing communications services to telecommunications
companies. She can be reached at [email protected]