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Tackling Roaming Data Services Challenges - Clearinghouses Can Provide The Answer
Tackling Roaming Data Services Challenges - Clearinghouses Can Provide The Answer

Modern users expect to be able to use their mobile wherever they are, but it's not always that easy to roam.

Over the past two years, major CDMA carriers in North America and Asia have rolled out packet data services based on the CDMA2000 1xRTT standard. The uptake of data services in consumer markets is now beginning to occur with the advent of services such as Multimedia Messaging Service (MMS) coupled with camera phones. Within corporate markets, new data services such as push to talk (PTT) are beginning to drive usage along with mobile data connectivity to the corporate office.

Demand for these services is such that one major CDMA wireless carrier is reporting a fourfold growth increase in data service transactions. As subscribers come to rely on these services, they demand that they work anywhere, which means that carriers must work together to enable roaming. Roaming allows subscribers from one network to use their device to access services on another network.

Service providers offering wireless voice ser-vices have successfully used clearinghouses to handle this challenge. In order to understand what needs to be accomplished for data services, it's useful to examine what has worked in the voice world.

Voice Clearinghouses
Clearinghouses for voice services provide management and control of the business relationship between a group of partners (service providers) that have agreed to share their network resources. This relationship gives their subscribers access to services over a larger geographic region than that provided by a single carrier. To do this, clearinghouses provide a central function that promotes trust between the service providers involved in the relationship. Trust extends to a number of areas related to payment, including the gathering and distribution of usage records and the exchange of payment. Clearinghouses provide a hub for record distribution among service providers. They also offer the ability to inform each service provider of aggregate usage and how much each owes the others. In some cases, clearinghouses also provide interfaces to the payment systems handling the actual cash settlement.

The current clearing process for voice involves a service provider analyzing the records of users roaming on its network, and providing these ratings to a clearinghouse for delivery to the users' home networks. The clearinghouse keeps a copy of the records and uses these for settlement between service providers using the clearinghouse. Once or twice a month the clearinghouse passes settlement records, which contain lists of the amount owed by each service provider, to a payment processor that moves the money between service providers. This is a completely separate process from user authentication, which is handled by a network and has no relation to the clearinghouse.

The voice model predominantly being used today is the "visited model." With this model, the usage records are rated (assigned a value) within the roaming network and sent to the home network via the clearinghouse for re-rating and individual subscriber billing. This method has some advantages for the voice world because it takes into account things such as location and long distance, and allows the service provider to charge an appropriate value for them. Using this model, the clearinghouse works with cash as the unit of trade between service providers. An alternative model is the "home model."

Using this model, the records are rated in the home network, and the units in the records transferred via the clearinghouse are values such as minutes rather than a strict financial unit. This model requires that the clearinghouse be capable of rating the units as cash equivalents to provide to service providers during the settlement process. This "home model" is becoming prevalent in the CDMA 1x data market and is having a revenue effect on those service providers offering services to roaming users. They are not now in a position to determine how much revenue they make from a service since their revenue is controlled by the wholesale agreement.

In voice models, a subscription to the clearinghouse provides access to a wide range of other service providers who are currently using the clearinghouse services. The carrier providing the service to the roaming user handles the entire call and maintains connectivity to the end point of the call. This is not the case for CDMA 1x data services, which have elements of the service that exist only in the user's home network.

Leveraging the Voice Model for Data
With the advent of data roaming, there will likely be significant differences from the already established voice clearing and settlement processes and billing models. Currently, service providers pay a clearinghouse to clear all their roaming transactions, but this can be costly. Thus, many carriers will likely opt to use bilateral agreements outside of the clearinghouse and the existing roaming agreements. This option benefits larger carriers that can gain significant savings in their roaming bills by removing large numbers of transactions from the clearinghouse. Using this model, large carriers will set up their own private exchanges and use the existing clearinghouses for exchanges with the smaller carriers or those outside of their continental region. This will lead to a tiered clearing model with top-tier carriers working together to cut costs and lower tier carriers using an existing clearinghouse.

To offer roaming data services, there must be a degree of internetworking between service providers to ensure that users can access desired services while roaming. The target service of the data session could be a Wireless Application Protocol (WAP) server, multimedia messaging (MMS) server, or another server, all of which lie within the home network. To make these accessible, service providers use a technology called Mobile IP. This provides the session with an end point within the subscriber's home network. Carriers configure this system using a peering point or create a virtual private network to exchange the packets between their networks.

With data services, large numbers of subscribers are charged by volume, which is nearly always part of a "bucket" plan. However, if this charge is too large then subscribers will not use wireless devices when roaming, which will stunt service providers' data traffic business. Thus, service providers must find ways to minimize the costs of clearing the transactions, preferably by using a home-rating model in which the subscriber's home network rates the record, and the clearinghouse works on a wholesale model. This is currently the predominant Internet roaming model and has the advantage that it is closely related to how carriers pay for usage, making things simple for the billing of the subscriber and settlement between carriers. It does remove the ability of the roaming service provider to change prices that are billed to the end subscriber, which may be deemed a disadvantage. But the benefits, such as the increased simplicity, alleviate some of the potential overcharging problems that could arise with a visitor model.

The best way to explain complex data-roaming challenges may be with the use of fictional carriers: Large Carrier A and Large Carrier B, both of whom are U.S.-based. Carriers A and B both charge subscribers extra for using voice services on other networks. But they don't charge extra for data roaming, since they are trying to encourage use of this service. Additionally, since all data services, such as picture messaging, are hosted on their own networks, Carrier A may be unaware that Carrier B's subscribers are using B's picture phone services on A's own network (and vice versa). In fact, it's difficult for either to know which network is being utilized for services such as picture phone use.

The voice-charging model (i.e., usage based) allows each carrier to rate the calls of other carrier subscribers using the network. So, for example, if A's subscriber roams to B's network, then B may rate this call as $1.00. Regardless of whether B increases the amount the subscriber pays to $2.50 or decreases it to $0.50, B still owes A $1.00. To handle these complexities, both carriers interact with a clearinghouse to work out how much A owes B and vice versa, and deliver the records for subscriber billing to their networks. This is an added expense in the provision of the roaming service.

Thus, in the data world, with no extra revenue coming from roaming, Carriers A and B are highly motivated to find a more cost-effective way of doing business together. So they form a bilateral agreement, where they connect their networks together at some point or use a virtual private network between them. This connection not only feeds user data traffic between them, allowing users to reach their picture messaging service, but also accounting records for subscriber billing. Carriers A and B calculate the total time and data used on their own network by the other's subscribers on a monthly basis. In the month of June, A calculates that B's subscribers used a total of 124MB of traffic and B calculates that A's subscribers used 97MB. They each know that the dollar value of a MB is $5.00 and so A writes a check to B for $485, and B one to A for $620.

Carriers A and B are now up and running with the management of both roaming and clearing operational. However, while both A and B trust each other to make payments, Carrier C from the UK, with whom they have no previous business relationship, communicates interest in doing business with A.

While A is interested in doing business with C, it is concerned about ensuring payments will be made properly. So A contracts with a clearinghouse to manage this arrangement. In addition, A also has a number of coverage holes that it contracts with 25 small domestic carriers to fill in. So A contracts with a clearinghouse to manage those relationships as well.

In this case, carrier A signs a unilateral agreement with the clearinghouse, which takes care of all the billing and connection aspects. This costs more to manage than the relationship it has with B on a per carrier basis, but is far less expensive and risky than managing international relationships and 25 small carriers.

Payment Processing
In the current voice market, a clearinghouse submits requests to a payment processor to move the cash between service providers. The role of the payment processor is to ensure the integrity of the clearing processes and to handle the inter-carrier payments. With the rise of new relationships such as bilateral agreements, the role of payment processors need not change. Those organizations can still provide payment processing and integrity checking. This has the effect of cutting out the associated costs of having a clearinghouse in the middle. For those service providers that want to lower costs still further and have a high level of trust in each other, the payment processor can also be removed from the picture and replaced with a simple bill sent from one service provider to another, requesting payment. This will not work on a net model like the payment processor works and will hence result in more cash moving. But it may still be cheaper than using a payment processor.

Allowing subscribers to roam enables service providers to generate new revenue streams and increase the usage of data services. However these revenues must be protected from the cost associated with the current clearing processes or the necessity of paying multiple parties to enable the payment and reconciliation between service providers. The good news is that the clearing process for CDMA 1x data calls can be simpler than the current voice process because of the commonality of technology used in the authentication and accounting processes. Using this technology, service providers should be able to offer subscribers the type of roaming data services they want at an acceptable price.

About Mark Denton
Mark Denton is a director at Bridgewater Systems (, a provider of dynamic IP and data service fulfillment and assurance solutions.

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