Calling on KM to keep telecoms prosperous
As the telecommunications industry has evolved to include data, video and Internet communications, as well as voice, the provider landscape has become more complex. Cable, local carriers, long-distance carriers, satellite providers, Voice over Internet Protocol (VoIP) services and others vie for a portion of the business. In a tightly competitive market, industry providers see knowledge management as a critical element in increasing revenues, cost-justifying services, reducing customer churn and enhancing profitability.
Determining settlement charges
When a person or business connects to the Internet, the connection itself may include a number of Internet service providers (ISPs). Small ISPs will have some transmissions between ISP members and might handle the traffic in-house. But other ISPs handle little or no traffic of their own, and even the large Internet providers—like some of the cable companies or major telecom carriers—have only limited connections to the Internet themselves. So any time a customer wants to go to a site or e-mail address that is outside his or her provider’s network, the provider has to route the IP transmission via one or more additional Internet providers to complete the connection from the sender to the receiver.
If the second Internet provider is larger, it will provide the brunt of the transmission, and it will receive a small settlement fee. If the first one is larger, it will handle most of the transmission and will receive a fee. If they are peers, there’s no fee, explains Sylvie LaPerriere, director of peering and commercial operations for VSNL International, one of the world’s 10 largest providers of voice, data and Internet services, according to Renesys, a company that offers real-time Internet monitoring and analysis services. While the fee for each connection is small (the exact amount varies depending on the relative size of the Internet providers), the total amount is in excess of $100 million annually, according to LaPerriere.
But the total revenue depends on appropriate settlement charges for the connections, LaPerriere says, adding, "We don’t want to give anything away for free." Yet determining the routing information and which party should pay what (if anything) has been a challenge since VSNL started a dozen years ago, LaPerriere explains. The company had based its settlement charges on interviews with other Internet providers, an unreliable process at best because many claimed to be peers when they weren’t.
"We never had a decision support system to look at every possible route on the Internet," LaPerriere says. Nearly three years ago, VSNL started using Internet monitoring and analysis services, which map out all possible routes on the Internet, providing LaPerriere with reliable information for basing settlement fees, which are growing along with the worldwide increase in use of the Internet. The company has expanded via acquisitions and via growth in worldwide Internet usage, so there’s no exact way to tell the benefits received, but LaPerriere now trusts that VSNL isn’t being short-changed on its revenues.
Better segmentationAs telecommunications providers have evolved from simply connecting phone calls to transmitting several services, selling bundles of voice, data and video and related services has become increasingly important in reducing customer churn and attracting new customers. The best predictors for both are current and past customer histories, including usage patterns, types of services purchased and similar metrics. While that knowledge is available through data warehouse providers such as Oracle, the challenge is to make the information easily accessible and usable for marketing and business, without the need for a data specialist, says Mattias Andersson, customer insight manager for Tre, a wireless provider based in Sweden.
"It was really important to become more knowledgeable about our customers in order to increase our revenues and decrease our costs," Andersson says. The company wanted to know, for example, what types of customers download music, use global positioning services and access television programs via their wireless phones. The heavy data users were good targets for additional data services and good models for prospective customers. Similarly, usage patterns of customers who had left the company were good indicators of current customers who were predisposed to leave.
The main indicator of customer churn is reduction in usage of Tre services or an increase in customer service issues. The Oracle database, combined with an analytical interface from Inforsense, arms the company’s marketing and business departments with that information, enabling them to devise target marketing campaigns and to develop plans to stem the tide of the 30 percent of customers who were leaving the company each year. Andersson says, "We used to wait for customers to contact us when they had problems. Now we contact them."
The result has been twofold. Customer churn has dropped from 30 percent to about 20 percent, while customer service ratings from Mobil, a Swedish magazine covering wireless communications, have gone from the bottom of the list to the top in three years, Andersson says.
MCI had successfully used knowledge management for a few years to provide activity-based costing information, helping to assign overhead and other expenses properly to different portions of the business. That helps corporate executives determine profitability, ROI and other financial metrics of different service offerings, advertising campaigns and the like.
The need for KM, and the success in using it, had to be rejustified after Verizon and MCI merged in January 2006, says Leslie Mote, group manager, profitability modeling and analysis, Verizon business segment. The merger resulted in sales of bundles of wireless and wireline communications to business and consumer customers.