Revenue leakage problems growing

09 Nov 2007
00:00

Despite the increased awareness of the importance of revenue assurance, telecom carriers worldwide are facing growing revenue losses, as convergence, increased complexity and the changing nature of services are making it difficult for telcos to tackle leaks.

According to a survey by UK research firm Analysys, global revenue leakage has increased every year since the study was first conducted in 2004. The average global level of revenue leakage this year rose to 13.6%, from 12.1% last year and 11.6% in 2005. That equals some $218 billion of the estimated $1.6 trillion in global turnover for operators.

On a geographic basis, operators in the Middle East and Africa suffered most, experiencing more than 20% losses, while Asia was close behind with nearly 19% leakage and Central and Latin America with more than 15%. Western Europe ranked lowest in losses (7%), following by Central and Eastern Europe (8%) and North America at just about at the average (13%).

Danny Dicks, principle analyst at Analysis, says one of the major causes is telecoms fraud, which is cited as the largest area of revenue leakage for telecoms operators - both globally and in Asia Pacific.

According to Dicks, the average fraud losses resulting from all types of fraud - including external fraud, internal fraud and fraud by other operators - grew from 2.9% of global operators' total revenues last year to 4.5% this year. In addition to fraud, the other three primary sources of revenue leakage cited in the survey are poor processes and procedures, poor systems integration, and problems associated with applying new products and pricing schemes.

IP services a major concern

Adam Boone, VP of strategic marketing for Subex Azure, which sponsored the survey, says a major concern for almost all operators now is the potential for revenue leakage from NGN services, such as those based on IP, as they anticipate such services will have a big impact on revenue loss.

One of the examples is VoIP, which is cited by some operators causing RA managers a big headache, as they are not sure if they have the right matrix for the delivery of VoIP, he says.

'VoIP hasn't yet reached mass market, so it's difficult to know what the implication will be for the operator as a whole service as VoIP develops,' he says. 'The same thing happened to IPTV as well. RA managers just don't really know the extent of what they are up against with these new services.'

He explains this is partly because the migration toward convergent IP networks and the changing nature of services are placing new demands on every aspect of telcos' operational support systems, which ultimately will profoundly impact telcos' revenues and profits.

'What you're doing in operation will affect your costs - whether or not a given device is deployed, how it was used and what was the utilization will drive up your costs,' he says.

As services get more complex, he adds, it becomes a challenging task for telcos to understand the type of traffic that is moving over the network and monitor things like quality of service, how bandwidth is consumed by different subscribers in different ways, and how different tariffs are applied to that.

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