"Certainly it's table stakes," says Bob Lozo, product manger for Quest411, Nortel Networks' NDA product. "Any carrier not thinking about [NDA] today could be putting [itself] at a competitive disadvantage."
NDA suddenly is getting a lot of attention. And with good reason. Most press coverage revels in horror stories of callers trying to find numbers outside their local calling area. But all that's starting to change. A combination of advanced technology and availability of incumbent local exchange carrier (ILEC)--namely regional Bell operating companies (RBOCs), GTE Corp. and Sprint Corp.--listings to third parties makes NDA a quality, viable offering that carriers can leverage to their competitive advantage.
The NDA Imperative
So what is NDA and why is it important? Simply put, NDA is a service that allows callers to obtain any number in the country simply by dialing a single number. With local DA today, we dial 411. To obtain a number outside our calling area we must dial 1+area code-555-1212. NDA affords callers the convenience of finding any listing in the country through a 411, 1+411 or 1+555-1212 access number without knowing the area code.
A confluence of market conditions favors NDA.
Area code splits have created havoc and confusion among callers. With so many new area codes, it's hard to know which ones apply to which areas. (Remember 212, 312, 404? What about 334, 847, 973?) As a result, most callers have to place more than one call to get the right area code even before they can request the number. And with second- and third-line additions and LNP, the incidence of wrong numbers is escalating. This chaos fuels customer dissatisfaction, yet creates opportunity for a solution.
The Telecommunications Act of 1996 is a catalyst for NDA. ILECs now must make their listings available to other carriers, third-party operator service providers (OSPs) and listing database companies. Up until now, many second-tier CLECs and IXCs have deferred to the RBOCs for DA.
Competitive carriers now have choices for implementing NDA. ILECs can augment their local DA with NDA. Competing carriers without operators can contract third-party OSPs to handle NDA service. Either way, operators tap independent databases that contain all ILEC listings.
Key Operating Benefits
NDA yields several operating benefits, including call branding, service differentiation and new revenues.
With NDA implemented through OSPs, all NDA calls are routed to the call center over designated trunks and can be answered using a greeting including the provider's company name. Branding NDA puts the company name in front of the customer with each call and reinforces its image as a quality, service-oriented provider. If each access line generates two to three NDA calls a month, that is two to three more opportunities to control that contact and reinforce the customer relationships, rather than relegating them to a default mode.
NDA includes options such as call completion, reverse search or even the ability to provide large-volume users with software to retrieve listings directly from the database. Wireless carriers today offer a type of locator or "concierge service" for finding movies, retail shops and restaurants. Other services include fax and e-mail listings and, in the future, websites and other content. So NDA really is an information service. By mixing and matching the services, a provider can differentiate from competitors.
NDA converts the DA business from a cost center, as local DA traditionally has been, to a profit generator. NDA can generate revenues that are nonexistent today.
Consider the economics. ILECs typically charge 40 cents for a local DA call. When the cost of the data and operator average work time (AWT) is figured in, local DA service barely breaks even. With NDA charges in the range of 75 cents to 95 cents per number and a similar cost structure, competing carriers can realize a higher margin service that more than pays for itself. On top of that, call completion and reverse search options can produce incremental revenues with other information services to follow. Callers can be charged on an incremental basis from a menu of services.
How It Works
Implementing NDA involves several key elements: the operator, the platform, the listing database and transport facilities. (See chart, "NDA Network Configuration.")
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ILECs can use their own operators if they already provide local DA, and toll-and-assist (T&A) services. Alternatively, new carriers can contract with third-party OSPs. Either way, the NDA learning curve for experienced operators is relatively short.
The NDA platform comprises the computing platform upon which the search engine runs and the workstation interface through which operators access the data and communicate with callers. The platform displays the found numbers and allows operators to deliver those numbers verbally or via a voice response unit (VRU) to callers. The platform also facilitates call completion.
The database is the source that contains all the directory listings in the country--more than 130 million numbers. Prior to the Telecom Act, database suppliers compiled listings from a variety of published sources: telephone company white pages that had to be scanned or keyed in, motor vehicle registrations, credit bureau data and commercial mail lists, for example. Compiled databases are relatively cost-effective to build and maintain; secondary sources, however, introduce errors and inaccuracies, and become out-of-date quickly.
With access to listings directly from the RBOCs and independent telcos such as GTE and Sprint, data accuracy and updating become less of a concern. The main objection to building and maintaining a database with just RBOC and major independent telephone company listings is the high price tag.
Transport facilities tie it all together. Typically T1 trunks carry the caller's NDA request to the operator service bureau from the serving central office (CO). Wide area network (WAN) connections such as frame relay allow the operators to tap into the database. Depending on the NDA call volumes, transport costs could be significant. "We'd love to add more customers. The trouble with CLECs is that they do not have much volume, so their transport costs are high in the early stages," points out Dan Evenoff, CEO of Excell Agent Services, Phoenix. (See chart, "NDA: Who Does What.")
| NDA: Who Does What | |
| Function | Company |
| Data Collection | RBOCs, GTE Corp., Sprint Corp., Experian Information Solutions Inc., InfoUSA Inc., Acxiom Corp., Credit Bureaus |
| Data Integration & Search Algorithms | Experian, Listing Services Solutions Inc. (LSSi), InfoNXX Inc., VoltDelta, Nortel Networks |
| Directory Assistance Platforms | Nortel Networks, IBM Corp., VoltDelta, pcPlus Communications LP |
| Operators & Call Centers | RBOCs, GTE, Sprint, Southern New England Telecommunications Inc. (SNET), Frontier Corp., Century Telephone Enterprises Inc., Excell Agent Services LLC, Teltrust Inc., First Data Corp., MetroOne Telecommunications, InfoNXX |
| Transport Facilities | T1 and frame relay special services available from interexchange carriers (IXCs) |
| Source: Skyline Marketing Group | |
The Accuracy Debate
Data accuracy is the subject of much debate. One new database company, Listing Services Solutions Inc. (LSSi) of Lumberton, N.J., has taken a pure approach. LSSi loads only ILEC listings into its database and has contracts for regular updates.
"Any carrier not thinking about (NDA) today could be putting [itself] at a competitive disadvantage."
--Bob Lozo, |
"We've spent many millions [of dollars] to build the database, and we'll spend millions more every year to keep it up to date," says Ken Kraus, LSSi vice president of sales. "We think it's worth it, and our customers think so, too."
Kraus cites recent audits with current and prospective customers in which LSSi scored close to 95 percent accuracy over the audit sample and test parameters compared to other databases that came in at the low 80 percent level.
But according to Jela Trivunovic, marketing manager for Lombard, Ill.-based Experian Information Services Inc. (formerly Metromail Corp.), a leading database provider, "It is not one-dimensional. The data, the platform and the operators themselves all must be coordinated."
That view is reinforced by Meg McCrae, principal at the Paisley Group, an operations-oriented DA consultancy in Denver. "The overriding concern is fulfillment. Customers want to get connected to the right number," she says.
Nancy Miller of ISC Consultants, New York, another DA audit firm, echoes that sentiment. However, Miller points out that NDA service starts with the database, no matter how good the operators are. "The data are the roots of the tree," she says.
Glenn Selbo, vice president of marketing at New York-based VoltDelta, says his company has improved its data quality by "layering on RBOC data via gateways" with good results.
All other factors being equal, carriers are raising their expectations about data quality. Having recently implemented NDA in Florida, Mike Barbour, senior product manager at Sprint, states, "The database is still our No. 1 concern. It is still not as accurate as we would like."
Market Appeal
The overall U.S. DA market reached an estimated volume of 8 billion calls in 1997. Through 2002, the overall market will grow at more than 8 percent per annum to 12 billion DA calls. (See bar chart, "U.S. Directory Assistance Market.")
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These data represent the total volume of DA calls, both local and long distance, that originate from all types of wireline and wireless carriers and access service providers.
The bulk of the market comprises local DA; that is, calls originated from subscribers dialing 411. NDA makes up the balance generated by callers dialing 1+area code-555-1212.
Overall market growth is driven mainly by the advent of competitive wireline and wireless, local and long distance carriers that use DA as a competitive differentiator.
In dollar terms, the overall U.S. DA market will grow from $3 billion in 1997 to $4.5 billion by 2002, a 9 percent annual growth rate.
The local DA market, served by ILECs and averaging 40 cents per call, accounts for an estimated $1 billion or 33 percent of the total dollar volume in 1997. That figure grows to $1.2 billion by 2002 but declines proportionally to 27 percent of the market due to slower ILEC access-line growth and fixed low prices. Actual ILEC revenues are lower than these figures; allowances for free calls and uncollectibles result in only about 60 percent of the total billable calls being paid.
The balance comprises NDA and alternate local DA service offered by competitive wireline and wireless companies. This is the growth segment. From an estimated $1.9 billion or 66 percent of the market in 1997, this segment increases to $3.1 billion or 73 percent of the total market value by 2002. Growth is due to opening of new markets, capturing access lines from the ILECs and higher prices, averaging 95 cents a call.
Show Me the Money
When planning for NDA service, the operating cost model comprises labor (operator AWT), data and transport.
The labor costs are influenced mainly by the search method used by operators to find requested numbers. The method, in turn, is a function of the efficiency of the search engine that is part of the platform and how the data are organized in the database. Most OSPs strive to retrieve the number in less than 30 seconds. That's assuming a rate of 1 cent per second for labor.
Charges for data come in several flavors depending on the platform and billing method used. Data billing can be done per query, per screen or per number released.
Per query involves a charge whenever the operator launches a query for the listing. Queries include entering the search information (name, city) and scrolling through displays of listings that result from the search. On average, numbers are found in two to three screens. At 3 cents to 5 cents per query, finding a number costs 6 cents to 15 cents, depending on volume.
Per-screen charges apply to batch requests associated with electronic directory assistance (EDA) access that some RBOCs offer. EDA charges run 9 cents to 23 cents per screen.
Per released number may be the simplest and most cost-effective method of data billing. Here the reseller only pays when the number is found, or "unmasked," and delivered to the caller by the operator or via a voice response unit (VRU) regardless of the number of queries. Nortel's Lozo suggests that the industry is "gravitating" toward this method. Typical charges are 8 cents to 11 cents for each released number, again depending on volume.
Transport costs depend on the network connection and the associated rates.
Assuming an operator finds a number in 30 seconds and the data are billed on a per-released-number basis at 8 cents to 9 cents a number, the resulting cost to the carrier is: 30 cents (labor, mainly AWT) + 8 cents to 9 cents (data) + 3 cents to 5 cents (transport) = 41 cents to 44 cents. If the customer is charged the typical 95 cents, that leaves a gross profit of 51 cents to 54 cents for each NDA listing. At that rate, NDA is profitable compared to local DA, which barely breaks even at a typical 40 cents for two local numbers.
Assuming each access line generates, conservatively, two to three NDA calls per month, at 100,000 access lines a CLEC can gross an incremental $200,000 to $300,000 a month. Scale that up to 1 million access lines and a tidy revenue stream results. On top of that, add extra charges for call completion, reverse search or other yet-to-be-defined information services. Now NDA becomes a profit center.
John M. Celentano is president of Skyline Marketing Group, a telecom marketing consulting firm in Owing Mills, Md. He can be reached at john@skymarketing.com
