Whether they’re launching a new prepaid service business, migrating existing customers or implementing a ‘cap and grow’ strategy, Prepaid Service Providers are drawn to SIP-based IP services and service delivery networks for their flexibility and fiscal advantages.  We’ve recently reviewed how IP networks give prepaid service providers far greater freedom to respond to competitive threats, and new flexibility to aggressively, rapidly pursue new types of profitable services and customer sectors.   But probably the single biggest draw for IP service delivery platforms is how IP networks and SIP application servers can help prepaid service providers wring costs from their operational and capital expenses.  But beware: the operational word in this last sentence isn’t ‘wring,’ it’s ‘can’… as in maybe. 

The same basic truths apply when purchasing telecom service capacity as with any other good or service:  it’s not what you buy, but what you get for the money that determines the value of a purchase and its potential to drive profitability. In IP services, there are two basic service licensing models: user (or seat) licenses and session licenses.  Every prepaid service application has sessions and – we hope – users consuming them.  Session and User Licensing are merely two different pricing models by which vendors sell and prepaid service providers buy session capacity to serve their customers.

Session licensing is essentially a capacity-based model: service capacity is sold per active ‘session,’ and each session supports multiple users over time.  A 1,000 session license can likely support anywhere from 10,000 to 40,000 prepaid long distance users, depending on a specific vendor’s service application and the underlying technology on which the service delivery platform is based. 

The user license (also called a seat license) is an enterprise-centric model that takes a different approach, using a per user licensing model.  So in the case above, a prepaid platform provider might charge for 40,000 users.  The important difference between user and session licensing models is that user licensing typically defines the upper-most capacity that a service is projected to need to support, and requires pre-payment for demand levels that may not be realized either initially or over the long term.  For this reason, the user license model is typically less attractive to service providers, both because its rigidity requires prepaid service providers to pay upfront for capacity they may not need, and because it prohibits multi-service providers from dynamically sharing call capacity among services based on subscriber demand.

What Lies Beneath: How Technology Impacts Call Capacity

Can you tell your preferred vendor which licensing approach you want to use in buying service capacity?  For the most part, the answer is no. 

Since we know that every prepaid service application has sessions and – we hope – users consuming them, it’s helpful to think of these two purchasing structures as reflecting two different underlying call processing technology models.  And as you’d probably assume, the differing call processing approaches directly impact which pricing method a vendor uses to license their services to prepaid service providers.  Typically, there’s a direct relationship between the licensing model and the underlying technology on which the service application and SDP are based.

In general, SIP applications based on the telecom-centric eXtensible Telephony Markup Language (XTML) standard tend to hit the application server’s central processor just once per call to get call processing scripts, the instructions for completing a call based on the subscriber’s account status, service provider policies, call path preferences, etc.  Conversely, applications based on Java using SIP Servlets tend to hit processors continuously when executing a call.  As a result, XTML-based SIP application sessions can typically support better concurrent call densities on the same exact processor than Java-based applications, so you typically save both on session licenses versus user licenses, and you don’t need as much hardware for deploying an XTML-based solution versus the Java SIP Servlet platform.  In combination, these Cap-Ex gains can significantly impact overall profitability.

To really analyze & understand session licensing vs. user licensing pricing models, it’s helpful to briefly review the dominant IP call processing technologies. (For a more in-depth review, see The Prepaid Press, September 2007, “A Look Under the Hood at Java and XTML: Why Application Engines Matter to Prepaid Services”).

Other key criteria such as performance, feature flexibility, partitioning to support channel and service expansion, and language supports will of course help guide the decision about what you’ll buy.  A clear understanding of the economics of user and session licensing will help ensure that you know what you’ll actually get. 



Ken Osowski is the VP of Marketing & Product Management at Pactolus Communications Software. He can be reached at Keno@pactolus.com.