Internet Billing

International Journal of Information Management 21 (2001) 101–121

Internet billing: the experience from four UK utility companies

Maureen Milroy, Feng Li*

Department of Management Science, Strathclyde Business School, University of Strathclyde,40 George Street, Glasgow G1 1QE, UK

Abstract

The deregulation of the utilities in the UK has forced most companies to improve efficiency and developinnovative services, often through the aid of new technologies. In the last two years or so, Internet billing isemerging as a strong competitive weapon in the energy sector. Using the evidence gathered from theliterature and from four recent case studies in the UK, this research investigates the new technologies thatare making Internet billing feasible, outlines the main models that are emerging and assesses the impacts itgenerates in terms of cost, organizational structure and customer relationships.

Our research has found that introducing Internet billing is an extremely complex process, and so far allcompanies have adopted a staged approach to its introduction. At the moment, several billing models exist,and no one model appears to satisfy the multiple driving forces for its introduction. However, once aparticular model is adopted it will have long-term implications. In particular, Internet billing will redefinethe customer–biller relationship and the internal billing process, thereby generating structural changes tothe utility companies. Due to the barriers of cost and security, the positive impacts of Internet billing willnot be instantaneous, predicting that the unraveling of a complete Internet billing service to gaincompetitive advantage will be a struggle for any utility in the evolving networked economy. # 2001Elsevier Science Ltd. All rights reserved.

Keywords: Internet; Utility companies; Internet billing; E-commerce

1. Introduction

The deregulation and privatization of public utilities in the UK have brought about majorchanges in these industries. Fierce competition has put enormous pressure on the main companiesto provide better services and more choices for customers. In the energy sector (as well as a fewother utility sectors), one of the latest innovations being introduced is Internet billing. AlthoughInternet billing appears to have gained recognition in the US, little research has been carried out

*Corresponding author. Tel.: +44-141-548-3612; fax: +44-141-552-6686.

E-mail addresses: [email protected] (M. Milroy), [email protected] (F. Li).

0268-4012/01/$ - see front matter # 2001 Elsevier Science Ltd. All rights reserved.

PII: S 0 2 6 8 - 4 0 1 2 ( 0 1 ) 0 0 0 0 3 - 2

in the UK. Using recent evidence gathered from four utility companies in the UK and a wealth ofsecondary data, this paper investigates the new technologies that are making Internet billingfeasible, discusses the various models that are emerging and assesses the impacts it generates interms of cost, organizational structure and customer relationships.

In the next section, some relevant literature will be critically reviewed and the main issues inExtranet E-commerce, the Internet billing process, and emerging models of Internet billing will bediscussed. Then the empirical work for this research is discussed and emerging trends and mainproblems are examined. Following that the impacts of Internet billing on the utilities and otherkey findings from this research are discussed; the possible future prospects of Internet billing inthe UK and the main barrier to its adoption are highlighted. It is still very early days in Internetbilling and further research is clearly needed.

2. The principle driving forces for Internet billing

In the utility sectors, deregulation has produced a more competitive environment, allowingaccess to markets that in the past have been excluded. Many companies are diversifying so theycan offer ‘multi-utility bundles’ to their customers. Moreover, the playing field is no longerrestricted to the UK, and many companies are expanding aggressively into the internationalmarket. One example is Eastern Electric, which in 1998 committed to purchase 34% of theFinland-based electricity supplier Savon Voima (Sunstrom, 1998).

Deregulation also means that customers now have the opportunity to choose their serviceproviders. For example, customers in the UK no longer have to obtain services from the locallicensed public electricity supplier (PES). They can choose from any of the 14 electricity suppliersin the UK. A survey by Coopers & Lybrand in 1998 revealed that only 29% of customers wouldstick with their current suppliers and 55% would shift to others. Equally, in 1998 the UK gasmarket saw a 20% reduction in their customers as a result of cheaper alternative suppliersentering the market. There has also been further speculation that oil companies such as Shell andBP Amoco could move into the gas and electricity supply business, altogether making the utilitymarkets increasingly volatile and competitive.

Such changes have increased the need for the utility companies to satisfy customer demands incost-effective ways. In the last two years or so, Internet billing, or Electronic Bill Presentment andPayment (EBPP), has emerged as a possible solution. This solution will enable utility companiesto introduce a new service, allowing them to reach current and new customers on a global scale.The US utility companies are particularly geared up towards this, and it has been predicted thatInternet billing will rocket in the US by the year 2002 (Fig. 1). Our research has found that UKutilities appear to be recognizing the importance of Internet billing in the US market, and it ispossible that this trend may be replicated on a smaller scale in the UK in the near future.

3. Extranet commerce}the gateway to Internet billing

The Internet is increasingly being deployed by utility companies to achieve cost reduction andservice differentiation, through the ‘‘the sharing of business information, maintaining business

M. Milroy, F. Li / International Journal of Information Management 21 (2001) 101–121102

relationships and conducting business transactions by means of telecommunication networks’’(Zwass, 1998; Riggins & Rhee, 1998). This is forming a new technological platform for thenetworked economy. Such activities are generally referred to as E-commerce, which can beclassified into three categories, namely, customer-to-business, business-to-business and intra-organizational, supported respectively by the Internet, Extranet and Intranet.

The Internet currently generates customer-to-business transactions through for example,electronic mails and the Intranet is increasingly adopted as a cost-effective way of distributinginformation within a company. The Extranet is often viewed as a bridge between the Internet andthe Intranet, strengthening the new business platform of the future from which innovative servicescan develop.

Extranet commerce, a form of E-commerce has its roots in Electronic Data Interchange (EDI),which has been part of the business world for over 20 years. The main difference between Extranetcommerce and EDI is that EDI operates through a closed set of standards which requires hugeinvestment compared with Extranet commerce, which uses the same infrastructure and technologiesas the already established Internet. Extranet therefore provides a gateway for synergisticrelationships to be established between companies enabling them to strengthen business-to-businessrelationships. It has been predicted that by the year 2003, 86% of the E-commerce market willinvolve business-to-business transactions (http://www.sk.ibm.com/events/prez 1).

The Extranet, located outside the corporate firewall, provides the same key services as anIntranet including communication and collaboration, internal information access and sharing,and application access. Additional advantages that the Extranet has generated are that it canprovide inter-company business communication and transactions through its ability to conduct

Fig. 1. The potential of EBPP (source: Singer et al., 1998). This exhibit is taken from Ouren, J., Singer, M., Stephenson,

J., and Weinberg, A. L. (1998). Electronic bill payment and presentment. The McKinsey Quarterly, no. 4, and can befound on the publication’s Web site, www.mckinseyquarterly.com. Used by permission.

M. Milroy, F. Li / International Journal of Information Management 21 (2001) 101–121 103

E-commerce in a secure, encrypted manner. It also allows customer and supplier access toinformation resources within the company, thereby providing worldwide service leverage. SinceExtranet transactions can be conducted without an intermediary, it can maximize processingspeed and improve the accuracy of data.

The main aims of the Extranet are to integrate customers into the ‘‘mission-critical businessprocesses’’ (http://www.differential.com/architecture.html) to establish a stronger communicationbond through tighter customer relationships while still maintaining control over internal businessprocesses. This suggests that the Extranet, as today’s mission-critical tool, has the potential torevolutionize the structure of utility companies and their internal processes in the new Internet-driven economy.

Extranets are a logical extension of Intranets, but the survey of Fortune 500 companies in 1998(Johnson, 1998) highlighted that 75–80% of businesses have Intranets and only 3% have anExtranet. Despite the fact that Extranets create an opportunity to conduct E-commerce,companies are slow to adopt this application due to its immaturity and security concerns.Research suggests that 80% of companies believe that security is the leading barrier to engaging inExtranet commerce (http://www.ibm.com/e-business/ecommerce). However, as the technologyevolves and matures, many current impurities will be eliminated. According to predictions by PCWeek, the Extranet will be at the core of E-commerce by 2003 (Fig. 2).

Since the opening up of the energy industry to competition, Extranet commerce has become afocused arena as a way to gain a competitive advantage. The Extranet opens up new channels ofcommunication allowing these companies to reach new customers while cutting customer supportcosts and maintaining information integrity within the company. Hence, the deployment of theExtranet by utility companies is laying the foundations that will allow them to create innovativeInternet-based services and conduct business-to-business transactions over the Internet. It willalso provide a gateway for emerging innovative services, the prevailing one being Internet billing.

4. Internet billing unravels: processes and models

While computer users have been paying bills electronically via home computers for more than15 years, EBPP, ‘the full loop’, is a recent development. Internet billing ‘‘differentiates your

Fig. 2. The evolving Extranet (source: PC Week, December 1998).


business as a leader by offering your customers cutting-edge electronic convenience’’ (Taylor,1997a, b), while extending the web-based service spectrum.

4.1. The Internet billing process

The process of Internet billing is based on the open Internet infrastructure known as the‘Electronic market’ (Li, 1995). This innovation uses the Internet as a bill management tool. Theprocess is complex as it involves electronic delivery, bill presentment, auditing and record keeping,payment options and the payment process. It also represents a learning process where thecustomer and the utility company learn together to gain mutual benefits. Generally Internetbilling can be completed in five main stages (Fig. 3). This entire process follows a mapped outroute (Fig. 4), which can be completed within two days.

This is just the most basic process that utilities can adopt, and recently more complex processeshave emerged in the US energy market in the form of electronic billing channels. Such complex

Fig. 3. Internet billing stages (source: http://www.greenshades.com/Inscreen.html).

Fig. 4. Internet billing route (source: http://www.trisense.com/paysense/biller.html).


channels involve the introduction of third parties (such as Checkfree or TransPoint). The bill ormultiple bills can be viewed, paid and personalized by the customer through a web browser. Thepresentation varies depending on the company. The bill contains real-time information andtherefore keeps the customer updated at all times. As Internet billing is still in its embryonicstages, the available customer options are limited. However, various models of bill presentationare beginning to surface, and the situation may change soon.

4.2. Three emerging models

At present, there are three main models: the direct, the invited pull and the consolidator models.Each model requires different formatting, a different infrastructure and software and gives thebiller varying degrees of control. The direct model represents the billers’ website which customersmust locate and access separately to pay each bill. This method is acceptable to the early adopter,but it appears inefficient for the customer market at large as there is no mechanism to consolidatethe customers payment process}the customer can only pay one bill at a time as illustrated inFig. 5.

This model is attractive to billers as they maintain control over all transactions and it isrelatively easy to integrate into their existing IT systems. Although it forces the customer into‘self-service’ mode, at the same time it provides the customer with uninterrupted access. The mainadvantage of such a model is that it allows the biller to build brand awareness, customer loyaltyand a demographic database that is not possible through adopting the consolidator model. Also,the bill is seen as the brand, therefore the name on the bill is whom the customer identifies with.Hence, using this model allows the utility to brand their electronic bill, not the third party or thebank. This model has been successful in the biller-to-business relationships where the billerrepresents a large proportion of the bills.

Fig. 5. The direct model (source: http://www.justintime.se-com.com/whitepaper).


The invited pull model is an extension of the direct model in that the customer can use clientsoftware to access various websites and download bills and statements automatically to theirpersonal computers. Such a model is attracting many business customers who conduct in-depthdata analysis on their bills. The invited pull model reaps all the benefits of the direct model, theonly difference being this added functionality. The integration of the online bill into thecustomer’s normal monthly financial processing routine is critical for future success. However,research suggests that billers will not develop this model for at least another year until vendorsaddress the technical barriers to its adoption. In this case the billers maintain a more dynamicrelationship with their customers while the customers enjoy the convenience of personal delivery(Fig. 6).

In contrast, the consolidator or aggregator model provides customers with a single access pointfrom which they can pay all bills saving the customer time. Depending on the way the billingsystem is developed, it can reflect the thin or thick consolidator model. The thick model has thecapability to hold all bill details; therefore, the customer never comes into contact with the billerwhen paying bills. In this case, the billing process is managed by a third party who may be afinancial institution, software company, service bureau or any combination of these. However,billers also benefit as the process is outsourced.

The thick consolidator model does not provide a smooth migration path to businesses, unlikethe direct model. However, it is the best model should the utility decide in the future to evolveto the thin consolidator model. Checkfree is currently the leading thick consolidator in the US.As a third party it operates a closed system, which allows it to control all operations of theInternet billing process. Transpoint, yet another thick consolidator differs from the adoptedmodel of Checkfree as it acts as a shaper-controlled consolidator. In this case, Transpointcontrols the Internet billing architecture but offers portions of the value chain to other interestedplayers such as banks, billers and payment and transaction service providers. This allows billers tobecome a small part of the Internet billing system but relieves them from the technicalcomplexities.

In comparison to the thick model, the thin model shows only the basic bill information on theconsolidated website and provides a link back to the billers’ website for the complete bill details.

Fig. 6. Consolidator models (source: http://www.justintime.se-com.com/whitepaper).


AT&T is currently developing as a thin consolidator as many billers are extremely reluctant todisclose confidential billing data to a third party. Most utility companies believe that‘‘maintaining a direct relationship with their customers is important and should not be lost’’(Duffy, Mgr AT&T Billing Strategy; cited in PC Week, June 1998). The thin consolidatorcan be thought of as a hybrid of the direct and thick models, combining their capabilities,allowing the customer to pay bills in one place, with the biller still controlling their financialand customer data. This model enables close seamless integration between the Internet billand the customer, and is more open than the previous two models. Also, a standard-basedconsolidator has partially emerged where billers, banks and consolidators try to agree on acommon architecture but implement it individually. This enables each party to benefit fromits success.

‘‘Companies opting for the total consolidation model overlook the creativity that billers havewhen dealing with their customers’’ (Frook, 1998a, b). The demand for ‘consolidation’ is quitehigh for households and small businesses but decreases as the customer size increases. Thissuggests that a balance of the customer’s needs is required when deciding on adopting a billingmodel. Also, the third parties involved have the ability to capture ‘click streams’ for analysis,enjoy advertising revenues of a utility’s content and reinforce their own brand at the expense ofthe utility. Using this model the billers can also get ‘locked in’ to using only one service provider,limiting greatly their scope, highlighting again some of the drawbacks utilities may face by theadoption of the consolidator model.

In summary, each model provides the biller and customer with several advantages anddisadvantages, and Internet billing presents tremendous opportunity for both service providersand utility companies. The utility sector is currently in a state of confusion about how best to meetincreasing customer demands for consolidation and integration and still satisfy their needs forreach and control. Two competitors have already set the pace in the US. Checkfree is wellestablished as a service provider in the financial community and Transpoint has developed a verycomprehensible end-to-end Internet billing system. To date, the US utility trend is movingtowards the thick consolidator model, an example being Boston Edision who has recentlyoutsourced their billing to Checkfree Corporation. Checkfree is the leading provider of billpayments services and have been delivering bills on the Internet since 1996. However, its positionis constantly challenged. In the UK, although Microgen is beginning to emerge as one of the firstUK service providers of EBPP from its launch of the service in June 1999, the model that willprevail is yet to become evident.

5. Research design and background of the case studies

To explore the development of Internet billing in the UK utilities, a series of case studieswere conducted. Due to the nature of this phenomenon, this research adopted a phenomeno-logical approach through comparative case studies. The case studies were conductedusing semi-structured, face-to-face and E-mail interviews to capture accurate data about theInternet billing process and its impacts. Participative observation, conversation and communica-tion techniques were also employed to assess the underlying processes and complexities of Internetbilling.


Primary data were gathered from four different utility companies. Because of the sensitivenature of relevant issues, the companies will remain anonymous in this paper for confidentialreasons. These four companies were chosen as they were geographically distant from eachother, providing good UK coverage from which the status of Internet billing could be as-sessed. Although they have a different business focus, they are all multi-utilities, actively en-gaging in acquisitions or mergers making comparisons more meaningful. The primaryevidence was supplemented by comprehensive secondary data gathered from varioussources. All four companies are currently engaging in Internet billing at various stages. A briefoverview of each participating company is presented in this section before discussing the mainfindings.

All four companies emphasized the need to grow and diversify through acquisitions for futuresuccess and stability, and the need to provide customers with more choices and innovativeservices. The first case, Company A, is one of the leading multi-utility companies in the UK. Thishas been achieved through a series of acquisitions in the electricity, telecommunications and waterindustries in different regions. Offering a broad and innovative mix of electricity, gas,telecommunications and water services, the brand name of the company is associated with trust,integrity, innovation and a high quality of service, placing emphasis on providing value for theircustomers. In 1999 alone, the company spent more than £100 million on computer systems andcustomer service innovations to position them well in the industry. The main achievements of thiscompany in the energy sector include offering a ‘dual fuel’ product and billing service, acquiring alarge Internet service provider (ISP) in the UK and utilizing the Internet to attract and registernew customers. Today, the company is well positioned in the utility industry and is constantlyseeking new service opportunities. One of its main ambitions is to become the first utility in theUK to offer customers a complete Internet billing service.

Like Company A, the second case, Company B saw the need to become a combined utility tosurvive in the emerging competitive market. This was achieved by acquiring a major electricitycompany in 1996 followed by a water company. This allowed Company B to become a true multi-utility offering water, electricity and gas to their customers as well as being involved in otherservices. In 1997 the company broadened its scope by taking a stake in a Water company inChina, adding an international dimension to its business portfolio. The company believes that itscombination of competitive prices, versatile contracts and high quality customer service willenable it to grow within the energy market. However, its competitive edge lies in offering a long-term, innovative and flexible approach to its outsourcing business. There is even the possibilitythat the company may sell its electricity and gas business in order to increase focus on itsoutsourcing business. More details will be given later in the paper.

Company C was established following the merger of a water company and an electricitycompany. A number of further mergers and acquisitions with three other electricity companies areon the cards in order to achieve economies of scale. This company is already an internationalmulti-utility providing water, wastewater and electricity services at several parts of the World. Thecompany is split into a number of divisions with each division being made up of operatingcompanies. As this study focuses on Internet billing as a new utility service, only the billing andmanagement services division was analysed. This division is a spin off from the utility company,which manages all activities associated with customer relations, incorporating customer contact,billing and payment services and field services.


Company D is one of the UK’s leading integrated electricity and gas companies emergedthrough various UK mergers. To gain International presence, this company is currently lookingto acquire a medium sized utility in the US and also a number of electricity companies in Australiaand Thailand. One of the main focuses of this company is on service improvements andinnovations and its future success depends on responding to customer needs, buildingrelationships and continually enhancing services through the aid of emerging technologies. Thiscompany aims, like Company A, to become the first UK energy group to sell electricity and gasover the Internet.

6. Internet billing: main issues from the case studies

Although Internet billing is still in its infancy in the UK, the case studies highlighted aseries of important issues. In this section, some of the issues are discussed. The case studiesrevealed that two main forces are driving the march towards Internet billing. One is the in-creasing power and pressures from the customers and the other is the rapid and con-tinuous development of the Internet and related technologies and services. In particular, allcompanies recognize that their current paper-based bills are inadequate in the networkedeconomy; therefore, the UK utilities may mirror the US Internet billing trend over the next fewyears.

All four companies acknowledged that in order to survive in the increasingly competitiveenvironment they must lower prices, raise the quality and expand portfolio of services. Thegeographical expansion and the expansion into other utility areas to offer multi-utility serviceshave further increased the need for Internet billing for both the customers and the utilitycompanies themselves.

6.1. Current electronic services

Our research revealed that all four companies use different forms of electronic and Internetservices (Fig. 7). The most mature technology is EDI, which has been widely used to conduct

Fig. 7. Current electronic/Internet services.


services to large customer, although no equivalent electronic services have been offered to smallercustomers. Since all four cases have adopted the Intranet as an internal communication medium,they are currently exploring the Extranet to service all business customers.

Company D, and to a lesser extent Company C, have great concerns over Extranet security,and currently, they are investigating various encryption technologies in order to mitigate anysecurity risks. In comparison, Company A has less security concerns as it has been working withexternal computer specialists, conducting ‘ethical hacking’ to ensure high level security. Likewise,Company B believes that its firewall is very secure. The general feeling is that net security is abarrier to Extranet commerce but it will be overcome as the technology develops. How this willaffect the introduction of Internet billing will remain to be seen.

All four companies recognize the importance of adopting emerging technologies for prod-uct innovation, operational effectiveness and customer relationship management. Company Ahas adopted a policy that it should not adopt any new technologies until they have passedthe ‘early adopter’ stage. Such in-depth information was not directly obtained from the othercase studies, although from their current status of Internet billing, it is evident that this policyalso applies.

To analyse this issue, we adopted a framework developed by Boozallen in 1998 as shownin Fig. 8. The case companies are currently exploiting the Internet by opening up newchannels such as the Extranet to their customers. Company A is by far leading in the adoptionof new technologies as it has already opened up a ‘new channel’ for its customersthrough its Extranet lines termed Business-to-Business. Company D, followed by C areslightly behind primarily due to their heavy security concerns. Company B is just recognizingthe potential of the Extranet possibly due to its size and lack of focus in this area in com-parison to companies C and D. However, all four utilities will have the opportunity toleverage Extranet commerce to open up a new interactive avenue between their customers andthemselves.

Fig. 8. Distribution of impacts of the Internet (adapted from Appel, 1999).


6.2. The pace of development: the march to Internet billing

Currently the four utilities are at different stages of development in Internet billing. This ismainly due to the complexities involved in developing such a service, the focus of the utility andthe investment being made to support new technologies. Using the information gathered from thecase studies, Fig. 9 clearly illustrates this varied development.

Unlike the US utility market, none of the UK utilities are close to launching a complete Internetbilling service. Company A and D hope to become the leaders, but there is doubt as to whether thepayment mechanism will ever be included in this UK service. At present Internet billing appearsto be more expensive and inconvenient than paying bills via direct debit, although Company C isdeveloping the entire Internet billing service, including the payment mechanism. This is the maindifferentiating factor between Internet billing in the UK and the US, as the US operates a differentbanking system whereby paying over the Internet is a more cost-effective option.

Currently, all utilities are focusing on developing the service primarily for business customersonly, although, they are already investigating this service for their domestic market. Company Aappears to be in the forefront as it is considering extending the service to other divisions.Company B, following the same route but at a slower pace, hopes to begin trials early nextyear, as its IT architecture is already in place again for business customers. In comparison,Company D and C appear somewhat slower than the other two case companies but were veryreluctant to discuss future trials, developments and service launches. However, they bothemphasized that they would also launch such services to business customers first followed byoffering to the whole market. This confidentiality suggests that they may launch this service aheadof their competitors.

From the analysis, it is clear that a staged approach is emerging in unraveling Internet billing inthe UK. This approach follows the trend of piloting and launching to business customers, gas and

Fig. 9. Prediction of UK Internet billing.


electricity only, followed by other extensions such as water prior to the service being launched fordomestic customers. The reasons behind such an approach relates heavily to the costs ofimplementing such a service and that business customer demand is much greater for this servicethan the requirements of the domestic customers.

6.3. Model confusion: which one will conquer?

From investigating the Internet billing models adopted or proposed by the four case studycompanies, there appeared to be at first a trend towards the direct model. Company A, B and Dare all working towards this model due to the importance of brand reinforcement and control thismodel gives. As all three utilities are concentrating on the business customer, the payment of onebill at a time is adequate. However, they are beginning to see a problem with this model when theservice is offered to the domestic market. At present the direct model benefits both the customerand utility but in the future these companies may need to reconsider to satisfy the additional needsof their domestic customers. However, Company A pointed out that its model is unlikely tochange as it sees billing as such a fundamental part of their business, one that they are reluctant tooutsource. In contrast, Company B and D have indicated that in the future a more consolidatedapproach may better fit the needs of their whole market. This suggests that integrating a thirdparty may become an integral part of their billing process.

As reflected in the literature review, the direct model is readily accepted by the ‘early adopter’which mirrors the actions of these three utilities. However, Company A is moving more towardsthe invited pull model as it highlighted that its customers are already beginning to integrate theInternet billing system with their internal systems. This contradicts the literature as it wassuggested that such a model would not be considered at present due to technical barriers. Hence,Company A appears to be heavily focusing on customer integration as well as internal processintegration due to its reluctance to outsource. This is not the case with Company B and C who arevery much in their infancy in developing the service and are not convinced that the direct model isthe best solution.

Following the past literature, Company C appears to have adopted the consolidator model byusing its spin off service provider as the third party. This is primarily due to lack of in-houseexpertise and knowledge of the Internet billing service and its underlying processes. Althoughit has not started testing Internet billing, it proposes to reflect the thick consolidator modelas the company has been working with the third party as an integral business partner over thelast three years. As the third party was formed by Company C itself, it feels that its creativity andimage is not lost as the third party is not viewed as a complete external partner. It perceives thismodel to give them the capabilities to ‘lock in’ their customers while the customers enjoy theconvenience of paying all their bills from one website. This opposes the logic behind that of theother three utilities.

To sum up, from the analysis some interesting discoveries have emerged which bothcompliment and contradict the literature. Company A is moving towards the invited pull model,blindly overlooking the other models available. Company B and D are currently adopting thedirect model although could migrate to one of the consolidator models through time, joiningCompany C. This suggests that no strong pattern has become clear as to which model is bestsuited to Internet billing in the UK.


7. The impacts on Internet billing on the utility companies

The adoption of Internet billing will have major impacts on the utility companies andtheir relationship with customers. The evidence highlighted some similarities and contradic-tions between the UK utilities and the past literature. In this section, some of these issues arediscussed.

7.1. The biller–customer relationship

The purpose of the bill is not just to obtain payment but it is also to sell, market and empowerthe customer. Hence, the shift from paper-based presentment to EBPP will transform thebiller–customer relationship. Internet billing creates the opportunity for an interactive bill. Thisinteractive capacity will create new means to serve customers, hence will revamp the relationshipbetween the biller and customers.

Such an impact has been highlighted by the literature. For example, Hong Kong Telecom, whohave already adopted Internet billing, the main reason was to make payments easier and to allowcustomers to understand their relationship and value to Hong Kong Telecom. By doing so thecompany can ‘lock in’ customers through service customization. Given the critical importance ofcustomer services to most organizations (De La Rosa, 1999), the role of Internet billing inimproving customer service cannot be ignored. To maintain a stable customer relationship, billersmay have to take their customers on a ‘learning journey’ to allow them to discover facilities ofInternet billing and to recognize the strong links it creates. This will help develop customerloyalty, which in the long run will strengthen the biller’s customer base. However, it is extremelyimportant to consider what the customers want and their comfort level with the Internet whendeciding which particular model of Internet billing to adopt. Failing to do so may adversely affectcurrent customer relationships. A Datamonitor survey (Electricity UK, 1999) suggested that allutilities were focusing on high customer importance and experience when developing innovativeservices (including Internet billing).

This was strongly supported by the empirical findings. Company A indicated that itsexperienced customers, whom they regarded as large multi-site customers, are already integratingthe Internet billing system into their internal systems. They believe that this is strengthening thecompany’s brand as well as building more dynamic and open relationships with customers. Theinteractive element, which Internet billing brings to their customers also changes the biller–customer relationship slightly, as the customers become more independent of Company A whileenjoying a better quality service. In order to secure relationships with customers when developingtheir Internet billing system, Company A engaged heavily in a lengthy pilot trial with only a fewcustomers. This enabled the company to massage customers into the service, increasing customercomfort levels while at the same time developing customer loyalty.

Company D, although it has not released any Internet billing trials, predicts that the customer–biller relationship will only be strengthened through the emergence of Internet billing. Thecompany believes that it is an opportunity to ‘lock customers in’, hence build healthierrelationships. Company B agrees with this prediction but only if the customer expectations aremet. Thus, as implied in the literature review, the case examples highlighted that the unraveling of


Internet billing will impact the customer–biller relationship in a very positive way if the demandsand expectations of the customers are fulfilled.

7.2. Organizational transformation

As EBPP systems are introduced, conflicts have arisen over how these billing systems shouldbe structured. Microsoft and First Direct argue that corporate IT departments should out-source such services and all billing and payments should be managed by a third party. Incontrast, America Online, AT&T, Checkfree, Cybercash and Intuit argue that multiplepartners should share the work but the data should remain in-house. However, irrespective ofhow the system is developed, it will lead to changes in the structure and billing process of theutility companies.

Internet billing streamlines the traditional billing method as it eliminates paper, printing,postage and waiting for billing operations. It involves banks, the bill issuers, customers and thecreditors, and they must work closely together in the form of electronic alliances (Li & Williams,1999). Such alliances can help stabilize relationships between billers and vendors and raise barriersto entry into the market. Microsoft and First Data Corporation have joined together to create anelectronic bill presentment and processing standard. This partnership has been strengthened bythe investment from Citibank, a banking arm of the Citigroup Bancassurance Conglomerate.Northern Trust Co. and Sun Microsystems have also followed this path by partnering to test aweb-based bill presentment application for the business-to-business market. Developing Internetbilling partially with an outside partner tends to streamline the organizational structure of theutility as the number of internal dependents decrease, but at the risk of sharing confidentialinformation externally (Graham, 1999).

Complete outsourcing of the Internet billing process is another option open to the utility.This service automates the traditional billing process through a third party, which woulddramatically change the structure of the utility company. Outsourcing the billing processmay bring several benefits to utilities, as it decreases their technical involvement allowingthem to focus on core business areas. However, this can also have costly effects. By outsourcing,the utility loses tight control of their processes while at the same time divulge confidential

Fig. 10. E-business model.


information which may be useful to the outsourcing company. To a certain extent, the utilitydepletes their identity by outsourcing but gains a more dynamic and focused company through aleaner structure.

The findings from this research generally support these views. As Company B and C have not yetfully developed an Internet billing prototype, they had no comments on structural impacts.However, the two more focused utilities voiced different views. Company D believes that Internetbilling would only have a significant impact on the company structure if the services werebroadened (for example, if customers were paying online or solving their own queries). Currently,the company is also investigating the possibility of forming alliances. If this develops, theorganizational structure will be streamlined and certain processes will be automated or outsourced.

Company A at present has no plan to form any alliances when adopting Internet billing.Through the development of their Internet billing service, the billing process was tightened andcertain activities and people were eliminated (e.g. some processing clerks). Internet billing is seenas part of the broader E-business initiative. To maximize returns on investment from electronicbusiness activities and to assess its impacts, the company developed an E-business framework tofacilitate a common view (Fig. 10). This model implies that the higher the level of maturity, thehigher business value from the deployment of Internet technologies through for example, brandimage, additional revenue, improved customer services and reduced costs. The Internet billingservice is approaching a high maturity level, characterized by internal and external processintegration and interactive services. The introduction of electronic payments, for example, willlead to further process changes not only within the company but also along the value chain. Tomaintain tight control of the billing service, the company has adopted the direct model, whichdiffers from most US utility companies.

7.3. An evaluation of Internet billing costs

Widespread confusion exists about the benefits and underlying costs of different Internet billingmodels. In developing any model, a range of equipment, software and service costs would beincurred by the utility. Using the direct model or the invited pull model would only incur costs toperform data extraction and for web-compatible presentment. The utility will also lower the costsof direct debits and gain greater availability of funds to invest by cutting out the third party. Insome circumstances, the utility may enjoy a ‘quantity discount’ from their partnering banklowering the cost of running the service even further.

In comparison, the consolidator model tends to be more costly if the utility chooses to workwith more than one bill provider. This model increases implementation costs as third partiescharge for set up costs, maintenance fees and also transaction costs (from the presentment of thebill to the consumer to the corresponding payment to the biller) when the service is operational.However, despite the costs involved, the service can greatly reduce handling costs to the utilitycompany, and Linder (1999) projects that by 2000, Internet-enabled customer service support willcut the labour costs per contact by 43%. By developing new web-based services utilities can gaingreat cost benefits when a critical mass in the number of customers using the service is reached(Utility Week, April 1999).

All four companies regard costs as a highly confidential area in the development andimplementation of Internet billing. Company B and C were reluctant to make detailed comments.


Company A and D pointed out that developing Internet billing involves a lot of investment butthe return on investment was debatable. Although the costs of developing this service through thedirect and invited pull models were higher, both utilities preferred to accept this penalty as thisprevented confidential information leaking. Company A highlighted that their security technologyis making the service very expensive to develop, restricting the service to business customers onlyin order to gain any financial value. Only when a secure and low cost security method is developedwill the company expand the service to domestic customers.

All four utilities are of the view that development and implementation costs of Internet billingwould be paid for by the customers by building the costs into their overall contract price.However, the customers see this service as ‘reducing the cost to serve’, as they will be able toautomatically check data. Like the US companies, the UK utilities believe that Internet billing willprovide large cost reductions in the production and sending of paper bills and in the consumptionof data. However, the current legal requirements of document production may depress this benefitand the implementation costs can only be recovered when sufficient number of customers use theservice. Company A believes that there is an acceptable level of business customer demand forInternet invoicing but not the complete Internet billing service. All other companies were not at astage to comment.

8. Conclusions and future research

Using recent evidence gathered from four utility companies in the UK and a wealth ofsecondary data, this paper investigates the new technologies that are making Internet billingfeasible, discusses the various models that are emerging and assesses the impacts it generates interms of cost, organizational structure and customer relationships. Since deregulation, the utilitysector has experienced great volatility and there is strong pressure to improve and develop servicesin order to retain their market position and to survive. The increasing adoption of the Extranet iscreating immense opportunities for the utilities by opening up electronic avenues to theircustomers, generating new communication channels from which new services can be developed.The adoption of such technologies is making the development of Internet billing feasible.

Today, Internet billing is becoming a common innovation in the utility sector, which has a steeppredicted growth rate over the next three years (Singer et al., 1998). The development of Internetbilling was very complex as it involved multiple parties either internally or externally. At themoment, the UK Internet billing service is still in its embryonic stage, not yet incorporating thepayment mechanism, and both the US and UK experience suggests that the utilities are taking astaged approach to Internet billing. However, when fully implemented, Internet billing mayfundamentally change the way companies interact with their customers. It accelerates the billingprocess, causing process integration, and as indicated by Company A, leading to significantbusiness transformation.

The study highlighted three emerging models of Internet billing, although it is difficult todetermine which model will dominate in the future. The evidence from the US has stressed thetrend towards the consolidator model, which at present reaps the greatest benefits. In contrast, theUK utility sector seems to favour the direct model. The complexities of the process together withthe high level of customer demands and expectations are difficult to satisfy through one model. At


this stage, Company A, B and D are all developing the direct model, and Company C seems to betaking the consolidated approach, like the US, but it is impossible to derive the model of thefuture. The direct model, especially the invited pull variation as adopted by Company A, is morelikely to encounter serious problems in the future if it needs to migrate to another model.Company B and D have identified this model ‘trap’ during the interviews, and they have alreadyrecognized that partial outsourcing to a third party, which points to the consolidator model, willpotentially better suit their company needs and their customers in the future. The benefits ofInternet billing are manifolds. It offers a new value service to premium customers throughimproved data accuracy, quality and efficiency and is perceived as a powerful marketing tool.Internet billing also has the potential to reduce administrative and transactional costs, and enablesthe utility company to reach customers on a global scale in real time.

Several barriers to the adoption of Internet billing were identified. Evidence suggests thatinitially security is an inhibiting factor, although it may well be more of perception than reality,and will be eroded in time. Currently, robust solutions are being developed. For example,Paysense, an Internet solutions provider, has developed a system that provides complete anonymouscommunication over the Internet as it ensures sensitive data such as name and bank details arenever sent over the Internet. This suggests that security has been recognized in the business worldas a major barrier. However, businesses are investing heavily in this area to try and alleviate theproblems. Despite these solutions being available, until businesses and customers perceive theInternet as a safe communication platform, Internet billing will remain an immature service.

As the process of Internet Billing is very complicated, another major barrier is for billers to figureout what technologies and services to use as currently there is a huge disparity between differentEBPP solutions. The technical complexities such as customizing and maintaining the infrastructureand deciding upon the appropriate model may also prove to be a drawback due to lack of expertise.In following the thick consolidator model the billers often regard the sharing of sensitive businessinformation with partners as a major obstacle in setting up the Internet billing process. An evenbigger barrier is the costs involved in developing Internet billing. Currently, the utilities are reluctantto develop full Internet billing services as the implementation costs may not be recoverable.

Through Internet billing, billers can streamline their processes, enabling more convenientcommunications with customers while reducing errors and the cost of the payment processing andbill delivery operations. A higher level of process integration can also be achieved, creating a moredynamic and flexible environment. More importantly, using the Internet for this process providesa new medium for target and one-to-one marketing therefore promotes corporate image. In thelong run this improves service quality, reliability and ease of payment, which together willimprove competitive positioning while facilitating better customer service.

Further reading

Appel, M. et al. (1999). Internet E-commerce: is it for real? (cited 24 July 1999). Available at: http://boozallen.se-com.com/.Barling, C. E-commerce security debate (cited 16 July 1999). Available at: http://www.ecommercetimes.com/news/

special reports/server-desktop.shtml.

Baskerville, R., Smithson, S., Nguenyama, O., & Degrass, J.I. (Eds) (1994). Transforming organisations with informationtechnology. Amsterdam: North-Holland/IFIP.

Bell, J. (1993). Doing your research project: A guide for first time researchers in education and social science (2nd ed.).

Buckingham: Open University Press.


Bickerton, P. (1998). Cyber strategy: Business strategy for extranets, intranets and the internet. Butterworth-Heinemann

in Association with the Chartered Institute of Marketing.Bray, P. (1998). Little bit closer; extranets. The Sunday Times, 29 November.Butler, P., Hall, T. W., Hanna, A. M., Mendonca, L., Auguste, B., Manyika, J., & Sahay, A. (1997). A revolution in

interaction. The McKinsey Quarterly, 14–23.Collin, S. (1997). Business on the internet. Koogan Page Ltd.

Corbett, M., & Thatcher, M. (1997). Wired and emotional: Negative impact of information and communication

technologies. People Management, 3(13), 26 June.Cronin, M. J. (1996a). The internet strategy handbook: Lessons from the new frontier of business. Boston: Harvard

Business School Press.Cronin, M. J. (1996). Global advantage on the internet: From corporate connectivity to international competitiveness. New

York: Van Nostrand Reinhold.

Davenport, T. (1993). Process innovation: Re-engineering work through information technology. Boston: Harvard

Business School Press.De La Rosa, B. (1999). Survey shows low UK E-commerce use. PC Week, 20 July.Denzin, N., & Lincoln, Y. (1994). Handbook of qualitative research. London: Sage Publications.

Dutton, W., & Peltu, M. (1996). Information and communication technologies: Visions and realities. England: Oxford

University Press.Ellsworth, J., & Ellsworth, M. (1994). The internet business book. New York: Wiley.Evason, M. (1998). E-commerce strategies. Reuters Business Insight, Datamonitor Plc.

Fawcett, N. (1998). Customised telecomms bills. Information Week, May–June.Frook, J. (1998a). Internet billing picks up the pace. Internet Week, issue 729, 24 August.Frook, J. (1998b). Internet billing causes digital divide. Internet Week, 6 December.

Galliers, R., & Baets, W. (1998). Information technology and organisational transformation: Innovation for the 21st

century organisation. New York: Wiley.Gay, L., & Diehl, P. (1992). Research methods for business and management. New York: MacMillan.Gill, J., & Johnson, P. (1997). Research methods for managers (2nd ed.). London: Paul Chapman Publishing Ltd.Goddard, J. (1998). Information and communication technologies and the geographical structure of the UK economy.

London: British Gas.Goldmann, N. Extranet: The ‘‘third wave’’ in the internet electronic commerce (cited 10 June 1999). Available at: http://

www.arraydev.com/commerce/delibadmin/extranet.html.Goodman, & Beverly. (1998). Take some pain out of internet billing. Money, 27.Graham, G. (1999). Information technology: A balancing act on the technology tightrope. Financial Times, 13 January.

Greenfield, T. (1996). Research methods: Guidance for postgraduates. London: Arnold.Hackbarth, G., & Kettinger, W. (1999). Matering information management: Reaching the next level in E-commerce.

Financial Times, 15 March.Harrington, L., & Reed, G. (1996). Electronic commerce (finally) comes of age. The McKinsey Quarterly, no. 2.

Hussey, J., & Hussey, R. (1997). Business research: A practical guide for undergraduate and postgraduate students.

Basingstoke: MacMillan.Jankowicz, A. D. (1991). Business research projects. London: Chapman & Hall.Johnson, D. (1998). Electronic commerce show a web of potential. Chemical Market Reporter, 253(12), 23 March.

Joy, D. Next generation extranets (cited 3 June 1999). Available at: http://www.digital.com/.Karpinski, R. (1999). Business-to-business E-commerce faces obstacles. Internet Week, 24 February.Kerstetter, J. (1998). Online billing thins down. PC Week, 15(24), 15 June.

Li, F. (1995). The geography of business information: Corporate networks and the spatial and functional corporate

restructuring. Chichester: Wiley.Li, F. (1997). From compromise to harmony: Organisational innovations through information systems. International

Journal of Information Management, 17(6), 451–464.Li, F., & Williams, H. (1999). Inter-firm collaboration through inter-firm networks. Information Systems Journal, 9(2), 103–117.

Liebmann, S. Microgen E-billing: Service overview (cited 24 July 1999). Available at: http://www.microgen.co.uk/

newsite/pages/ebilling/bilover.html.


Linder, C. (1999). E-commerce takes off (cited 24 July 1999). Available at: http://forester.se-com.com/.

Manchester, P. (1997). Impact of the internet: No longer just another option. Financial Times, 1 October.McClelland, S. (1998). Entering the wireless era: The wireless economy. Telecommunications, 32(8), August.McKenney, J. (1995). Waves of change: Business evolution through IT. Harvard Business School Press.

McNurlin, B. (1992). Trends in information technology ((2nd ed.)). New York: McGraw-Hill Book Co..Mittal, V., & Sawhney, M. (1998). Managing learning to lock in customers. Financial Times, 19 October.Monk, P. (1991). The technological transition of the information economy. Glasgow, Scotland: University of Strathclyde,

SGBS.Moran, N. (1997). Business-to-business links: Now the attention turns to extranets. Financial Times, 4 June.

Morton, S. (1991). The corporation of the 1990s: Information technology and organisational transformation. Oxford:

Oxford University Press.Moynihan, M., & Jonash, R. (1993). Leveraging technology in the new global company. EIU Research Report No. I117,

Economist Intelligence Unit.Nelson, V. (1998). Leveraging the ’net for business. Communication News, 35(7).Palumbo, F., & Herbig, P. (1998). International marketing tool: The internet. Industrial Management and Data Systems,

98(6).Patel, J., Desai, G., & Bromberek, J. (1998). Bill presentment and payment hit the web. Internet Week, 25 November.

Psoinos, A., & Smithson, S. (1999). European business plays catch up in E-commerce. Internet Business, issue 30, July.Riggins, F., & Rhee, S. (1998). Towards a unified view of electronic commerce (cited 2 June 1999). Available at: http://

130.207.57.82/papers/unified.html.Saunders, M., Lewis, P., & Thornhill, A. (1997). Research methods for business students. London: Pitman Publishing.

Singer, M., Ouren, J., Stephenson, J., & Weinberg, A. L. (1998). Current research: Electronic bill payment and

presentment. The McKinsey Quarterly, no. 4.

Smith, A. (1998). What consumers really want. Financial Times, 13 October.Stewart, T. (1999). Customer learning is a two-way street. Fortune, 139, 10 May.Sumner, I., & Summer, D. (1999). The free-access revolution. Marketing, 4 March.

Sunstrom, K. (1998). Nordic: Power building. Acquisitions Monthly, August.Tapscott, D. (1993). Paradigm shift: The new promise of information technology. New York: McGraw-Hill Inc..Taylor, P. (1997a). Fuelling the electronic commerce revolution. Financial Times, 7 May.

Taylor, P. (1997b). Businesses see it as vital for competitiveness. Financial Times, 5 August.Taylor, P. (1998). Competing in the global economy: Britain ‘catching up’ in digital economy. Financial Times, 17

December.Vaugh-Nichols, S. (1997). Intranets. Boston: AP Professional.Wayne, R. (1998). Internet commerce: Building the future. Datamation, 5 October.

White, A., & Adshead, S. (1998). Intranet & extranet strategies: A management guide to implementation and planning.

Reuters Business Insight, Datamonitor Plc.

Yakhlef, A. (1998). The internet as a new locttfgfhhhffhgffus for value creation. Management Decision, 36(9).Zikmund, W. (1991). Business research methods (3rd ed.). Chicago: The Dryden Press.Zwass, V. (1998). Foundations of Information Systems. Maidenhead: McGrawHill.

Websites (no author specified)

http://island.isl.uni bremen.de.eies/acs/acs3.html Port intranet (cited 11 July 1999).http://www/cordis.lu/espirit/src/ecomcom1.html The electronic commerce revolution (cited 15 June 1999).http://www.differential.com/architecture.html The architecture of an extranet (cited 24 February 1999).http://www.encommerce.com/products/whitepaper.html Gaining a competitive advantage by harnessing the internet

(cited 6 June 1999).

http://www.extranet-strategist.com/ A new management and security architecture for extranet (cited 3 June 1999).http://www.futureworld.co.za/ The 3 revolutions of the information economy (cited 6 March 1999).http://www.genmagic.com/Internet/Trends (cited 14 June 1999).http://www.greenshades.com/Inscreen.html (cited 6 June 1999).


http://www.guideware.com/extranets.html Process driven extranets (cited 10 June 1999).

http://www.ibm.com/e-business/e-commerce (cited 1 August 1999).http://www.isdnzone.com/telcom/trends.html Telecommuting trends (cited 10 June 1999).http://www.justintime.se-com.com/whitepaper/ Open internet billing: Building a successful future (cited 24 July 1999).

http://www.mybills.com/ebill/ CheckFree’s web E-bill (cited 24 July 1999).http://www.noinfo.com/technology/ecommerce/tsld014.html (cited 8 July 1999).http://www.sk.ibm.com/events/prez 1 (cited 20 August 1999).

http://www.trisense.com/paysense/biller.html How paysense works, biller advantages, payer advantages and advertising(cited 8 February 1999).
