Telecom AuditM.S. Mastel and Linda D. Williams
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Review/interview by Mitch Betts Hundreds of pages of complex telecommunications bills land on the desk of some overworked IT staffer every month. And if they “look normal,” they get paid. But auditors say those bills are full of mistakes that typically result in overcharges of 5% to 35%. Meanwhile, many users fail to get the best terms in their telecommunications contracts. At a time when cost reduction is king and the telecom industry is in turmoil, Mitch Betts asked Missy Sue Mastel, author of Telecom Audit (McGraw-Hill, 2003), what IT managers should do. These are tough times in the telecommunications industry. Is now a good time to renegotiate long-distance telecom contracts? Yes. You want to improve not just your rates but the terms and conditions, too. Your contracts were probably negotiated during the economic glory days, and some don't have clauses for business downturns or rightsizing or billing verification. You may be able to get more competitive rates ... but the rates aren't really where [the telecom carriers] get you. Where they get you is in fees and surcharges. Some carriers have significantly higher fees or surcharges for ordering an 800 line, for example; it may be free with one carrier and $50 a month at another. Are too many contracts left in the filing cabinet unexamined? Yes, indeed. Companies may think it's someone's job to pull the contract out and take a look at it, but given the [staff] downsizing today, there's not time to actually do it. The contract could be 90 pages. And the bills could be 1,100 pages for a $30,000-per-month customer. You should negotiate into your contract a period of review. And you should negotiate billing verification into the contract, so you're not spending an average of 18 to 21 months to get credits back for overcharges. It should be a much shorter period of time. You should expect the carrier to provide accurate billing practices and, if not, they should correct it within 30 to 60 days. And you should be reviewing your bills and comparing them to your contract terms once every quarter, if not more. Sometimes the rates and terms negotiated in the contract don't actually show up on the bill. What are some common billing mistakes? “Casual billing” is the worst. Long-distance carriers can lose track of phone numbers and instead of billing the call under the corporate contract, it falls off the contract and gets billed at astronomical rates by the local carrier. It happens to large corporate customers a lot, unfortunately. It's a billing system error. The billing systems are incredibly complex, full of interfaces and patches to deal with new features and services. Most large phone companies have computer systems that are 10 to 15 years old, and they lose track of things. The phone companies invest in patches but not in overhauling the systems. I've also heard reports that you can discontinue a service, such as a T1 line, but it can still show up on the bill. That certainly happens; it's human error if they don't properly enter the disconnect order so it shows up in the billing system. But get this: Sometimes they discontinue only one point of a two-point circuit. So you could still be charged for the other point, perhaps at an office you've closed. What are the best money-saving strategies, the low-hanging fruit? Billing increments. Any time you can reduce your billing increment, say, from one-minute billing to a six-second increment, you save about 30% on the usage portion of your bill. If you have a three-minute conversation and your rate is 5 cents a minute, you pay 15 cents. The problem is that even if you talk two minutes and one second, you're still billed for three minutes and still paying 15 cents for that call. If you're billed at six-second increments, you're only paying about 11 cents. In addition, there are about 17,000 taxes from different jurisdictions that apply to telecommunications, and the carriers have a tough time dealing with it. The laws are incredibly ambiguous, and we've been successful interpreting the law in favor of our [corporate] clients. For example, the federal excise tax covers toll service [typically voice service], but it shouldn't really apply to networks that aren't toll service. So most data networks — where you're just paying for bandwidth, not usage — shouldn't have the federal excise tax applied. Yet it happens all the time. Are companies starting to get better control over their wireless costs, or is it still the Wild West out there? Even if they are getting it under control, it will all change in November. Cellular number portability is coming out Thanksgiving, and it's going to be an absolute madhouse. The carriers will do just about anything to get customers to sign a contract so they don't leave them in November. The carriers are all terrified. If you're renegotiating a contract, you can pin them to the wall. Customers have a lot of leverage, so take advantage of that to get free equipment or upgrades to your equipment in a multiyear contract. Do you expect to see more consolidation in the telecom industry? Yes, there will be more bankruptcies, among smaller players. I expect to see price increases for another 12 to 15 months, but then I bet we'll see the FCC clamp down on pricing and make the carriers reduce their fees and surcharges. Computerworld 20030728