With Telecom, it's not just about rates.

Many customers have learned to focus extensively on the cost per minute for voice calls or the cost for a certain size Frame Relay Port in their carrier negotiations. The carriers have learned this lesson as well. The next time you open your office mail don't be surprised to read something like this, "Effective September 15, 2003, the credit card surcharge rate (per call) has increased from $1.80 to $5.50 or 306%." Recently, Qwest business customers received little postcards in the mail with just such a message. The postcard served as the public notice of six rate increases effecting Operator Assisted calls, with rate increases that ranged from 200% to 445% over the present rates. Today, business users need to think about a lot more then just the cost per minute when contracting for carrier services.

Some carriers are moving aggressively to increase revenues any way they can and doing so, sometimes with direct price increases like the ones mentioned above and sometimes by including terms and conditions in their standard contracts that play to the carriers advantage over the life of the contract. The following are some items that you may want to insure you're protected from in your next contract (or maybe even your existing one).

Directory Assistance & Operator Services 

>From the example in the opening paragraph, unless your Operator Services rates and per call surcharges are fixed for the term of your contract you could be exposed to major price increases for these types of calls. The real key is knowing what types of calls your business makes, if you don't have many Operator Assisted calls it may not be worth your time to negotiate fixed O+ rates in your contract. Almost all businesses do make a number of directory assistance (DA) calls and this is another area that rates have been going up. With 411 and long distance DA calls currently costing up to $1.99 each with many carriers, locking in fixed rates with your carriers for these types of calls can reduce per call costs by up to 75% and provide protection against future increases. There are other options that can help control these costs such as setting up different classes of service in the company PBX to restrict 411, using an outside directory assistance company, and directing employees to use one of the internet based yellow page options that are available today. Customers should inspect their carrier bills and understand the types of calls their business makes. If the business only makes intrastate or interstate DA focus on locking in fixed per call rates for those types of calls on your carrier contracts and don't waste time trying to lock in international DA rates if the business doesn't make those types of calls.

Calling Card Surcharges

While the move to cellular phones has impacted calling card usage at many companies, there is still a need for calling cards for the non-cell phone user or as a backup option for the traveling cell phone user. To control costs some companies buy the pre-paid calling cards in bulk at their local Costco that have rates as low as a few cents per minute. The bulk option can be a challenge as it relates to allocating and tracking costs for each user at some companies. For those companies that still use cards, having a clear understanding of numbers and different types of calling card calls being made allows customers to target cost controls and contract terms for these services as well. Some of the tier one long distance carriers have different calling card per call surcharges for in-state calls vs. interstate calls. If calling cards are a significant expense for your business, make sure your contract locks in fixed per call surcharges for all the types of calls your business makes (intra-state, interstate, international, country to country).

Toll Free Number Fees

About a year ago the fixed monthly charge that users pay for each toll free number started to change with some carriers. The tier one carriers have been charging on the average $20 per switched termination toll free number each month plus usage costs and the monthly fee component has remained unchanged for many years until now. One of the largest tier one carriers had two price increases last year and now charges $35 per month for each number, a 75% increase. On the carrier side, adding $15 per month to the revenue from each toll free number times hundreds of thousands of numbers can mean adding tens of millions of dollars to the bottom line each year. On the customer side, for example, a business with only 20 switched toll free numbers is now paying another $4,000 annually for toll free service by the time taxes and surcharges are figured in. Customers should either make sure their monthly fees for toll free numbers are fixed for the term of their contracts or waived entirely.

Dedicated Access Fees

Over the years as the competitive access providers grew the long distance carriers started adding Access Coordination Fees (ACF) and Central Office Connection (COC) fees for end users that selected to use another provider for dedicated access to the carriers network versus ordering it from the carrier. These fees have also seen recent price increases to the point that now the ACF/COC fees can be higher then the monthly local loop cost itself. During contract negotiations, many customers request a waiver of these fees as part of their contracts and save thousands of dollars each year on every dedicated circuit they have in service. The latest twist on the ACF/COC fee issue now that many customers have been able to have these fees waived in their contracts is that one of the tier one carriers came out with a new fee called a "Network Termination" charge. This new fee is in essence the same as the old fee for providing your own dedicated access lines but now it has a new name. Customers should he aware of carriers rolling out new fees, which may in fact just be a name change from an old fee that earlier contract negotiations may have yielded a waiver of.

Carrier Administrative Fees, Property Taxes

Over the last several years another major issue has been that the carriers have been creatively and proactively adding "other" fees and surcharges to customer bills. Universal Service Fund (USF), Primary Inter-exchange Carrier Charges (PICC, not be confused with PIC charges), are some of these new fees. Last year the outrage over how some carriers were adding a mark-up on USF fees prompted the FCC to act and restrict carriers from adding any additional overhead on top of the USF fee but carries were allowed the option to add a new fee on customer bills called the "carrier administrative fee." In a recent RFP bid process we conducted for a client the carrier responses on this new fee ranged from zero to almost two percent. The next time you issue an RFP to compare carriers make sure you compare "administrative" fees. Another new "fee" in the last few years is the practice of some carriers to even bill customers for a portion of the carrier's property taxes. Again, these are more points to consider when comparing carriers or when reviewing your contracts and negotiating for new services.

Conclusion

More so than ever customers need to be aware of exactly what their service and usage mixes are so they can strategically negotiate with carriers for services. Signing a new carrier contract and looking like a hero by saving the business 10, 20, 40% is no longer a given. With the present instability in the telecom marketplace, Risk Manager, is a new hat that many telecom/IT managers are now having to wear for the first time. Any savings must be balanced against the real danger of a carrier going out of business or suddenly making wholesale changes in services. Signing a carrier contract today requires more due diligence then ever to make sure the business is protected from "backdoor" carrier rate or fee increases that could wipe out savings, or worse t yet, result in the business paying higher costs. Some users have taken the time and effort in the last few years to lock in more than just base rates for the services they use the most. As carrier contracts come up for renewal more businesses need to invest the time to make sure their carrier contracts protect them just as aggressively as the carriers seek to protect and increase their revenues.

Richard Longview is the President of Telecom611.com, a telecom consulting firm based in Pasadena. Richard is a member of the Society of Telecommunications Consultants and specializes in providing unbiased analysis and contract negotiations services for mid to large enterprise customers.