Changing to Centrex service

Local carriers rolled out Centrex service in the 1970s as a way to offer advanced features to their customers. The customer got a reduced line charge but had to pay for the features. The total cost was usually higher than the cost of a single POTS line. Many customers figured out that they could replace their POTS lines with Centrex lines and save money. Even today, a customer can order “stripped down” Centrex lines without the expensive features. This can dramatically cut the cost of their local phone bill.

Switching to Centrex requires a term agreement. In general, the longer the agreement, the lower the pricing. The pricing difference between a 5-year contract and a 1-year contract may only be 4% to 10%. Centrex volume commitments are more likely to specify a commitment of the number of lines rather than a dollar amount. BellSouth Centrex agreements usually specify that the customer must agree to keep a minimum of two lines during the term of the agreement.

The ideal candidate for Centrex is a business with numerous POTS lines and multiple features on each line because the features are free with Centrex. Some of the main cost-saving benefits of switching to Centrex are: reduced line rates, free features, reduced local calling charges, and reduced primary interexchange carrier charge (PICC) fees. To find out if Centrex can help you save money, call your local telephone company and ask for a Centrex price quote.

Centrex line rates are often lower than POTS line rates. The main advantage to Centrex may be with the free features. A business that pays $5 per line on 10 lines for call forwarding each month should be able to save $50 a month by switching to Centrex and getting these features for free.

In many local markets, the local carrier’s Centrex offering will include an option for an “off-premise extension.” For example, a manufacturer with a factory and a sales office in the same city may be paying for local calls between locations. The company can convert the local service at both locations to be under one Centrex system through its local phone company. Then, instead of paying for calls between the two locations, the calls are free, because the lines at the sales office are now treated as off-premise extensions.

One of the so-called reforms of the Telecom Act of 1996 is that we all get to pay new fees, such as the PICC fee. For a long time, local carriers have charged customers a fee of $5 to switch long-distance carriers. This is called a change of the primary interexchange carrier (PIC). Recently, the local carriers argued that not only does it cost them to change a PIC code in their system, it also costs them to maintain the PIC code. The end result is that everyone now pays a PICC fee on each telephone line.

The LEC bills the long-distance carriers for the PICC, and they, in turn, bill you, the end user. The PICC fee shows up on the long-distance bill but is based on the type of service a customer has with the local carrier. Yes, it is confusing, but the good news is that Centrex customers pay a greatly reduced PICC fee. WorldCom has recently been charging a PICC of $4.31 for POTS lines, but only $0.31 for Centrex lines. Current Centrex customers are overbilled for the PICC almost a third of the time.

If you decide to switch to Centrex service, be careful to schedule the conversion during off-hours. It has been my experience that about a third of all Centrex cutovers result in a service outage for the customer. Some of the causes for the outage may be on the customer’s premise, but sometimes the telephone company technician at the central office makes a mistake. Regardless of who is at fault, the business suffers the down time. It may be advantageous to hire a consultant, or deal directly with a Centrex agent who is skilled at conversions instead of dealing directly with phone company representatives...