Long-distance calls on local bills

During the past few years, local phone bills have become like credit card accounts. A host of services can be billed on the last pages of your local phone bill, including charges for long distance, 900 calls, collect calls, Internet charges, and miscellaneous fees. Sometimes these charges are legitimate—but often they are fraudulent; and they are always expensive. Regardless of why the charges were billed, a business can always reduce this expense, or eliminate it altogether.

Local telephone companies allow other carriers to tack their charges onto your local bill because they keep a percentage of the charges. Other companies do not mind paying this commission because local carriers collect the money for them. It is a win-win situation for both companies, but not for the customer. The average customer does not question any charges on the local bill. She sees it as an “assumed cost” and pays the bill each month. Even if a customer suspects that the bill is incorrect, he will still pay it, rather than risk having his local service disconnected. In truth, however, local carriers will not disconnect a customer’s service for withholding payment for another company’s charges.

Loose traffic
Loose traffic is a term widely used by AT&T referring to long-distance traffic billing on a local bill, instead of on the master long-distance account. Loose traffic usually bills on the back pages of the local bill or on a separate long-distance bill. Other terms for loose traffic are casual calling, random billing, thrifty billing, or LEC-billed traffic.

Besides the confusing and annoying arrangement of receiving two bills for long distance, the real problem with loose traffic is that it is very expensive. I have seen domestic long-distance rates as high as $7 per minute, but a typical rate is about $0.30 per minute.

Long-distance rates are based on this formula:

gross rate - discount = net rate

Loose traffic rates are high because the calls get no discount. Customers end up being charged the gross rate, also known as the tariff rate. Table 8.1 compares the high cost of loose traffic to the cost of long distance correctly billed on a long-distance bill. The figures are based on the sample phone bill in Chapter 4. Telecom consultants commonly use this format; notice the additional savings attributed to having calls billed in 6-second increments instead of full-minute increments.