Sample local telephone bill

These are typical local bill for a fictional business in Florida. Like other local bills, this one follows an outline: summary page, monthly service, local calling, intralata calling, and charges from other carriers.

Summary page
The bill’s first page usually has two sections: the summary of charges and the bill remittance page. The summary of charges outlines the current charges, any past-due charges, charges from companies other than the local carrier, and the total amount due. The perforated bill remittance page is to be included with the check when the customer sends in the payment.

When looking at this page of the bill, a seasoned bill auditor notices that the customer has measured local service. It is billed $12.54 for local calls. It may be cheaper to switch to a flat-rate service. The customer also has intralata calls. (On Telephone Company A’s bills, intralata calling is listed as “Itemized Calls.”) Any usage, whether it is local, intralata, or long distance, that appears on a local bill can almost always be reduced. In this case, the customer also has $31.04 listed under “Charges for Other Companies.” These charges can almost always be reduced or removed altogether.

Monthly service
Page 2 of the bill shows all of the monthly recurring charges billed by the local carrier. The first item is usually the charge for the lines, which is a fixed expense. Other charges appearing in this section are any optional services, such as call forwarding, wire maintenance, hunting/rollover, and directory advertising in the yellow or white pages. In the sample bill, the customer has two lines that cost $43.87 each. This is a high rate for measured service, so a bill auditor would research why the line rate is so high. A bill auditor would also check with the end user to make sure the three-way calling and call forwarding features are actively used. If not, they should be canceled.

Local calling
As previously stated, local lines can be billed one of three ways: flat-rate service, measured-rate service, or message-rate service. With flat-rate service, local calls are not charged, so this section of the bill may be missing. In some cases, the local carrier will still provide a summary of local calls even though it is not charging for the calls. With measured-rate or message-rate service, this section of the bill itemizes the local calling usage and the charges associated with that usage. If the customer switches to flat-rate local service, the $12.54 charge for local calls, listed on page 2 of the bill, will be eliminated.

Intralata calling
In this bill, intralata calls are listed under the heading “Itemized Calls” on page 3 of the bill. The customer is paying $0.24 per minute. The business saver service discount plan gives the customer a 15% discount. This lowers the effective rate to $0.20 per minute, which is still far too high for today’s marketplace. The customer should consider switching these calls to its long-distance carrier. Most long-distance carriers will carry intralata traffic for less than $0.10 per minute. Telephone Company A can implement this change in its central office. Before switching, the customer should first try to negotiate a lower rate with Telephone Company A.

The next heading on page 3, “Optional Calling Services,” simply shows the business saver service discount plan. The customer receives a 15% discount on intralata calling. If the customer had 800 service or calling cards through Telephone Company A and was using these services within the LATA, the 15% discount would also apply to these calls. However, most customers use their long-distance carrier for calling cards and 800 service.

Charges for other companies

After the local carrier has itemized its charges for monthly service, local calling, and LATA calling, the remainder of the bill is comprised of charges from other companies. The most common charges in this section, also listed on page 3 of the bill, are for legitimate services such as Internet access, interlata calling card charges, direct dial long distance, and collect calls. Fraudulent charges billed by other carriers such as United States Billing, Inc. (USBI) and Hold, Inc. usually appear in this section of the bill. Slamming, cramming, and 900 calls, if billed, will appear in this last section of the local bill.

In the sample bill, one of the two lines is showing long-distance calls carried by Telephone Company B at $0.25 per minute. The true cost-per-minute is actually higher, because the calls are billed in full-minute increments. Full-minute billing is about 8% more costly than billing the same calls in 6-second increments (see Table 7.1 for a further explanation).

This customer might have been slammed by Telephone Company B, but it is more likely that a customer error caused this problem. Assuming the customer has a separate Telephone Company B long-distance account, this line should have been billed on that account, not on the local bill. But if the customer failed to inform its Telephone Company B account team about this line when it was first ordered, the line will bill alone on the local bill. This situation is called “loose traffic” because the calls (traffic) on this line are billing apart (loose) from the main Telephone Company B account. To correct this problem, the customer should inform Telephone Company B and request a refund. Telephone Company B will request bill copies and then “rerate” the bill—it will recalculate the bill at the correct lower rates and refund the difference.

Now that we have examined the outline of the local bill in detail, the different local line charges that appear on the local bill. Customers have many choices when it comes to their local service.

Only through systematic review and diligent auditing of your local bills can you avoid being overcharged. If a customer blindly accepts the carrier’s service offerings and billing, without question, the company will be subject to overcharges and inefficiencies every month. The culture of the telecommunications industry is built on carriers providing customers whatever the customer is willing to accept. The fewer questions customers ask, the greater the revenues for the carriers.

The local bill

Items on a local bill fall into one of four categories: regulated charges, nonregulated charges, taxes and fees, and charges from other carriers.

Regulated charges

Tariffs are filed with the state Public Utility Commission (PUC). Tariffs define the rules and pricing of telecom services. The prices for regulated charges are nonnegotiable, although the carriers often file additional tariffs to be used to offer special pricing to large customers. Line charges and calling rates are regulated charges.

Nonregulated charges

Carriers are not required to file tariffs for these services. Prices on nontariffed items are set based on current business and competitive conditions for the area. These charges are often “nonessential” services such as calling features and voice mail.

Taxes and fees
There are typically four types of taxes and fees that appear on local phone bills:

Service fees and charges, such as the 911 surcharge and PUC funding fees;

Franchise tax—usually a local item like a municipal charge;

Sales, use, or special taxes—usually written as “state and local taxes” on the bill;

Federal excise tax—this 3% tax was originally a World War II emergency tax.

Charges from other carriers
Charges from companies other than your own local carrier sometimes appear at the back of your local telephone bill. Because local carriers keep a small portion of the money, they are always happy to provide this service to other companies. Some of the charges that may appear are collect calls, 900 calls, voice mail, long distance, and Internet access.

Local telephone companies

Local telephone companies are known by a variety of names according to their function. The following acronyms and terms are most commonly used to describe telephone companies.

LEC - Local exchange carrier. Every local phone company is an LEC, for example, Cincinnati Bell Telephone Company.

IXC - Interexchange carrier. Long-distance companies carry calls between exchanges (or LATAs) and are known as IXCs. One of the largest wholesalers of long-distance service is a company whose name is IXC.

BOC - Bell Operating Company. The 22 local telephone companies that were originally owned by AT&T were transferred to seven Regional Bell Operating Companies. Mountain Bell, Northwestern Bell, and Pacific Northwest Bell were all transferred to the RBOC U S West.

RBOC - Regional Bell Operating Company. At the time of divestiture, AT&T spun off 22 BOCs, which were managed by the seven RBOCs. Since then, the RBOCs and GTE have dominated the local service marketplace. The seven RBOCs were Ameritech, Bell Atlantic, BellSouth, NYNEX, Pacific Telesis, Southwestern Bell, and U S West. Southwestern Bell (now known as SBC Communications) has merged with Pacific Telesis and Ameritech. Bell Atlantic has merged with NYNEX and GTE. Now, there are only four RBOCs.

ILEC - Independent local exchange carrier, a local carrier that is not a part of the Bell System. GTE long boasted that it is the “largest independent LEC.”

CAP - Competitive access providers. These small entrepreneurial companies provide “access” to the public-switched network and bypass the incumbent LEC, such as Teleport Communications Group in the 1980s.

- Competitive local exchange carrier. After the Telecom Act of 1996, a multitude of CLECs started up, such as Adelphia, Nextlink, and SNiP. Due to changing market conditions and financial mismanagement, numerous CLECs have filed for bankruptcy, such as e.spire and Teligent. In addition to long-distance service, AT&T now offers local service in many markets, so AT&T can be called a CLEC.

ILEC - Incumbent local exchange carrier. If a CLEC such as Nextlink is operating in BellSouth’s region, Nextlink will refer to BellSouth as the incumbent carrier.

Local access and transport areas

What determines if the telecom service is local or long distance? As part of the agreement between AT&T and the Justice Department at the time of AT&T’s divestiture, this question was one of the most important to be answered. Why? The negotiators on the LEC side of the table and on the AT&T side of the table haggled over who got to carry which calls. Ultimately, the question was: “Who gets to earn the revenue from these calls?” A huge amount of money was at stake. In the end, it was decided to divide the country into 777 LATAs.

LATA boundaries were determined by population and, in most cases, LATAs are the size of two to five counties. In some cases, the LATA is almost the same geographically as the area code, but they are not the same. Most LATAs are contained within a state, but some cross state lines. The Chicago LATA, for example, includes Gary, Indiana. A call from Gary to Chicago is an intralata call, even though it is an interstate call.

In 1984, as part of the agreement between the Justice Department and AT&T, local telephone companies would provide all telephone lines (access) and carry all telephone calls (transport) within the LATA. Calls between LATAs, or interexchange calls, were to be carried by long-distance carriers. Figure (x) shows the two LATAs in Washington state. A call from Spokane to Seattle to Tacoma is an intralata call and should be carried by the local carrier. A call from Seattle to Spokane, however, is an interlata call and is to be carried by the long-distance carrier.

Figure (x): Local access and transport areas in Washington state.
Although the breakup of AT&T was designed to benefit consumers because competition would bring prices down, the situation initially proved to be very confusing for consumers. It was unclear to customers which company was responsible for which service. This was very frustrating, especially for customers whose lines needed to be repaired. Bell and AT&T often blamed each other. Meanwhile, the customer lost valuable phone calls while the carriers were busy pointing fingers instead of repairing lines. Today, local carriers and long-distance carriers still bicker about who is responsible when a customer experiences technical difficulties with the phone lines.

Implement your changes

Because of their experience, professional phone bill auditors can easily find savings opportunities for their clients. They have done the work before; they know what to look for, so they can quickly recommend cost-cutting changes. But it is not easy for consultants to implement their own recommendations. Before making any changes, telephone companies always require the consultant to present a letter of authorization (LOA) signed by the client. The LOA functions like a power of attorney.

Consultants also have a reputation of bullying telephone company employees, and because fraud is so prevalent in the industry, phone company employees are very reluctant to work with consultants. Telephone company customer service representatives generally have a large number of orders on which they are working, and they are not happy to receive more work. When they are overworked, they make mistakes. Sometimes when you request a change to your account that will cut costs, phone company representatives instead make a change that increases your cost.

Auditing a $10,000-per-month customer’s bills may take 3 hours, but implementing the changes may take 3 to 4 months. Most consultants are paid 50% of the savings once they are realized on phone bills. But if a client is willing to implement the consultant’s recommendations on its own, many consultants would gladly reduce their fees. They may even cut them in half. As a consultant, I would much rather make $5,000 in 3 hours than $10,000 over the course of 6 months. If you have hired a consultant, you can cut his or her fees if you are willing to handle all of the implementation.

Once all the orders are placed with the phone companies, be sure to verify all implementation. After placing the order, call the carrier back to double-check that the changes have been made. Diligently check the next phone bill to ensure that the new pricing is in place.

One-time credits and refunds

A successful telecom audit will not only reduce ongoing monthly expenses but also produce one-time refunds and credits such as the following:

- Refunds of overcharges. A customer is always entitled to a full refund if the phone company has erroneously billed the customer. The refund should always include the taxes paid, and sometimes the carrier will also refund interest.

- Bonuses. Many carriers will give bonus credits to customers who sign term agreements. One of the most common bonuses is a credit in the 13th month of a 24-month term agreement with a long-distance carrier.

- Installation credits. Many carriers will reimburse any expense a customer pays to have the carrier’s service installed. For example, a customer who signs up for new frame relay service will have to buy routers. Once the frame relay service is up and running, the carrier will put a credit on the customer’s account to reimburse that customer for the router purchase.

- Promotions. From time to time, such as once a quarter, carriers give away promotional credits. A typical promotion will be something like waived local loop charges for 6 months. During the course of a telecom audit, the auditor should ask all the carriers (especially the long-distance carriers) to give the customer the next promotion. The carriers are most likely to give new promotions when the customer is negotiating a new term contract.

- Courtesy credits. Most customer service representatives are able to credit customer accounts to satisfy minor discrepancies. For example, if a carrier cannot speedily implement a new rate plan on a mobile phone, it may give a $50 one-time courtesy credit as a good faith gesture. It does not hurt to ask for courtesy credits, especially if the carrier owes you a favor.

Audit phone bills

Once you have gathered all the records, you will have a mountain of paperwork in front of you. Now you are ready to audit. It works well to keep the phone bills organized by location or according to service: local, long distance, data, or wireless. Before doing a detailed line-by-line audit (which most people never have time for) do a cursory review of the bills. Take a common sense approach and look at the bills one by one. Try to get an idea of where your organization spends most of your telecom dollars. Then you will be ready to start auditing each bill.

First read the summary pages of each bill and see exactly what the carrier is charging you for. Does your organization really need all of these services? Do the charges seem correct? Are the taxes and fees excessive? Next, spot-check the call detail to get a ballpark idea of the cost per minute. When you encounter a charge that you do not understand, call the phone company and question it about the charge. Most phone company employees will patiently explain the phone bill to you, and many will offer suggestions on how to reduce the bill. You can also get end users involved. Your employees who are actually using the phones can be a valuable source of information. Ask them if they have any ideas on how to reduce the cost of your telecom services.

Monthly savings

The desired result of a telecom audit is to reduce monthly expenses by doing one or more of the following:

- Correct erroneous rates, such as wrong per-minute rates on a longdistance bill.

-Close unused accounts, such as local phone lines that are no longer used.

- Eliminate employee expenses, such as a mobile phone expenses for ex-employees.

- Eliminate unnecessary services, such as pager replacement programs and wire maintenance plans on local lines.

- Add missing discounts back to accounts and secure refunds of the overcharges, such as a missing association discount on a long-distance bill.

- Eliminate excessive fees by having the carrier waive them, such as monthly fees for 800 numbers on a long-distance bill.

- Add missing promotions back to accounts, such as missing waived local loop charges on a dedicated private line.

- Negotiate new promotions, such as free nights and weekends on a mobile phone.

- Implement lower pricing on an existing service, such as by changing rate plans on a mobile phone.

- Change to a more cost-effective service, such as replacing cellular phones with personal communication service (PCS) phones.

- Negotiate a new contract with your current carrier.

- Change vendors, for example, move intraLATA calls from the local carrier to the long-distance carrier.

The complete do-it-yourself telecom audit

Anyone can successfully perform a telecom audit. If you are already familiar with your own services and willing to spend a couple hours a month reviewing your bills, you can trim your telecom costs by hundreds or thousands of dollars each month. I will explain a simple step-by-step method for performing a complete audit of all your telecom services. Many professional telecom consultants and bill auditors use this same approach.

Numerous phone bill auditing firms have sprung up in the last 10 years. These firms provide a valuable service for businesses that lack the time and expertise to audit their own phone bills. These consultants are either paid an hourly rate or a percentage of the savings and refunds that they generate. They prefer to work with customers whose monthly phone bills total $5,000 to $50,000. Smaller companies keep a close eye on their expenses, and larger corporations have a full-time telecom staff that manages the services each month. When customers keep their phone bills clean, there is less opportunity for the consultant. But no matter what size your company, you need a strategy for controlling and minimizing your telecom expenses.

The audit method explained is a comprehensive system to manage all of your telecom expenses. This system is scalable. You may not have the time to perform a complete audit; you may only be concerned about one of your services. In that case, you can use this book as a reference tool and selectively attack one telecom service at a time. But if you have time and follow this plan, you will know exactly what services your organization uses, as well as the exact cost for those services. You will then be able to cut your costs by thousands of dollars.


Every day, we use telecommunications products and services. We take for granted that we can pick up the telephone, dial a few digits, and talk to someone across town, or across the world. We have come to expect quality telecommunications services, and we are surprised, or even offended, when the phone does not work.

The cost of telecommunications is one of the top five expenses listed on the balance sheet for most businesses. But corporate users do not make up the largest slice of the telecommunications pie. About 70% of telecommunications revenue comes from consumer spending. It is not unusual for an individual to spend more than $250 a month on personal telecommunications services. This book is written for corporate users. Small businesses, large corporations, and everyone in between will profit from the information contained in this book.

The telecommunications industry is a unique mix of contrasts. Next-generation technologies such as asynchronous transfer mode (ATM), wireless access protocol (WAP), and digital subscriber line services are taking the market by storm but most phone calls still originate across plain copper wires. Mature carriers such as AT&T compete with upstart carriers such as Qwest for dominance in today’s fast-paced marketplace.

Those who cannot keep up with the pace are being left behind. Smaller carriers are being swallowed up by hungry “supercarriers” through a record number of mergers and acquisitions. If customers do not stay abreast of the market, they end up using outdated services and being overcharged. Customers have more service choices than ever before, and carriers are enjoying record revenues. One thing has not changed, however—few customers understand whether the charges on their phone bills are accurate and if the rates are competitive.

Every month, more than 10 million American businesses that do not fully understand their phone bills dutifully mail (large) checks to the phone companies. If they do not pay these bills each month, their services will be turned off, and no business can operate without phones.

Most carriers use billing systems designed in the 1970s. These “legacy systems” were designed to handle only a small number of service offerings. They cannot keep up with today’s complex telecom services, and they end up being inaccurately billed. Few businesses are assured that they are not overpaying. They do not know exactly how charges are calculated or how to verify that those charges are correct.