Saving money on local calls by changing class of service

Reviewing the class of service for your local lines is an integral part of a telecom audit. Businesses can change from flat-rate service to measuredor message-rate service. Certain types of business are key candidates to change their service.

For example, a telemarketing company whose calls are all long distance should switch from flat-rate service to measured-rate service. Its line charges will be lower with measured-rate service and, because the telemarketing company makes minimal local calls, the charge for usage will be lower. Flat-rate service is better for a business with a lot of local calling.

Table below shows the cost comparison of a telemarketing company that switched from flat-rate to measured-rate local service. The telemarketing company has 50 lines, and each line averages only 60 minutes of local calling each month. In this example, the customer can save more than $5,000 per year by making this change.

This strategy does have a caveat. The phone bill for flat-rate local service does not give a summary of the local calls. Therefore, the customer does not know exactly how much local calling it has done. I have seen one business switch from flat-rate to measured-rate service only to find its costs increase by $800 per month. The company was unaware that its local calling was so high. Unless you are sure your local call volume is low, you should first find out exactly how much local calling you have. This can be accomplished by having your local carrier perform a traffic study. Your telephone equipment may also be capable of tracking the volume.

When considering changing the class of service for your local lines to reduce the cost of your local calls, the following items must be included in your cost comparison: number of local calls, duration of local calls, and the difference in the cost of the lines.

Off-peak calling

A low-tech way to cut the cost of your local calling is to use lower off-peak calling rates. This works especially well if you have a great deal of computer modem traffic. If you do not use dedicated data lines, then your computer modem calls are billed as regular voice calls. If you have a significant amount of modem traffic, consider changing the time that you transmit the data to be evening off-peak calling. Phone companies offer reduced rates at night to encourage callers not to flood the network during peak hours.

Local calling packages
As in the case with Bell Atlantic’s ValuePak calling plans, some local carriers offer discount local calling plans. A good rule to follow when auditing local bills is that anytime you see calls billed according to measured usage, there may be a less expensive way to have the calls billed. A quick phone call to the carrier is all you need to find out what options you have. If the carrier has no discount plans for local calls, consider eliminating the calls altogether by switching to flat-rate service.

Some local calling plans offer a discount each month, such as 10% off, while other plans simply offer lower per-minute calling rates. The impact of the plan is usually fairly simple, but the plan’s design may be puzzling. Consider Bell Atlantic’s ValuePak plan that has been offered for years in Pennsylvania. The plan allows you to purchase “Paks” of local calling at a reduced rate each month. For $13.80, you get a calling allowance of $18. If you use more than your allowance, the rest is billed without a discount. If you use less than your allowance, you are still billed $13.80 per month. Higher volume users usually add multiple ValuePaks but are limited to one Pak per line on the account. Table 6.3 compares a customer’s $100 cost with and without ValuePaks.

As illustrated on top, the customer can save $21 per month by adding five ValuePaks. I have also encountered numerous customers that pay for ValuePaks but have no local calling. Either their calling habits changed or they moved their local calling traffic to another carrier. If they do not cancel the ValuePaks, they will continue to make a donation to Bell Atlantic every month.

Using local call volume to secure discounts
Some discount plans offered by LECs do not offer lower rates for local calls, but they do allow the local calling volume to contribute to the overall volume. As with most telecommunications pricing, the greater your volume, the greater your discounts.

For example, a customer who signs up for Ameritech’s Complete Link plan with a 12-month term and a $500 monthly volume commitment receives lower rates for intralata calling and a discount of 4% to 5%. The discount is applied to monthly service, local calls, and intralata calls. While the local calls do not directly receive a reduced rate, the local calling volume may be significant enough to allow the customer to qualify for the next discount tier. Table below shows an example of the Complete Link plan.

Local calls

Every phone call is a local call, an intralata call, or a long-distance call. These three classifications are determined by geographic boundaries. Figure 6.1 shows the two LATAs in Washington state. A call from Yakima to Seattle crosses LATA boundaries and is therefore a long-distance call. A call from Yakima to Spokane is within the LATA and is therefore an intralata call. A call made within Yakima is a local call.

Local access and transport areas in Washington state

Local calling boundaries are set by the local carrier; LATA boundaries were established at the time of divestiture. To know the exact boundaries of your local calling area, consult the map in the front of your local phone book. Most consumers do not pay for their local calls—they have flat-rate local service. They pay for the line, but the local calls are free.

Businesses either have flat-rate, measured-rate, or message-rate service. Customers with measured-rate service pay for their local calls according to the minutes of use. Message-rate customers pay for local calls according to the number of messages (calls). Table below shows a cost comparison of these three types of service. With all three classes of local service, no one pays for incoming local calls.

Class of Service for Local Lines

Optional services

Most optional services are nonregulated, so the charges vary from market to market. One thing these services have in common is that they are “services of convenience.” For example, the average business can usually live without call forwarding or voice mail, but these services certainly make doing business more convenient. Some of the most common optional services are:

- Remote call forwarding;

- Wire maintenance;

- Voice mail;

- Pay-per-use features.

Remote call forwarding
Remote call forwarding (RCF) allows a subscriber to have a local number in one area from which all calls are forwarded to another area, such as the home office. For example, Pete’s Plumbing has an office in Orlando, but Pete and his plumbers work across Florida. When someone in Miami needs a plumber, they look in the Miami phone book and call a local plumber. Pete is not in Miami, but RCF gives the impression that he is in Miami. Pete pays $15 per month for RCF so he can have a Miami number. When the customer in Miami calls Pete’s Plumbing, the call is forwarded back to Orlando. Unless Pete tells him otherwise, the customer in Miami thinks the company is a local business. Pete incurs long-distance charges on these calls, but the additional customers make it worthwhile.

Saving money on RCF
RCF is a tariffed item, so the rates are set. About the only way to save money on this item is to cancel the service altogether and replace it with 800 numbers. Compare all of the costs, including 800 number fees, long-distance rates, and call volume, before switching. The main advantage of remote call forwarding is the perception it creates that the company is a “local business.”

Wire maintenance
The urban legend states that the CEO of one of the Regional Bell Operating Companies challenged his managers to “find a way to generate an additional $2 million in annual revenue, without increasing the level of service we provide our customers.” The end result was the wire maintenance plan that was quickly adopted by local carriers nationwide. Some of the names of this plan used by the different carriers are: Linebacker, Lineskeeper, Inside Wiring Plan, Trouble Isolation Plan, and Wire Keeper.

The local telephone company is not responsible for maintaining the physical wires inside a customer’s premise beyond the demarcation point. The wire maintenance plans work like an insurance policy. A customer usually pays approximately $3 per line per month for the wire maintenance plan. In the event the inside wiring fails, the phone company technician will repair the inside wiring. The main problem with this plan is that inside wiring almost never fails.

Another problem with wire maintenance plans is they often do not cover the entire cost of the technician’s repair job. A typical wiring repair job carries these charges:

Initial trip to the customer’s premise;

- Cost to diagnose the problem;

- Cost to repair the problem;

- Cost of materials.

In the case of Ameritech’s $3.50 Wire Maintenance Plan, only the diagnostic charge is covered. To have the line repair covered, the Linebacker plan must be added for an additional $3.50 per month. To be “fully insured,” a customer pays $7 per month to be protected from a $50 to $100 repair that only occurs once every 5 to 20 years.

The biggest sting of wire maintenance plans is that the average customer is unaware that it even has the plan to begin with. A manufacturer in the Chicago area was donating more than $100 each month to Ameritech, because it had the wire maintenance plan on more than 50 lines. In many cases, the wire maintenance plans were added to customer bills without their permission. Class-action lawsuits against the RBOCs have recently been resolved. The RBOCs had to give back millions of dollars to their customers who had wire maintenance service.

Most businesses have their phone bills managed by the accounts payable department, but the phone service itself is managed by the computer department or telecom department. In the event the lines need repair, the telecom department will probably call its phone equipment vendor to do the work, and not the local carrier.

Cancel wire maintenance plans
Because of the reasons listed, almost every business should cancel its wire maintenance plans. When canceling the plan with your local carrier, request a full refund of back charges unless your organization actually did order the service. Sometimes, the local carrier will issue a 3-month “courtesy credit” anyway.

Voice Mail
On numerous local bills, there is a $5 to $10 charge for voice mail. A decade ago, this may have been a cost-effective way to have voice messaging. Many Centrex services include voice mail as part of the package of additional services.

Saving money on voice mail
If you see voice mail being charged on your local bill, first find out if it is even being used. Your staff should be able to tell you who is using the service. If not, check with the phone company to see who set it up. In many cases, these “mystery services” were set up accidentally by an overzealous phone company representative or by an ex-employee. In either case, canceling the service can reduce your bill.

If you have a large number of voice mailboxes, you may be able to negotiate a lower price with the telephone company, or you may want to look into switching to a company that specializes in offering voice mail separately. Another cost saving idea is to buy your own voice mail equipment. If you have a PBX, it may be as simple as buying a voice mail card and installing it in your PBX.

Pay-per-use features

Pay-per-use features have been described as a lazy man’s way of using the phone. Every time the caller uses the service, a charge is generated, thus the term pay-per-use. The most common charges are directory assistance call completion, call return (*69), repeat dialing, and three-way calling. The charge is typically $0.75 per use.

Saving money on pay-per-use features
Employees typically do not worry about the small cost associated with these charges, but they can potentially be a significant expense for a business. I have seen businesses pay thousands of dollars per year for the convenience of using these unnecessary services. The simplest way to cut your cost here is to call the local carrier and have it block these features in its central office. If you decide these services are necessary, consider purchasing one of the bulk packages offered by the local carriers.

Directory services
Phone books contain two types of listings: white pages and yellow pages. Each separately billed local account is entitled to one white page listing. Enhanced white page listings that include bold text or additional lines cost extra. Having your numbers unlisted will exclude them from the directory but they will still be available through directory assistance operators. A nonpublished number is not printed and is not available to operators.

Yellow pages listings are usually sold once a year, although the billing shows up at the back of the local phone bill each month. In some cases, the billing is a one-time expense. Pricing is based on the size and placement of the advertisement, if any, and the number of listings.

Saving money on directory services
Directory services are nonregulated, so the rates have a greater propensity for error. One of the most common errors is that a business may have some of its numbers incorrectly designated as “nonpublished” and pay $3.50 per month for this. I have seen payphones in a warehouse treated as “nonpublished.” This is ridiculous because the local carrier typically does not publish payphone numbers in its directory anyway.

The most significant errors to occur with directory services are with the yellow pages. When an order is placed for the advertisement, the phone book is printed as far out as 1 year later. Sometimes the advertisement in the book does not match what is ordered. In this case, the business is entitled to some form of refund. Often, the yellow pages company (usually a sister company of the LEC) offers reduced rates on the advertisement in next year’s phone book. If it misprints the number, you can have the company pay to secure the erroneous number and call forward it to your correct number. If the erroneous number is not available, you may be out of luck.

One of the most recent scams in the yellow pages industry has to do with fraudulent billing by other companies. Companies have sprung up that print their own phone books to compete with the standard phone book provided by the local carrier. Usually, the books are legitimate (although not as thorough as the “real” phone books), but their tactics are unscrupulous at times.

When securing a new order for a directory advertisement, sometimes these companies simply mail an invoice to a business in hopes that the company pays it. These invoices look genuine because they include the yellow pages logo, which is not a trademarked logo. The accounts payable clerk who processes the bills understands that yellow page billing is a legitimate charge, so the invoice gets paid. The “dummy invoice” is a fraudulent technique becoming increasingly common, and not just with yellow pages, or telecommunications, for that matter...

Miscellaneous recurring charges billed by the LEC

In addition to line charges, local calling, and intralata calling, the local phone bill will include additional charges. Most of these items are optional but some are almost always mandatory, such as the FCC charge and touch-tone service. Optional services are normally nonregulated, so charges will vary from market to market. One thing these services have in common is that they are services of convenience. For example, the average business can usually live without call forwarding or voice mail, but these services certainly make doing business more convenient.

Optional services are usually listed in the first pages of your local phone book. Carriers change their service offerings frequently, so you may want to call the carrier to find out exactly what is being offered today.

Does the money for the “FCC Charge” really go to the FCC?
In addition to the charge for the actual phone line, local carriers also charge a fee with each line. During the negotiations associated with the breakup of AT&T in the early 1980s, the Bell companies argued that AT&T would get more money because long-distance service has higher profit margins than local service. They also complained that they had to bear the high cost of maintaining the local lines from the central office all the way to the business or residence. This was a legitimate concern, so the government allowed the LECs to subsidize their costs by charging each customer a fee per line.

On the phone bill, this fee usually reads “FCC Approved Line Charge” or “Interstate Access Fee.” The fee is usually around $8 per line. The money does not actually go to the FCC—that organization is funded by our taxes. Instead, this money goes directly to the local carrier as additional revenue. Over the years, this fee has steadily increased, like most other charges on the local phone bill.

This fee is not negotiable, so the chances of saving any money here are slim. The only way to cut this cost is to order your customer service records from the local phone company and ensure that the number of fees charged does not exceed the number of lines charged.

How line charges and local calls are billed

Regardless of whether or not a business has lines, trunks, or Centrex, there are three ways to pay for local phone lines. With flat-rate service, the line is billed but local calls are free. Measured service consists of a line charge, and local calls are billed by the minute. Message-rate service has a line charge, and local calling is billed on a per-call basis. Each call is considered a “message.”

Three Different Classes of Service for Local Lines

Reducing line charges by changing class of service
Local telephone companies usually only offer one or two of these classes of service in each market. The best practice is to compare your current service to whatever alternative service the carrier offers. If you change your class of service, it is usually only a billing/pricing change—not a change regarding how the service actually works.

Line charges are usually higher with flat-rate service. A business such as a mail-order company that makes few local calls can benefit by changing from flat-rate service to message-rate. The line charges will be lower, and because the business makes almost no local calls, the local calling charges will be minimal. Table 6.2 shows an example of this type of change. The math, of course, works two ways; a business that makes a great deal of local calls will profit by switching from measured-rate service to flat-rate service.

Saving money by changing to a CLEC
CLECs are aggressively winning business away from incumbent local carriers. CLECs usually enter a local market as a reseller of the incumbent LEC’s services. Once they have established a customer base, they will begin to install their own lines and central office switches. Teligent, one of the first CLECs, offered local service via line-of-sight wireless connections. (Building a network from the ground up is costly, and cash-poor Teligent went bankrupt in May 2001.)

As part of the Telecom Act of 1996, incumbent LECs are required to allow CLECs to interconnect to their network. They are also required to allow the CLECs to “colocate” their switching equipment in the same central office.

CLECs usually offer prices 5% to 30% lower than the incumbent LECs. The end user has to decide whether to sign up with the CLEC under a reseller arrangement or under a facilities-based arrangement. The savings are better using the CLEC’s actual facilities, but many of the problems previously mentioned regarding a Centrex conversion apply with a change to a CLEC’s physical lines. It may not be worth the “pain of change” for the customer, so the reseller option may be best.

Eliminating erroneously billed lines
Many businesses make a “donation” to their local telephone company each month by paying for lines that are not used. Once a year, a business should audit its phone records for these lines. A low-tech method of verifying what lines you have is to request a list of all your telephone numbers from the local phone company, and call the numbers yourself. You may be surprised to see who answers.

In some cases, a business may be paying for someone else’s lines because the telephone company made an error in its records. A simple data entry error may cause you to pay for your neighbor’s phone lines. Or you might be paying the phone bills of an ex-employee’s home office phone bills each month. Unless you are feeling benevolent, you should correct the problem. Notify your local carrier and request a refund of all the past-due charges plus interest. The carrier will reroute the phone bills, but the actual customer probably will not be back-billed.

Reducing the number of trunks
As noted above, a business with a PBX uses trunk lines provided by the local telephone company. The trunks connect the customer’s PBX to the telephone company’s central office. Within the customer’s premise, inside wiring connects each individual phone to the PBX. This configuration is often called “trunks and stations.”

A business only needs a number of trunks equal to the maximum number of callers who will be making outside calls at the same time. To determine whether or not you are “overtrunked,” you can order a trunk study from your local carrier. A trunk study measures the number of outgoing calls over a specified period of time. The term traffic study is used to describe a usage study performed on POTS or Centrex lines.

To order a trunk or traffic study, call your local telephone company representative and specify when you want the company to analyze your traffic volume. Your carrier will probably give you a 5-day statistical sampling of your traffic volume. The trunk study report sent to you details the number of calls, the duration of the calls, the “busy hour” each day, and the amount of any “overflow.”

In the sample trunk study below, the customer experiences “call blockage” on Thursday and is, therefore, “undertrunked.” This study reveals the need to add, not drop, trunks. This is especially important for a business that cannot afford to miss any calls, such as a hospital. A radio station that experiences high levels of overflow should not be concerned, because the overflow is most likely callers flooding the lines in response to an on-air contest.

Trunk study report

Alternative local lines offered by local carriers

Most phone calls by consumers or businesses are carried across ordinary POTS lines, trunks, or Centrex lines. However, local carriers do have alternative offerings such as WATS, T-1, T-3, ISDN, dedicated private lines, DSL, X.25, frame relay, and tie lines. I will explain how some of these services can be beneficial for voice calls in this section.

Wide-area telecommunications service (WATS) was originally offered by AT&T prior to divestiture. It was designed for high-volume long-distance users and was more of a bulk pricing service than an alternative technology. It came in two varieties: In-WATS, the precursor to toll-free calling, and Out-WATS.

Long-distance carriers have moved their customers away from WATS service, but the local carriers are less proactive. A customer who used WATS service for intralata calling 10 years ago might still have monthly billing for the service. A good portion of the WATS service today is inactive. Customers now use direct dial long distance and 800 services from their long-distance provider. If customers fail to cancel the WATS service, even though it is not being used, they may still be paying a hefty recurring fee of up to $500 each month for it.

Cancel WATS service
The reason this antiquated service is addressed in this book is because one in ten large businesses still has a WATS line. WATS lines were originally a great idea because they lowered a customer’s cost for long-distance calling. With the decline of long-distance pricing over the past decade, most WATS lines should be canceled and regular long-distance calling should be used. The cost of direct dial long distance today is much lower than WATS pricing.

T-1 for local service

Local carriers have struggled to increase their network capacity to keep up with ever-increasing call volumes. The demand for lines is also rapidly increasing. Carriers are now using technologies that allow more phone calls to travel across the same number of phone lines. T-1 service accomplishes this objective by using multiplexing technology, which is a method of cramming multiple phone calls across the same phone line at the same time.

A T-1 is a dedicated connection between the customer’s premise and the carrier’s central office. A T-1 has 24 distinct channels for calls. It can carry 24 voice or data conversations at the same time. The 24 channels are multiplexed across four wires (which is the same physical capacity as two POTS lines). Because less of the carrier’s network is used, local carriers are able to offer high-bandwidth T-1 service at a fraction of the cost of the same bandwidth across multiple POTS lines.

Multiplexing technology.

Saving money with a local T-1

Because the T-1 can handle 24 simultaneous calls, it can theoretically be used to replace 24 local trunks or POTS lines. PBX trunks typically cost $60 per month, but T-1 service is available in most markets for less than $500 per month. (Exact T-1 pricing is determined by the actual mileage from the central office to the customer’s premise.) Using these figures as a guide, the break-even point is about 10 phone lines. Factoring the “pain of change” into the equation, a business with 15 or more trunks should definitely consider switching to T-1 service.

These monthly savings are significant, but this is an often-overlooked cost management measure. An organization’s financial managers need technical expertise to handle the T-1 conversion. The company’s technical managers are often too busy with new technologies to be concerned about upgrading a low-tech service such as trunk lines, especially if the current service is functioning properly. Once you have done your own T-1 cost study and determined that it is beneficial, then it is time to pursue a technician, such as your PBX maintenance company. The technicians can tell you exactly what needs to be done to your equipment to upgrade to T-1 service...

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...

The physical telephone line

In spite of all the hype about fiber-optic phone lines, most businesses and residences still connect to the public-switched network using copper wires. Carriers are beefing up their networks by using high-capacity fiber-optic lines, but most of this is between central offices, which are commonly referred to as the “backbone” of the network. It is far too costly to run fiberoptic lines across the “last mile” to the end user. The copper wires are already in place, and it is just too expensive to replace the wiring. No matter how advanced the phone network, a user is still hindered by the limitations of the last mile. The last mile is almost always low-capacity copper wire. This trend is not likely to change any time soon, as the average cost for a “fiber drop” replacing the copper wires into a residence with fiber-optic lines costs approximately $2,000 to $3,000 at the time of this writing. Phone companies are too busy concentrating on competition and profits to make large investments upgrading the last mile from copper to fiber. Therefore, most of us have telephone service via traditional copper wires, rather than high-tech fiber-optic lines.

Circuit is a generic term referring to the physical connection, or path, between two given points, such as your phone and the central office. A common type of circuit, used in residences and businesses, is called “four-wire.” One wire is used to transmit data, and one wire is used to receive data. The other pair of wires is a spare set. That is why the phone company technician only works inside the house if a person orders a second phone line to his or her house. The technician does not need to string a whole new pair of wires all the way to the house from the telephone pole.

The wires connecting to the central office may be identical, but they are called different names according to the type of connection and its purpose. Local service is provided three ways: POTS lines, trunks, and Centrex.

Regular phone lines are called “POTS lines,” which stands for plain old telephone service. POTS lines are used with single-line termination points, such as a telephone, fax machine, alarm, or modem. For each phone or device, one phone line is required. Residential customers use POTS. Key systems also use POTS lines. Figure below shows how POTS lines work.

POTS lines typically cost around $40 per month for a business, while residential lines cost $15 to $25 per month. Although residential lines are more expensive for the phone companies to maintain, the end user pays less because residential service is subsidized by the phone companies through the higher rates that businesses pay for phone service.

A trunk is a circuit that connects two switching devices. The lines connecting two telephone company central offices are called trunks, but for the end user, the term trunk is used to describe the line that connects a customer’s private branch exchange (PBX) to the telephone company’s central office. A PBX is a computer-driven phone system.

A PBX is a highly sophisticated telephone switch located at the customer’s premise with an attendant console. The PBX connects to a group of trunks that are accessed by the caller first dialing “9” to make an outside call. Inside calling from one internal extension to another does not tie up a central office trunk, because the PBX switches the call; only inside wiring is used. Figure 5.2 shows how trunks work with a PBX.

Trunk lines connect internal calls to the telephone company’s central office.

If a business has a PBX, it must purchase trunk lines from the phone company. The physical circuits are still the same copper wires it would have had with POTS service, but with trunks, a business can expect to pay $60 per month, per trunk. The cost is higher than POTS lines, but multiple internal extensions can use one trunk, just not at the same time. Therefore, a business need only purchase a number of trunks equal to the number of calls it expects to have during its busiest time.

Centrex service
Centrex was originally designed for large customers, such as hospitals or college campuses, whose facilities were almost big enough to warrant their own central office or central exchange. The first Centrex system was implemented in 1965 at Prudential’s office in Newark, New Jersey, but today, Centrex can be a cost-effective way to have sophisticated phone service even for a small business.

Centrex is a business service offered by local exchange carriers. These lines are normal telephone circuits with lots of features included in a package, such as call forwarding, call park, call transfer, speed dialing, and off-premise extensions. The local carrier’s central office provides the features.

Like PBX service, Centrex service usually requires the caller to dial “9” to make an outside call (see Figure 5.3). This can be very cumbersome for the customer, especially when equipment may have to be programmed to dial the “9” such as alarm systems, computer modems, and fax machines. Some local carriers “assume the 9” so customers do not have to reprogram their equipment and retrain their employees.

Centrex service.

Centrex pricing varies widely. Sometimes it costs less than POTS lines; sometimes it costs more. Centrex generally costs less than POTS lines with GTE, U S West, Ameritech, and BellSouth. Centrex almost always costs more than POTS lines with Southwestern Bell. Centrex pricing with the other Bell companies varies.