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.

Program your PBX

Another technique for moving intralata traffic to your long-distance carrier is to program your PBX to function like an autodialer. The PBX can insert your carrier’s CIC and move all intralata calling away from the local carrier. If you have a key system, or single-line phone set, you should be able to program one of the speed dial buttons to dial the CIC for you.


The easiest way to shift your intralata traffic from your local carrier to your long-distance carrier is to use the newly popular dial-around techniques. This works the same way autodialers work, except the caller is manually dialing the CIC instead of the autodialer. This solution never works with a larger company, because the cost of training the staff outweighs the savings. For a small office with few employees, however, this can be a very effective way to trim intralata billing.


Long-distance carriers knew that if a customer dialed its carrier identification code (CIC), such as 10-10-288 for AT&T today, the call would be routed to AT&T. This works regardless of whether or not AT&T is the chosen long-distance carrier, and it works regardless of whether or not the call is intralata or interlata.

Because the long-distance carriers knew that the average business would not take the time to dial the CIC, they installed autodialers, which are small electronic devices that interpret the numbers that the caller is dialing. If the autodialer detects the dialing of “1 + area code + number,” then it automatically inserts the CIC before the phone number the caller has dialed. When the local carrier’s central office computer detects the CIC; it automatically sends the call to the long-distance carrier’s network.

With this fairly simple technique, long-distance carriers were able to capture the intralata traffic from the local carrier and increase their revenues. The cost of a dialer is around $300, and as long as a customer used $50 or more in monthly intralata traffic, most carriers installed autodialers at the customer’s premise for free. The caveat of autodialers is that they have a reputation of being electrically unstable. The slightest power surge due to a nearby lightning strike is all it takes to reset the average autodialer. When that happens, your technician must reprogram the equipment. Keep that number handy for the next time a thunderstorm rolls around.

Intralata calling

LATAs were set up as a result of the landmark breakup of AT&T called divestiture. Divestiture was implemented on January 1, 1984. The LATA is a geographic area wherein the local carrier, such as U S West, provides all the land line-based telecommunications services. Access refers to the customer’s connection to the public-switched network. The phone line that connects to U S West’s central office gives a customer “access” to the outside world. Within the LATA, U S West is designated to carry, or transport, all of the calls.

Picture below demonstrates the concepts of access and transport. Ron “rents” a phone line each month so he can have “access” to his friends via the telephone. When Ron dials the number, the local telephone company “transports” the call to Bev’s phone. A call originating and terminating within the same LATA is called an intralata call. Depending on the carrier, intralata calls may show up on local phone bills under any of the following headings:

- Local toll calls;

- Local calls;

- Long-distance calls;

- Itemized calls;

-Regional toll calls;

- Toll calls;

- Measured calls.

Since divestiture, local telephone companies have provided access and transport for all calls within the LATA.

Even though long-distance rates dropped significantly in the decade after divestiture, intralata call rates remained fairly level during this time. It was not uncommon for a business in Dallas, Texas, to pay $0.15 per minute to call Ft. Wayne, Indiana, but pay $0.25 per minute to call to Ft. Worth, Texas. Customers thought call rates should be lower if the person called is only a short distance away. Due to a lack of competition for intralata calling, local carriers did not reduce their rates. Customers began to look elsewhere for service, and the first place they looked was their long-distance carriers.

Shifting local calls to an alternate carrier

In some markets, the local provider does not offer low rates for local calls. A business in this situation may be able to cut its costs by switching to an alternate carrier for its local calls. Changing your local calling provider is not as simple as changing your long-distance provider, but it may be worthwhile if you can save enough money.

Using the long-distance carrier’s T-1 for local calls
Local calls are normally carried across LEC trunks to the central office and then the call is connected to its destination (see Picture 1). But if you have dedicated service through your long-distance provider, you can easily switch your local calls to your long-distance provider from your local carrier. Dedicated service means you have a T-1 connection from your facility directly to the long-distance carrier’s central office (see Picture 2). The outbound local calls can be rerouted away from the local provider by reprogramming the PBX to handle local calls as long-distance calls. Incoming local calls will still use the local carrier’s trunk lines.

Local calls originate at the customer’s premise and travel across local telephone company trunks.

Local calls originate at the customer’s premise and travel across the T-1 connection

In a typical example, the PBX sends these local calls to AT&T instead of the incumbent local provider, such as Pacific Bell. AT&T has been calling this service Digitalink. By reducing the cost of their local calls from $0.02 per minute to $0.01 per minute, I have seen many Digitalink customers save more than $500 each month.

The second way to move your local calls away from your current provider is to switch carriers altogether. The new CLECs would be more than happy to have your business. A business with a significant amount of expensive local calling whose local service is not complex is a good candidate to switch to one of the many new CLECs. Be careful that they do not also secure your long distance, however, unless you want them to.

OPX: The off-premise extension
A business with two locations in the same city is billed for local calls between the two facilities. If it has Centrex service, however, it can eliminate these charges. With Centrex, one location can be designated as an off-premise extension (OPX).

The OPX functions like an internal extension, and calls between the two facilities are handled like internal calls rather than local calls. Converting an off-site location to an OPX eliminates all local calling charges between the two locations.

Zone calls
In certain markets, customers are billed for zone calls, in addition to the local calls and the intralata calls. This is true for Ameritech’s Detroit, Michigan, customers. As Figure below reveals, the zone is a geographic area in-between the local area and intralata area.

Zone calls in Detroit, Michigan.

Zone calls are like local calls in that the phone bill gives no detail for these calls. Zone calls are like intralata calls, in that zone calling rates are much higher than local calling rates. But unlike local calls and intralata calls, the cost of zone calling is difficult to reduce. However, you can have your zone calling volume contribute toward a greater volume discount with your carrier.

Ameritech’s Value Link plan offers lower intralata rates based on a term and volume commitment. Although the zone calls are not directly reduced, at least the volume from these calls contributes to the overall Value Link volume commitment. The Value Link plan is being replaced by the newer Complete Link plan.