Commissions directly from the operator services provider

In many markets, the site owner can choose the long-distance provider for each payphone on the premise, even if the physical payphone is owned by the local phone company. Another way to impact your bottom line with payphones is to negotiate a separate commission agreement directly with a long-distance carrier. The local phone company still provides the payphone, whether or not you pay for it each month.

In this case, the long-distance carrier is functioning as an operator services provider (OSP). The OSP handles most operator-assisted calls, and the site owner is paid a monthly commission by the OSP. The commission rate is 5% to 25% of the operator-assisted calls only; the local carrier keeps all the coin revenue.

Saving money on semipublic payphones

In many states, a site owner does not have to pay for a semipublic payphone. There are varying definitions for the term, but usually semipublic means the payphone is accessible to the general public. The classic example is of a payphone at the back of a loading dock. Even though the loading dock itself may close for business at 5 p.m., the payphone is still available for someone walking by. In this example, the business should be able to get the local phone company to stop charging it for the payphone each month. On the other hand, the phone company may just decide to remove the phone at that point.

Telecom : Managing your payphones

Many businesses have on-site payphones. The local phone company either owns the phones or they are customer owned. If the local phone company owns the phones, then the business owner normally pays a monthly fee to the local phone company for the payphone. The payphone bill is almost identical to a local bill for a regular business phone line. The charge for the payphone is usually about the same as the charge for one flat business line: about $40 per month.

Eliminating payphone bills

The problem with paying the local phone company to have a payphone at your site is that you are paying the company so it can earn money from your employees. Not only does the carrier earn $40 a month from you, but it gets all of the coin revenue and probably receives a commission on all operator-assisted calls, collect calls, calling card calls, and long-distance calls from the payphone.

- The “$4 rule” has long been a standard with payphones. If the payphone is earning $4 or more per day in coin calls, then the local phone company will discontinue billing you the monthly fee and instead will pay a commission on the calls.

- A typical business has multiple payphones at one facility. If most of the payphones are meeting the $4 minimum, then an overall commission agreement may be negotiated with the local phone company. Commissions on payphone calls vary from 5% to 25% of both the coin and long distance revenue. The commission checks are usually paid monthly or quarterly.

- If the local phone company is unwilling to waive the monthly fee for the payphone due to the low amount of calling, you may consider canceling the service altogether. If you have multiple payphones in one location that are not producing significant call volumes, consider reducing the number of phones until the $4 minimum is met.

Capturing loose traffic

If you have loose traffic, immediately inform your local carrier and your long-distance carrier. To get rid of loose traffic, the following steps, listed in order of urgency, should be followed:

- Change your PIC code. Make your local carrier change the PIC code on your lines, both in its billing system and at the central office. Then have the company put a PIC freeze on all lines.

- Add the lines to your long-distance account. Ensure that your longdistance carrier is aware of the line numbers. Make sure it adds the line numbers to your main account.

- Dispute the charges. Dispute the charges with your local carrier. You have the option of withholding payment for these charges. The local carrier will not disconnect your local lines for nonpayment of another carrier’s charges.

- Negotiate a refund. Negotiate a refund of the overcharges with the carrier that charged you. If the loose traffic is due to a carrier error, insist that it issue an invoice credit equal to 100% of the charges. The carrier will probably refuse to issue a full refund, but it will agree to rerate the traffic and issue a partial refund.

Although these are simple steps, many things can go wrong when trying to eliminate loose traffic. It has been my experience that a business with 10 or more locations will have loose traffic almost every month. A wise customer checks his bills every month for discrepancies, especially loose traffic errors.

Loose traffic rerate credits

Ift a customer has had his long distance billed as loose traffic, he is usually entitled to a refund. Unless the problem is the customer’s fault, customers should not be required to pay more than they would have normally paid if the long-distance calls had been billed correctly. Loose traffic happens for a variety of reasons, and it may be impossible to figure out how it happened and who is at fault. If you cannot convince the carrier that it is the company’s fault that you were overbilled, the carrier will resist giving a refund. The customer should steer the negotiation away from faultfinding and concentrate on the fact that the rates paid were too high and unfair.

Loose traffic may only involve two carriers: your local carrier and your authorized long-distance carrier. At other times, however, three carriers may be involved: the local carrier, your authorized long-distance carrier, and another long-distance carrier. If you have been slammed, however, it is likely that a fourth company has joined the party—a billing company. Billing companies such as USBI and Enhanced Services Billing (ESBI) are legitimate companies that handle the billing for fraudulent companies such as NOS and Hold. What follows is an example of how carriers operate using Luigi’s Automotive Supply, a fictional Los Angeles company.

Luigi’s local carrier is SBC Communications. Sprint is his long-distance carrier. A representative from Scamco Long Distance places an order with SBC to switch Luigi’s long distance to Scamco. Because Scamco is a small new company with no billing agreement with SBC, Scamco has USBI process the billing. USBI represents hundreds of small telecom carriers and has a shared-billing arrangement with SBC. SBC is happy to make the change because it keeps a portion of the billing. In this fictional, but nonetheless realistic, example Luigi has four phone companies to deal with: SBC, Sprint, USBI, and Scamco. Table 8.2 shows how Luigi’s long distance cost has drastically increased as a result of the slam.

The full recourse option
If the customer cannot negotiate a refund, a full recourse of the charges can be requested with the local carrier. Explain to your local carrier that you are disputing the full amount of the charges billed by the fraudulent company. Be sure to exclude that amount from payment of your local carrier’s bill.

The local carrier then notifies the fraudulent carrier that the charges are being disputed, and the fraudulent carrier has a limited time (usually 60 days) to respond. Fraudulent carriers usually do not respond, and the local carrier credits the customer’s bill in the full amount.

Unethical phone companies rarely fight these disputes. In fact, many fraudulent companies are so eager to avoid customer complaints to the FCC that could result in stiff fines that they readily offer refund credits. Their phone greeting is practically “Thanks for calling Scamco, would you like a refund?”

Collect calls
Collect calls are handled by AT&T, WorldCom, Sprint, and a host of collect call niche providers. The charges for these calls usually appear in the last pages of the local bill.

Collect calls are fairly straightforward: You call collect and the person you called is charged. Encourage your employees to use 800 numbers or calling cards instead of calling collect. You can also block collect calls with the local phone company. This forces the caller to use another method to complete the call. But this is not a solution for everybody. Organizations such as law enforcement, hospitals, bail bondsmen, and lawyers regularly receive important collect calls.

900 calls
900 calls are expensive because the caller is paying for the information given by the 900 provider in addition to the long-distance charges associated with the call. Almost all 900 calling is billed on the local bill. In this way, the call is handled much the same as collect calls. 900 services are usually provided by the big long-distance companies. If you call a 900 number, you will probably see a charge from AT&T on your local bill.

900 calling has a well-earned stigma, but some of the calling is legitimate, such as technical support centers that use 900 numbers. If you have determined that your business does not need 900 calling, call your local phone company and have it block all 900 and 976 calling. 976 numbers function like 900 numbers but are based in your local market.

The block is ineffective against some 900 numbers, however, because they are accessed by dialing an 800 number first. 900 service providers are aware that most businesses block 900 dialing through their PBX or through the local carrier’s central office, so they have invented a way to get past this obstacle. A caller dials an 800 number to get past the PBX, and then the call is transferred to the 900 number.

Miscellaneous monthly fees
If loose traffic, slamming, collect calls, and 900 calls are not bad enough, local bills are now fair game for a whole host of miscellaneous fees. The charges already described are all usage-based, but fees are a fixed expense each month. I have seen businesses waste thousands of dollars a year on fees that should have been canceled.

Some fees are legitimate, such as charges for voice mail, Internet access, and Web site hosting. Vendors that supply these services choose to do their billing through the local phone company because it makes collecting their money easier. As long as the customer verifies the charges on the bills each month, misbilling should be minimal.

A big problem for customers is that phone companies charge fees as a part of almost every service. Customers moving their loose traffic from their local bill to their main long-distance account will still be billed a monthly service fee of $5 to $20 just to maintain an account with the old carrier. Some carriers bill a monthly fee for each individual line on the account. Not only is it important to move the traffic, it is also necessary to inform the carrier to cancel the account.


Cramming is the process of adding services or fees to a customer’s phone bill without permission. The services are often legitimate, but the customer does not want them. A local phone company representative may have added them intentionally or accidentally. Customer service representatives are often paid a commission on each additional service they sell a customer.

Another way to accumulate fees is to make collect calls or 900 calls. Some 900 numbers, when called just one time, will enroll the caller into a monthly “membership” program. If one of your employees calls a psychic line one time, you may be enrolled as a member. Your local bill will then include a $50 membership fee each month.

Many unethical companies add monthly fees to your local bill and provide nothing in return. They deceptively give the fee a legitimate sounding name, such as “network management” or “call reporting.” When the average accounts payable clerk sees the charge, she simply pays the bill rather than question the charges.

The key to avoiding or reducing the risk of cramming, slamming, collect calls, and 900 calls is to spend a few minutes each month scanning your local bills. Large companies should consider hiring an outside consulting firm for a telecom audit once a year. Discrepancies should be corrected immediately. Be firm with carriers and insist on refunds.

Telecom: Why all the loose traffic?

Loose traffic occurs for a number of reasons. Sometimes it is the customer’s fault; but usually it is the fault of one of the phone companies. Regardless of who is at fault, customers pay double or triple what they would normally pay for these long-distance calls. The problem should be corrected immediately.

New lines added by the customer
Because of the recent explosion in the use of computer modems and fax machines, customers regularly add additional phone lines to connect to these devices. When you order a new phone line from your LEC, the company always asks which long-distance carrier you want assigned to the new line. If you fail to notify your long-distance carrier you will have loose traffic. The line will not bill on your master long-distance account; instead, the calls on this line will bill on your local bill at high nondiscounted rates.

In the sample local bill in Figure 4.2, Acme Manufacturing needed two new phone lines to facilitate its new computerized part ordering system. When ordering the phone lines from Telephone Company A, Acme specified that both lines should have Telephone Company B as the long-distance carrier. Because it never informed Telephone Company B of the new lines, the long-distance calls on these lines are billed on the last few pages of the Telephone Company A local bill.

PIC code errors
Another reason loose traffic may appear has to do with phone company errors. The local carrier controls which long-distance company is a customer’s PIC. Each long-distance carrier has its own PIC code, which is entered into the local carrier’s central office and into its billing computers.

If an overworked phone company billing representative accidentally enters the wrong PIC code for your lines, your long-distance calls will be handled by the wrong carrier. These calls will be billed on your local bill. Many carriers have multiple PIC codes, and you must ensure that the correct one is in place. Certain AT&T customers use 732 as their PIC code, but if the more common AT&T PIC code of 228 is used, the calls still might bill on the local bill.

Mismatch at the central office
Even if the PIC code is correct in your local telephone company’s billing system, it may be incorrect at its central office. Since the billing computers and central office computers are usually separate systems, mismatches frequently occur. In this case, loose traffic might appear on your bill. This problem is especially prevalent when you switch long-distance carriers. Local carriers are notorious for changing the PIC in the billing system but failing to do so at the central office. Of course, the end result is that the customer pays the old rates for another month or two until somebody figures out why the change never occurred.

PIC freeze

Once a customer is satisfied that his lines have the correct PIC code, it is a good idea to request a PIC freeze with your local carrier. This “freezes” the PIC choice and prevents anyone from changing your long-distance carrier again unless the company has written permission from you.

Slamming is the fraudulent practice of changing someone else’s long-distance carrier without that person’s permission. This is a common practice in the industry, especially among entrepreneurial start-up long-distance companies and multilevel marketing long-distance companies. If your long distance suddenly starts to appear on your local bill and you do not recognize the carrier, you have been slammed.

Slamming methods
The latest slamming techniques are becoming increasingly creative. Fraudulent carriers create sweepstakes with a free car or a cruise as the grand prize. To enroll in the sweepstakes, you fill out a small card from a countertop display found in convenience stores and restaurants. If you read the fine print on the card, you will find that you have just agreed to switch your long-distance carrier. (Do not count on taking that free cruise anytime soon.)

One of the most creative techniques has to do with the name of the long-distance carrier, as in the case of long-distance companies called “I Don’t Care” and “I Don’t Know.” When a new customer orders lines from a local carrier, the local carrier’s representative asks, “Who do you want as your long distance provider?” If the customer replies, “I don’t care,” then he gets his long-distance from the I Don’t Care Long-Distance Company.

Another company that is successful in securing new customers fraudulently is Hold, Inc. That company’s telemarketer calls you for an innocent-sounding survey, then suddenly asks “May I put you on hold?” If the person says “yes,” then his long distance is switched to Hold, Inc. If a customer denies choosing Hold as her carrier, the Hold customer service representative plays back the recorded conversation to prove the customer did say “yes” when asked “May I put you on Hold?”

Slamming rights
If you have been slammed, you should not pay the charges for the first 30 days. The new FCC rules effectively give you a free month of long-distance service. According to FCC ruling 00-135, released in May 2000, you do not have to pay anyone for the first 30 days of calling. After 30 days, you must pay for the calls, but you are only responsible to pay your original carrier according to its rates. This is true even if the slamming company is still the carrier for the calls. If you have already paid the bill, the slamming company must pay your authorized carrier 150% of the charges. Your carrier is then supposed to issue a credit to your account.