Long distance is now a commodity

Companies that built their own telecommunications networks such as Sprint and MCI began to win market share from AT&T. Hundreds of longdistance resellers also entered the foray. Long Distance Discount Savers was one such company. Later known as LDDS and then as WorldCom, this tiny Mississippi company soon became one of the most dominant telecommunications providers in the world in less than a decade. The 100-year dominant reign of AT&T was definitely over.

Residential and business customers now have more choices than ever for their long-distance service. Over the years, customers have left AT&T for a variety of reasons. Some prefer the more personal service smaller carriers offer. Some left because they think calls may be clearer on another carrier’s network. However, most left AT&T because they have found lower prices elsewhere.

Most industry insiders agree with the statement “long distance is now a commodity.” What they are really saying is that the service the end user receives does not vary from carrier to carrier. The sound quality of a longdistance phone call is so clear now that end users rarely experience any problems when making a long-distance call.

The core issues that separate one long-distance provider from another in today’s marketplace are advanced features, customer service, pricing, billing, and technical support. These are the issues that heavily influence telecom managers and corporate controllers today when negotiating new service with a long-distance provider.

Businesspeople in charge of managing their telecommunications services are under pressure from within their organization to ensure three things:

- Secure customized long-distance service that meets the specific needs of the organization.

- Choose a carrier that will not allow any service outages.

- Secure the lowest pricing available in the industry.

How does a long-distance call work?

Standard phone lines connect an end user to the local phone company’s central office. The central office computer, called a switch, interprets the numbers dialed and then routes the call to its next destination.

How a long-distance call works.

When the central office detects that “1 + area code” has been dialed and determines the call is to another LATA, it knows the call must be handed off to the long-distance carrier. The central office computer then queries a database to find out which long-distance carrier has been selected for the line. The PIC code is used by the local telephone company’s computers to keep track of a customer’s chosen long-distance carrier. Appendix 10B lists the most commonly used PIC codes.

Once the central office computer determines that the call will terminate outside the LATA, it connects the call to the caller’s chosen long-distance carrier. Although the switching equipment at the local carrier’s central office may be exactly the same as the long-distance carrier’s central office, the long-distance carrier’s central office is almost always called a point of presence. That term refers to the fact that the local carrier has a complete phone network within the LATA, while long-distance carriers only have limited network points within the LATA.

When a caller needs to make a long-distance call, the local exchange carrier’s central office directs the call to the nearest point of presence so the call can then be carried by the long-distance carrier. At the terminating end of the call, the long-distance carrier connects to the local carrier’s central office that serves the person being called.

These multiple interconnections and handoffs between central offices take place within milliseconds. The whole process is seamless to the end user, except for the occasional faint clicking sound that may be the result of antiquated equipment in an older central office.

Customer Service Report (CSR) errors

The following items are the most common errors that can easily be located when auditing customer service records. Each item is an example of local telephone company overbilling, wherein the customer should be entitled to a refund.

Wrong PIC

To keep track of which long-distance carrier a customer is using, the local carrier uses the PIC code of that carrier. The PIC code may be expressed numerically on the CSR as in “222” or with letters, as in “MCI.” AT&T’s most commonly used PIC code is 288. The PIC code is stored in the local carrier’s central office and in its billing records. It will be printed on the CSR.

If a customer’s phone lines have the wrong PIC code, his long-distance traffic will be routed to that carrier. This is a very common problem, especially in the case of slamming, when a fraudulent carrier changes a customer’s PIC without the customer’s authorization. When auditing CSRs, you must check the PIC code on each line. If it is wrong, call your local carrier and have the company change it. Call your long-distance carrier if you do not know its correct PIC code. Appendix 10B lists common PIC codes.

Wrong LPIC
As a result of the Telecom Act of 1996, customers can now select their carrier for intralata calling. On the CSR, the code LPIC appears and is followed by the PIC code for the carrier. Many customers have moved their intralata traffic to their long-distance carrier, so their PIC code and LPIC code should be the same. If the wrong LPIC code is on the CSR, your calls will be handled by the wrong carrier. In the sample CSR in Figure 10.1, the second phone line shows “/LPIC TCB,” which means the intralata calls from that line will be carried by Telephone Company B. The customer should call Telephone Company C and have the company change it.

Too many 9ZR charges
As stated above, the 9ZR is the USOC for the end user common line charge, which is about $9 per line. Sometimes, the number of 9ZR charges is greater than the number of lines. This is especially true for large Centrex accounts that bill the 9ZR as one single-line item separate from the line charge. When auditing your CSR, count the number of lines and the number of 9ZR charges. If you are being overbilled, contact your local telephone company.

Wrong tax area
The code TAR indicates which tax area you are in. Taxes are based on where the customer is physically located. Some customers have a city address but are located outside the city limits. Such a customer should be exempt from any city taxes. In other cases, the local carrier enters the tax area of the billing address instead of the physical address of the customer. For example, a company based in downtown Chicago has a manufacturing facility in the suburbs. The taxes are lower in the suburbs, but if the phone company enters the wrong tax area, the customer will be overbilled.

Incorrect hunting sequence
HTG is the code for hunting service. If an incoming call finds your main number busy or gets no answer, hunting allows the call to automatically transfer to another line. If the second line is busy or unanswered, the incoming call hunts for another line. At the end of this “hunt group” of lines, the call will “rollover” back to the first line. Hunting is designed to prevent a business from missing out on important business calls.

A common error with hunting is that one of the numbers in the hunt group may be an old number that is no longer in use. In this case, the call will not work. Another problem is with the rollover feature. At the end of the hunt group, the call should be transferred back to the first number. If this is not set up properly, calls will be lost.

Hidden wire maintenance charges
Many local telephone bills do not offer an itemized list of all charges. Even simple phone bills with only one or two lines may contain hidden charges. You must check the CSR for these charges. The most common hidden charge is for wire maintenance. It is very common for a phone bill to simply say “monthly charge for local service” but the CSR lists MNTPB, the code for wire maintenance plans. If the customer has not ordered wire maintenance, this charge should be canceled.

Wrong mileage—first 1/4 mile
Point-to-point data circuits are billed according to the bandwidth and mileage of the circuit. The rate for the first 1/4 mile is higher than the rate for additional 1/4 miles. A 5-mile circuit will, therefore, be something like this:

First 1/4 mile:

19 additional 1/4 miles @ $20:


If the data entry clerk makes an error when provisioning the above circuit, the customer may be billed each 1/4 mile at the higher “first mile” rate.

Wrong mileage—too much mileage
Another common error has to do with the exact mileage, which should be calculated according to the “airline mile” distance between the two local serving offices (LSO) at the ends of the circuit. If the carrier calculates the mileage according to the physical address of the two sites instead of the mileage between the two LSOs, you will be overbilled.

If you do not have access to telecom pricing software, you can double-check the mileage by giving the NPA-NXX (area code + prefix) for each location and requesting a new detailed circuit price quote from the carrier. Many carriers share software, so if you feel your current carrier may not be truthful, you can get the same information from another carrier.

Wrong mileage—double billing
Data circuits crossing LATA boundaries are usually provided by an LEC and an IXC, or long-distance carrier. The bill is handled by one of the carriers, normally the IXC. Sometimes, both carriers provide a bill for their percentage of the circuit. The customer might be billed 60% of the circuit by U S West and 40% of the circuit by WorldCom. The ratio is determined according to mileage. If 60% of the mileage is provided by U S West, then the customer’s rate will be multiplied by 60%. Unfortunately, some customers end up being billed 100% by each carrier. To ensure that you are not being overbilled, match each CSR and each phone bill to your corporate network diagram.

Hanging circuit
Each data circuit must connect two points. If a customer disconnects an unneeded circuit, she should no longer receive a bill for the circuit. But sometimes, the carrier only disconnects one of the two locations. It is difficult to catch this error by looking at the phone bill alone. This error is very obvious on the CSR, however. If the CSR reads CKL 1 (circuit location 1) and there is no CKL 2, you have found a hanging circuit. The LEC should completely disconnect the circuit, stop the monthly billing, and issue a refund.

You should also check the addresses at each end of the circuit. A travel agent had dedicated lines to an airline. The agent stopped selling tickets for that airline but never canceled the billing for the dedicated lines. When the CSRs were audited, the airline’s address showed up as CKL 2. The customer knew he was no longer doing business with the airline, so he canceled the circuits, saving the business about $3,000 per month.

Term plan error
Signing a 12-month term plan agreement will discount voice or data service pricing by 5% to 15%. Longer-term plans will generate greater discounts. Carriers frequently enter the wrong term plan on a CSR, resulting in missing discounts for the customer. To verify discount amounts, check the original term contract with the actual CSR. If the given discount is lower than the contracted discount, the LEC should issue a refund and correct the problem going forward. If neither customer nor carrier can produce a copy of the original contract, you may be out of luck. However, some have used this situation to eliminate an existing term commitment with the carrier.

Sliding scale line rates
Local accounts with more than 12 lines may qualify for sliding scale pricing. This is especially true with Centrex pricing. The billing may work like this:

First 25 Centrex lines @ $20 each:

Next 100 Centrex lines @ $15 each:

Next 100 Centrex lines @ $12 each:


Auditing the CSR might reveal that all 225 lines are being billed at the higher $20 per month rate. In this example, the customer would pay $4,500 per month instead of $3,200. This customer is entitled to a significant refund. To detect this error, the auditor must be familiar with the original contract terms or be willing to wade through the actual tariff to determine how the lines should be priced.

Loose calling cards
Few customers use the calling cards provided by their local telephone company. Lower rates are available through long-distance carriers. When a business changes calling card providers, it sometimes fails to cancel the old cards. A review of the CSR may reveal that active calling cards are still on the loose. This will not be evident by looking at the phone bill, unless someone uses the cards to make calls. Old cards should be deactivated anyway to avoid the risk of future billings if the cards are used by ex-employees or someone else.

Unused voice lines and data circuits

A very valuable piece of information on the CSR is the service address. Companies with multiple locations will often find, after they audit their CSRs, that they are still paying for lines at closed locations or at an ex-employee’s home. Some businesses detect this problem many years after they quit using the lines. They may have even placed a disconnection order with the phone company. If you have documentation to prove that the lines were canceled, you are entitled to a refund. Most carriers and customers fail to keep good records, however, and the customer will never get a refund.

Sample CSR

The CSR has four different sections: header, list, bill, and service and equipment. The header section is repeated on each page of the CSR and contains information such as account number and bill date. The list section contains information about how the customer will be listed in the white pages, yellow pages, and directory assistance. The bill section contains the billing address, billed name, and tax jurisdiction. The final section, service and equipment, details all of the lines and services the carrier is providing for the customer.

Figure below is a sample CSR for a fictional customer in New York. The customer has two measured-rate business lines. Most of the RBOCs use a similar format for their CSRs. The following list offers a detailed explanation of the most relevant parts of this CSR. In the sample, many blocks are empty because there is no pertinent activity to document.

Account number This is the main telephone number followed by the three-digit customer code. Telephone companies use different customer codes to separate the records of this customer from the records of the previous customer who had this phone number. Some phone company CSRs use the code BTN, which stands for “billed telephone number,” for the main telephone number.

Class of service This is usually 1FB or 1MB, which stand for one flat-rate business line or one measured-rate business line, respectively.

Directory This block is used as a reference point, indicating which letter of the alphabet this business listing falls under in the directory.

Page The page number of the CSR.

Bill period This shows the most recent bill cycle.

Record statement Depending on the carrier and customer’s specific services, the CSR may have up to seven sections (or segments): Account, Line & Station, Key System, Special Service, Extra Listings, Account Summary, and S&E Cross Reference.

Print date This is the actual date this paper record was printed.

Print REA This block explains the reason for printing. BD indicates the record was printed because of the bill date.

Quantity This column shows the quantity of items listed in the next two columns: service and description.

Service This shows the USOCs that correspond to the customer’s services.

This column is as close as we can get to an actual plain-English description of customer services.

L This stands for the last service order action that was performed for the item listed in the description column. The possible codes are E, I, and T, which stand for enter, in, and to, respectively.

Activity date This is the date of the last action for the item.

Total This column shows the charges for each item. Where no charge appears, as in the case of HTG (or hunting), it is a free service.

T This column uses numeric codes to show the tax status of each item. The following codes determine which taxes apply to each service:

Federal, state, and local;

No taxes;


State and local;

Federal and state;


A The activity column contains an asterisk when an item has been changed since the printing of the last CSR.

LN Listed name. This column shows exactly how the business will be listed in the white pages and directory assistance.

LA Listed address. This column shows how the address is listed in the white pages and directory assistance.

SA Service address. This is the physical location of the phone lines.

LOC Location. This column indicates the floor or building number where the service is located. This field helps telephone company technicians locate the physical location of the service.

YPH Yellow pages heading.

BILL This shows the start of the CSR’s bill section.

BN Bill name. The name of the business as it appears on the phone bill. This may differ from the listed name.

BA Bill address. The actual address where the phone bill is sent. In this fictional example, the bill is sent to Acme Manufacturing’s home office in Dallas.

PO This shows the city, state, and zip code of the bill address.

CCH This field indicates the number of calling card holders.

TAR This indicates the tax area of the customer’s physical location and determines which taxes are in effect.

S&E This shows the start of the CSR’s service and equipment section.

BSX This shows that the customer has two active calling cards.

LUD This is the USOC for a telephone company’s Local Usage Discount Plan.

1MB One measured-rate business line. In the description column, “/PIC TCE” shows that Telephone Company E is the PIC. “/LPIC TCE” shows that Telephone Company E is the carrier for intralata calls. Further down in the CSR, notice that the second line has Telephone Company B as the LATA PIC (LPIC). The intralata calls will be carried by Telephone Company B, not Telephone Company E.

RJ21X This is the USOC for a common type of wall jack used by local carriers. The RJ21X jack serves as the demarcation point where the phone company’s network connects to the customer’s inside wiring. Note there is no charge for the RJ21X.

TTB Touch-tone business. With many carriers, this is not a free service, but this telephone company does not charge for touch-tone.

ALN Additional line or auxiliary line. The main number on a telephone account is often called the BTN (billed telephone number) and additional lines are called WTNs (working telephone numbers). A simple technique for CSR auditing is to verify that each ALN shows up as an exact repeat of the others. If they are not exactly the same, you may have found an incorrect PIC or LPIC, or you may have found hidden charges such as wire maintenance.

MNTPB Wire maintenance plan. The actual phone bill may not itemize this service. Note that MNTPB only appears on one of the two lines. This indicates that the customer is probably unaware of this charge, and it should be canceled.

HTG Hunting. In this example, if the calls are not answered on 555-1000, the call is forwarded to 555-1001.

CHN Card holder name. This shows the name of the employee who has been assigned a calling card. If you recognize the name of an ex-employee, cancel the card to avoid fraudulent charges. Most CSRs do not show names.

9ZR This shows the number of FCC line charges. In this example, the customer is being charged three 9ZRs but only has two lines. This error should be corrected, and Telephone Company C should issue a refund.

Customer service records

The customer service record (CSR) is a copy of how a customer’s record appears in the local carrier’s computers. Like other computer records, the CSR is arcane and not much fun to look at. However, a complete telecommunications audit should include at least a cursory review of your CSRs. Most local phone bills lump multiple charges under one heading labeled “monthly service” but the bill does not itemize the charges. This post explains each item on a sample CSR, lists the most prevalent CSR errors, and lists the most common codes used in CSRs. The main value of being able to interpret a CSR is that you can see, in detail, exactly what charges are being billed.

Some local phone companies, such as Pacific Telesis, send their customers one copy of the CSR each year. Most carriers will provide a CSR copy in a few days at no charge or for a small fee.

Universal service order codes

The CSR is a database record that uses universal service order codes (USOC) to describe each detail of your account. USOCs were used before divestiture, when all of the RBOCs were still part of the Bell System, so many of them are still consistent today. Independent LECs such as GTE and SNET use CSRs but their USOCs differ from the RBOCs.

Your monthly telephone bill is generated based on the items in your CSR. Each item is billed according to the rate assigned to that USOC. If the USOC is incorrect, your phone bill will be inaccurate, and you will either be overor undercharged. This is how one flat-rate business line with touch-tone service will appear on a CSR:

1FB - $20.00

TTB - $5.00

9ZR - $8.30

Total: $33.30

1FB is the USOC for one flat-rate business line. The USOC for a measured-rate business line is 1MB. TTB is the USOC for touch-tone business. 9ZR, if itemized on the phone bill, is the FCC line charge, which is also called the end user common line charge (EUCL). The EUCL rate is raised regularly, and, ironically, this money does not go to the FCC. This fee goes straight to the local carrier and is more accurately described on some bills as the “FCC-approved line charge.”

These are the most common USOCs, but thousands of others exist, and new ones are invented daily to describe carriers’ new offerings. Appendix 10A contains a list of 100 of the most commonly-used USOCs, but keep in mind that USOCs are not universally used by each carrier. Most LEC customer service representatives will take time to explain the details of your CSR. If you plan to review a large number of CSRs, you should try to sweet-talk your LEC representative into giving you its internal USOC dictionary.

Armed with a list of USOCs, and a little patience, you should be able to interpret your own CSRs and audit them for accuracy. If you have complex services and want to be absolutely sure your records are accurate, hire a consultant to perform a detailed audit of your CSRs. Because CSR auditing is so tedious, the consultant will probably charge an hourly rate in addition to 50% of the monthly savings and refunds implemented on your behalf.

The payphone surcharge

Prior to the Telecom Act of 1996, payphone owners received no compensation for 800 calls from their payphone. Their $1,000 payphone equipment was being used for free, and the “free caller” tied up the phone, preventing a paying customer from using it. Today, this has changed. If a caller dials an 800 number from a payphone, the long-distance carrier handling the call must pay the payphone owner $0.28 for each call. This small amount of revenue slowly trickles in, but in the high-overhead payphone business, revenue from the surcharge makes all the difference.

Saving money by using a customer-owned payphone

Besides using a payphone provided by the local phone company, a business may decide to use a private payphone company, or purchase and install its own payphone. Either way, the principle is the same. Many convenience store chains use private payphone companies such as the People’s Telephone Company, one of the largest private payphone companies.

The private payphone company installs and maintains its own payphone at the convenience store. If the local phone company already has a payphone on-site, which is usually the case, the private payphone company requests that it be removed. The local company will require a letter of agency signed by the site owner prior to honoring any of the private company’s requests.

Once the old payphone is removed, the private payphone company orders a line from the local phone company and physically connects its payphone to the line. All installation costs should be absorbed by the private payphone company. The company should also pay the $40 bill for the line each month.

Before removing its payphone, the local phone company will probably send a sales representative out to the site owner to try to convince him not to change anything. Most of the time it is too late, because private payphone companies usually sign 5-year contracts with their customers prior to contacting the local carrier. Customers considering signing one of these contracts should contact their local carrier first. If the local carrier can offer a similar commission check each month, then the site owner should not change. Local carriers normally offer commissions on coin revenue only, not long-distance revenue.

As expected, the private payphone vendor will pay the site owner a monthly commission on both the coin calls and long-distance calls. To handle all of the operator-assisted calls and long-distance calls, the private payphone company contracts an OSP, such as AT&T, Sprint, or Opticom, one of the leading independent OSPs.