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.
POTS
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.
Trunks
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.
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.
POTS
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.
Trunks
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.
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 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.
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