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.

WATS
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...