Dedicated private lines : Consolidate circuits, Volume and term discounts, Update pricing

Consolidate circuits
When numerous data circuits terminate at the same customer location, it is possible to consolidate the smaller circuits into one large circuit, especially in the case of point-to-point circuits. As previously explained, the first leg of a dedicated private line is the local loop. In many cases, a business can consolidate its various local loops into one circuit with greater bandwidth.

For example, a manufacturer in Marietta, Georgia, was expanding into other states. When a new facility was opened, a new 56-Kbps dedicated private line was installed from the Georgia office to the new facility. The cost of each 56-Kbps line was based on the local loop charges in Marietta, the IEX mileage, and the local loop charges at the new location (see Figure 1). The Marietta local loop charge was $150 on each of the five lines. In total, the business paid $750 for 280 Kbps of bandwidth.


Figure 1: A company in Marietta, Georgia, has five data lines connecting to remote sites in other states.

When the company had five dedicated 56-Kbps lines, the BellSouth account manager helped it cut its cost. The business consolidated all of the traffic from the five data lines onto a single T-1 data line that gave the business four times more bandwidth at a cost of only $350 per month (see Figure 2).


Figure 2: Five local loops are replaced with a single T-1 connection.

In another example, a pharmaceutical research facility in Wisconsin paid more than $10,000 for a dozen T-1s used for voice and data. The telecom manager cut the cost in half by consolidating all of the T-1s onto a single T-3.

Volume and term discounts
Dedicated line charges are nonfluctuating charges, so volume discounts usually do not apply. Data services are more subject to term discounts. The simplest way to cut the cost of data services is to sign a term agreement with the carrier. Unlike other telecom services, data term agreements can be as long as 7 years. Table 16.1 shows how data circuit discounts are often structured.


Table 1: Typical Monthly Pricing for Data Circuits

Update pricing
The tariffs filed with state and federal regulatory bodies describe carriers’ service offerings and detail pricing information. From time to time, carriers update their tariffs. Prices usually go up, but sometimes they go down. The phone companies also might add a short-term promotion, to stimulate sales activity.

Once or twice a year, you should contact your carrier and find out the latest pricing for the services they currently use. If the new pricing is lower than your current pricing, ask the carrier to upgrade you to the latest offering. Carriers always say “this pricing is only available for new customers, not existing customers.” Sometimes, however, a sympathetic account manager will implement the new low pricing anyway. It helps if the customer has some leverage in the negotiations.

LATTIS.PRO

Some consultants use LATTIS.PRO to check circuit pricing. The software instantly tells you prices for circuits throughout North America. The prices will be broken down according to each circuit element. LATTIS, which is a fee-based service, is located on the Internet at www.triquad.com/lattis.html.

Add promotions to the account
Consider the following example: A Sacramento, California, publisher had a dedicated T-1 line connecting to a marketing office in Phoenix, Arizona. The T-1 was provided by Qwest and cost $1,365 each month. The publisher learned from a friend that Qwest was waiving local loop charges in Sacramento for all new orders for dedicated T-1s. Armed with this information, the publisher approached Qwest and requested the promotion.

The publisher’s long-distance contract with Qwest was about to expire. The account executive did not want to lose the account, so he added the promotion to the publisher’s T-1 bill. Waiving the local loop charges saved the business $185 per month.

Dedicated private lines : Correct mileage errors, Disconnect dead circuits, Network diagram audit

Correct mileage errors
Dedicated private line pricing is based on bandwidth and mileage. The further the distance between the two points, the greater the cost. A T-1 between Baltimore, Maryland, and Baton Rouge, Louisiana, costs more than a T-1 between Baltimore and Buffalo, New York. The mileage is based on the exact distance “as the crow flies” between the two central offices at the endpoints of the circuit. Customers are sometimes misbilled because of incorrect mileage calculations.

In some cases, the carrier’s mileage calculations are incorrect. A common sense review of the phone bill and CSR may expose an erroneous calculation. Most carrier account managers will take the time to help you double-check your mileage charges. If an error is found, the carrier will correct the pricing and refund the overcharges.

Disconnect dead circuits
When a telecom service is no longer used, the customer should immediately cancel the service. In many organizations, the telecom department quits using a service and forgets to tell the accounts payable department. Consequently, the phone bills continue to be paid every month. Many customers wrongly assume that no longer using a service tells the carrier, “We’re done using this service, please quit billing us.”

Carriers never close accounts unless a customer tells them to. If they did, they would risk canceling a customer’s legitimate service. Because data accounts have flat-rate pricing, inactive accounts still generate the full amount of revenue for carriers. They make sure the customer has canceled the service prior to forfeiting this revenue.

For example, a New York-based travel agency paid for services it no longer used. Through a partnership with a nationwide travel company based in Philadelphia, the New York travel agent sold tickets for cruises, hotel rooms, and vacation packages. Each of its five offices in New York was equipped with a computer terminal that connected directly to the nationwide travel company’s reservation office across dedicated private lines. The nationwide company supplied a special computer terminal, and the New York agency was responsible for paying for the dedicated private lines each month.

After a few years, the two companies decided to end the partnership. The nationwide travel company picked up the computers, and the New York travel agency figured the project was closed out. The agency’s accounts payable clerk continued to pay for the service for the next 2 years. The company never canceled the dedicated private lines with its carrier.

Years later, an outside auditor noticed the data lines terminating in Philadelphia. Once he found out the two companies were no longer business partners, the services were canceled. Correcting this error created thousands of dollars in monthly savings for the company. Even though the problem was the customer’s fault, the carrier still issued a significant “good faith” refund to the customer.

Cancel dangling circuits
When a customer cancels a point-to-point data circuit, carriers sometimes fail to disconnect the circuit at both locations. This results in being billed for a dangling circuit, which is like the tin can phone with only one can. Dangling circuits are most prone to show up when a private line is furnished and billed by two separate carriers.

Phone bills for dedicated private lines usually do not give enough detail to detect dangling circuits. You must call customer service and ask for the addresses of both circuit locations. You can also check the CSRs for the circuits. Local carriers and some long-distance carriers, such as AT&T, keep CSRs. The carrier’s CSRs always specify the locations of the origination and termination points of a dedicated private line. If the CSR only lists one location, it is probably a dangling circuit that should be disconnected.

Network diagram audit
An organization’s IT department usually maintains a network diagram. If a circuit is no longer used, the IT staff erases it from the network diagram. If the staff forgets to cancel the billing with the carrier, the organization may go on paying the bill for years. An effective way to locate unused data lines is to match up the company’s internal network diagram with the actual phone bills. The diagram reflects exactly what data services are in use at each location, and the phone bills reflect the actual services that are currently being billed.