Telecom For Dummies

You may be able to save a healthy percentage on your phone bill without even changing the rate your carrier charges. All it takes is to tighten up the accounting. To find this savings, you must first determine the following:

• The minimum duration your carrier charges per call

• The number of digits in the rounding

• Whether you’re on a flat or tiered rate plan

The more you pay for your phone service, the more important it is for your carrier to be exact when tabulating charges in these three areas. They may seem like trivial details, but they make a huge difference on what you pay per month.

Understanding call duration and incremental billing

Telecom uses two main call durations: whole-minute increments, or six-second increments. The whole-minute increments are simple and make reconciling your invoice simple. Every call is be rounded up to the next full minute and charged at the rate you agreed to. Because there are no fractions of a minute, there is no rounding, and all of your calls divide out to your exact contracted rate. The downside of whole-minute increments is that most calls do not end at exactly a full minute. For example, a call lasting a minute and three seconds is billed out as a two-minute call. If you’re happy paying for 57 seconds of a call you didn’t make, then whole-minute increments are for you. If you work for a telemarketing company and most of your calls are 30 seconds long, with each call being rounded up to one minute, you’re paying twice the amount that you should.

The best option is negotiating with your carrier for six-second billing increments. This option breaks every call down to tenths of a minute and prevents you from paying for an excessive amount of time that you didn’t use. You still have a few seconds on each call that are added, but the net effect is minimal.

The world of telecom doesn’t always use standard mathematical rounding when rating phone calls. If you should be charged $1.011 on a call, your 5th grade math teacher would tell you to round to the nearest penny, so the cost is $1.01. The reality of it is that many telecom companies with two-digit billing charge $1.02 for that call.

Here’s the rationale for increasing what you pay by a penny: No one can expect you to pay a half of a penny for a call, and so why not simply round the fee to the next penny?

If you only make five calls a month, this creative math is not a problem. If you make 500,000 calls a month, however, the pennies add up quickly. If you cannot get four-decimal rounding from your carrier, at least negotiate standard mathematical rounding until you can find a carrier that will give you four-decimal rounding.

 Warning!  Beware of the lure of billing units. Some carriers do not charge you in increments of seconds or minutes, but in billing units that do not correlate easily into reality. If your salesman cannot explain the rates of your calls in one sentence, avoid it.

 Remember  One-second billing units aren’t necessarily better than six-second units. It does seem logical that the more accurate your duration is recorded, the more accurate your invoice will be. That is, unfortunately, only half of the equation. In the end, your rate also depends on your decimal rounding. See the following section, “Dealing with decimal rounding.”

Dealing with decimal rounding

If, as in the previous section, “Understanding call duration and incremental billing,” you run a telemarketing business that makes many short phone calls, you may want to negotiate a six-second billing plan so that your invoice is more manageable.

But wait — there’s more. You need four-decimal rounding. Many companies in America have two-decimal rounding — every call is individually rated to the nearest penny. If you have a dedicated circuit with a rate of three cents per minute on calls and you make a six-second call, you should legitimately be charged $0.003 — three-tenths of a cent — for the call. If you have only two-digit rounding, you’re going to be charged a penny for the call. This does not seem like much, but $0.01 for a0.1-minute duration call gives you a per-minute rate of 10 cents.

 Remember  If most of your calls are of short duration, two-digit rounding can easily raise the average rate you pay. Consider three- or four-digit rounding if you have the option. If your calls are rounded to three decimals in a six-second call at three cents a minute, you’re charged the correct cost at three-tenths of a penny. Sounds good? The only problem with that is that most long-distance rates are not in full-penny increments. Competition has pushed rates down so that your contract for dedicated circuits may have a rate of 2.9 or 2.2 cents per minute. When you’re dealing with 300,000 minutes per month, the difference in your phone bill between the two rates is $2,100. The only way to effectively capture your rate of 2.9 cents per minute is to have every call rated to the fourth decimal point. In this case, a 12-second call (0.2 minutes) costs $0.0058, and your per-minute rate is intact. If this amount is rounded to two decimal points, you pay about double for the same call. If you have a small number of calls per month, and they are all of long duration, the digits in rounding don’t affect your bill too much. But if you have a high volume of calls under a minute, the cost savings through this one change could be 50 percent.

 Remember  The savings you see don’t increase if you secure five- or six-digit rounding. At that level, the amount of money is so small that it would take hundreds of thousands of calls to add up to a dime of savings. If a carrier sales rep claims that the carrier’s billing plan will save you money because it has five-digit rounding, have the rep crunch the numbers to prove it to you.

Figuring out flat and tiered rates

Setting call durations to full-minute or six-second increments, as well as ensuring that call rates are rounded to four digits can make a huge difference to your phone bill, without technically changing the rate you pay per minute. Well, you can negotiate your per-minute rate, as well. In the realm of call rates, there are two methods: the flat, and the tiered.

• Flat rates: Simple call rates (also called flat rates) break your calls down by type (intraLATA, interLATA, intrastate, interstate, and international), and charge you a set rate for each category. The breakdown may even be simpler, with one set rate for your in-state calls, and a different rate for your out-of-state calls. If you have a flat rate of six cents per minute for all in-state calls and three cents for all calls that terminate out of state, you have nothing to confuse you. Whether you call a cellphone, a phone number that belongs to the local Bell carrier in your area, a VoIP phone or any other type of phone in your state, you’re charged six cents per minute. This system makes life easy, but you may be paying more than you need to for these calls. Flat rates are relatively uncontroversial.

• Tiered rates: Complex rates (also called tiered rates) are becoming more and more common with carriers. Competition has forced the per-minute rates for calls down, so the carriers have reevaluated how they charge for calls. Every long-distance carrier has a contract with every local carrier in the U.S. It may cost seven cents per minute to terminate a call to a cellphone company, but it may cost one cent per minute to complete to your local Bell carrier (Pacific Bell, Bell Atlantic, Bell South), and maybe four cents to complete to a company that provides VoIP service. Long-distance carriers now tier their prices accordingly. If most of your traffic terminates to the local carriers with better rates, you could save some money by going to a tiered rate plan. Conversely, if most of your calls end up going to cellphone providers or competing local carriers (CLECs) like MPower or Vonage, your costs could go up substantially. Deciding on a tiered plan can be an arduous task. The following sections give you more information to make your decision a bit easier.

 Tip  Always check over your first invoice from any new carrier with a fine-toothed comb. You may have spent a lot of time negotiating a better rate for an area you call frequently, only to discover that the rate was never sent on to the billing department.

 Technical Stuff  Telecom customers have become very sophisticated in the past ten years. Some customers have advanced routing tables that look at every outgoing call and send it out over the cheapest route. This idea may sound great, but as these new, technically advanced customers have entered the market, they exploit any carrier they can find with a flat-rate pricing schedule. As carriers began charging anywhere between 3 and 9 cents to complete calls to cellphones or competing local carriers (CLECs), these ubercustomers routed those calls to carriers with 2½ cent per-minute flat rates. After a few months, the flat-rate carrier would see a dramatic spike in traffic to the expensive terminations and would have to correct the problem or face bankruptcy — and so all the carriers eventually created their own tiered rate plans to stay alive.

Knowing your tiered plan do’s and don’ts

Tiered rates sound great in theory, but the devil’s always in the details. Before you sign on the dotted line, consider the following do’s and don’ts:

• Don’t get a tiered plan if you call a lot cellphones or CLECs. Tiered pricing contracts commonly require users to pay a premium to terminate calls to cellphones and competing local carriers.

• Do get a tiered plan if you call a lot of the local Bells. Tiered plans commonly require users to have a high percentage of calls terminate to the local Bell carriers like Bell Atlantic, Nynex, Bell South, Qwest (local), and Pacific Bell. Great, right? Well . . . read the next item in this list.

• Don’t get a tiered plan if you don’t call enough local Bells. If you terminate fewer calls to these carriers than the required percentage (which varies from around 65 to 80 percent), you may face a substantial per-minute or per-call penalty.

   Tip  Do review your calls before you make a decision. Before you agree to a tiered pricing plan for your company, make sure that you look at all of your outgoing calls for a few months. Better yet, ask your carrier to analyze your traffic and determine what the net result will be. Ask for a report showing the percentage of calls that fall into each tier, and your aggregate cost per minute. It would be horrible to go into a tiered pricing contract, only to find out three months later that your average cost per minute went up five cents.

•  Warning!  Do know the intrastate rates on calls. Around the year 2000, carriers began to notice that their customers with dedicated circuits were inputting origination phone numbers on their calls. If a telemarketing company in Texas was working a project for a customer in Florida, they would list the client’s Florida phone number as their caller ID. This enabled the people who received the telemarketing calls to contact the Florida business that hired the telemarketing company in Texas. A good idea, really — it made the Florida business look really snazzy. The only problem was that the local carrier in Florida saw the calls as having Florida origination numbers, and Florida termination numbers. In the eyes of Bell South, that made it an intrastate call, so they charged the carrier 14 cents per minute to terminate the call. Usually, interstate calls cost two cents per minute. As the carriers realized they were losing money, they put measures in place to pass on the cost to their customers.

  The moral of this story is that if your business has a direct contract with a carrier and your phone system inputs a Caller ID number on your dedicated circuit that does not represent your business’s physical location, you need to check your phone bill. If you see summary sections for intrastate calls in areas where your business cannot originate a call, you need to take swift action to correct your billing. Your carrier may have another billing plan available, or you may need to find another carrier altogether.

Introducing OCN, the Rosetta Stone for tiers

Every carrier has its own system of grouping the local carriers into tiers. One carrier may place Verizon in tier 3, while another may place them in tier 1. Some carriers also assign tiers to each LATA, and some assign tiers only at state level. One unifying thread enables you to make sense in a world that lacks uniformity.

An Operating Company Number, or OCN, is a four-digit number that the telecom world uses to identify a local carrier. Your carrier can provide you with a list of OCNs and their associated tiers. Of course, this information still doesn’t tell you how much money placing a call to a number in Maine at 207-224-XXXX will cost. To determine per-minute costs, look at the OCN tier list provided by your carrier; find the OCN of the local carrier that provides service to the number you’re dialing and identify the tier of the call. Then you can determine the LATA of the same phone number, and then you are ready to dive into the LATA-tier price list provided by your carrier. Clear as mud?

 Tip  Your carrier should be able to provide a list of every area code and prefix (that’s the first six digits in any domestic phone number) in the U.S., along with their associated OCNs. If you have a large analysis you are crunching, you need this information in a database or a text format.

 Remember  The OCN-to-tier list that your carrier gives you doesn’t include all the OCNs in the U.S. If an OCN doesn’t appear on a carrier’s list of tiers, the general rule is that the OCN is in the most expensive tier. Some carriers offer a disclaimer to this effect.

If you want to spot-check a few rates, you can visit a Web site to check individual phone numbers. Follow these instructions:

1. Visit the Local Calling Guide at the Outsider’s Report Web site.

   The Web address is www.localcallingguide.com. The Outsider’s Report is a Web site that has provided telecom information in one form or another since 1994.

2. Scroll down to the middle of the page and click the Search AreaCode/Prefix/OCN link.

   The Area Code/Prefix Search page appears.

3. Enter the area code in the text box marked NPA. Enter the first three digits of the phone number into the text box marked NXX.

   You can leave the other boxes blank.

4. Click the Submit button.

   The next screen lists all the information you need. The four-digit OCN is cramped right before the name of the local carrier, but is easily visible.

5. Write down the OCN and LATA for the phone number.

   Be sure to cross-reference the OCN to the appropriate carrier tier with the spreadsheet your carrier provided.

6. Write down the tier for the OCN and identify the correct rate per minute you should be assessed.

   Quickly dividing the cost of the call by the total number of minutes gives you the contracted rate. If the numbers don’t match, call your carrier to determine why.