In the 25 years since the phone company monopoly was broken up, the cost of a long distance phone call has fallen from 30 cents a minute to just a penny a minute. The deflationary price trend even picked up a name, "the race to zero".  But it must have dawned on the people in charge of telecom prices that you can't lose money on every call and "make it up in volume". 

The telecom companies have now hit the brakes on falling prices and are looking to make up for years of lost revenue in an almost frantic way. Business customers that are not buckled in tight are about to hit the windshield. Telecom agents and channel partners need to call their customers for a contract and phone bill review today because the telecom race to zero is over and the unwary business customer may get "blown up" by their next phone bill.

Most Current Customer Contracts Offer Little Rate Hike Protection

In an era of constantly falling prices, scant attention has been placed on preventing carriers from raising rates on customers during the term of an agreement. For 20 years, the one constant  in telecom seemed to be the fact that market prices for any service would fall during the term of any agreement. It seemed logical that fierce competition would prevent even the biggest provider from raising rates - ever! 

Unfortunately, this conventional wisdom caused many telecom agents and their customers to overlook a critical clause contained in the customer's telecom contract which basically states, "this agreement is bound by the terms on our website". The agreement on the "website clause" seems innocuous enough until you go to the website to discover  additional terms clearly stipulating that the carrier can basically "change any term at any time" with no more notice than a bill insert or a phone call.

Business telecom customers who do not scrutinize every line of every phone bill AND the web-based telecom service agreement EVERY month may very well end up with a phone bill bomb that can not be defused. 

Three Phone Bill "Bomb Checks" Anyone Can Do in Under Five Minutes

So how do you know if there's already a bomb in your customer's phone bill? Any of the following three checks can quickly alert you in under 5-minutes to a problem. Please be advised that your customer might still have a phone bill problem even if these three quick "bomb checks" don't alert you to a something obvious. If one of these three check do alert you to an anomaly there may be a good explanation that the phone company can provide.

     A. Divide "Taxes + Surcharges" by "Total New Charges"

If the total of taxes plus surcharges is more than 15% of all the new charges for the month then the bill has likely been hit with some new surcharges. Over the past several years, tax/surcharge percentage of an average phone bill is usually between 7% and 15%. The percentage is towards the lower end if intrastate calling is high and local phone taxes are modest. Also figure the same percentage for the first full month of service that does not show any installation charges. Is the recent and initial percentage the same?

     B. Divide "Total Category Dollars" by "Total Category Minutes" for Intra and Interstate Call Categories

If the resulting "cost per minute" is different than what you contracted for then you've suffered a rate increase or a call surcharge.

     C. Figure "Cost Per Minute" for the Most Expensive Calls You can Find

Either find the "most expensive calls" summary report or flip through some of the call detail of the invoice until you find calls that cost more than a dollar or two. dived the minutes into the cost. Is the rate or cost per minute higher than what you originally contracted for?

Recently Discovered "Phone Bill Bombs"

Telecom Association ("TA") members have recently reported the following surcharges, rate hikes or other phone bill bombs for the benefit of fellow TA members. If you discover a phone bill bomb not on this list, please report it to TA by contacting Dan Baldwin at 951-251-5155 or Dan@TelecomAssociation.com.  

Registered TA members can get get "customer friendly" versions of this information that they can use to fully inform their business customers and prospects by visiting www.PhoneBillBombs.com.  

A. The "We Can Change the Rules (But You Can't)" Notice

The following language is showing up on carrier "Service Terms" web pages and is pretty unmistakable. (Highlights inserted by TA.)

"Nothing contained herein will prohibit Company from implementing rate increases or surcharges for its service which are unrelated to Governmental or Quasi-Governmental actions or the actions of the Company's underlying carriers at any time provided Company provides written notice to Customer of the increase."

Another example:

"Carrier may change this Agreement at any time. Carrier will notify Customer of any material change in this Agreement, in Customer’s services or of an increase in rates or fees prior to the billing period in which the changes would go into effect, except for international rates, which may be changed on one (1) day notice. Notification of any such change may be in the form of a bill insert or by a message within your invoice, by postcard or letter, by Carrier’s calling and speaking to Customer or leaving a message for Customer, by postings on our website at www.website.com/terms, or by email."

So what's the point then of even negotiating rates? Good question. TA strongly suggests the TA members advise their end-user prospects and customers to seek the counsel of qualified legal professional if they have specific questions about interpreting any carrier agreement. Personally, I tell clients to request the carrier amend their standard agreement to give the customer a "90-day out" in the event the carrier makes individual or collective changes over the course of the agreement that increase the customer's monthly gross costs more than 5% from the total gross monthly costs in effect on the day agreement was first signed.

B. Rate Plan Changes Including Price Increases Up to 77%

The following rate increase or change notices have appeared in business customer phone bills over the last several months. Quoted information has been drawn from the original documentation but has been paraphrased and/or highlighted by TA for the sake of brevity.

     1. "Dedicated intrastate rates shall change based on the jurisdiction of the intrastate calling. The new intrastate rates will be accessible to you via (our) customer portal (at) https:..." Click here to view a TA created table of these intrastate rate changes for all 50 states. The new rates were lower for 14 states with Texas getting a 33% price reduction. Washington was one of the 27 states that got a price increase of up to 77%.

     2. "Dedicated interstate inbound and outbound rates shall increase by 9.23%." This rate change was effective April 1, 2009 for customers on a specific underlying network on a flat or blended rate plan.

     3. "Switched interstate inbound and outbound rates shall increase by 16.96%." This rate change was effective April 1, 2009 for all this carrier's switched customers.

     4. "Local PRI or Integrated T1 interstate outbound rates shall increase by 19.78%." LOCAL T1/PRI OR INTEGRATED SERVICE UTILIZING THE xxxxx UNDERLYING NETWORK Pursuant to your carrier. SERVICE AGREEMENT, we are notifying you that your rates for long distance switched voice traffic will be changing effective May 1, 2009 Interstate Outbound Rates shall increase by 19.78%

     5. "Tiered rate plan customers will be transitioned to LATA/OCN rate plans."  Instead of just two flat or blended US calling rates (interstate and intrastate), tiered rate plan customers got upwards of ten different US calling rates for different types of US traffic. Tiered rates allow customers with narrow, identified and consistent traffic patterns to possibly save money. LATA/OCN rate plans are extremely tiered plans that may have over 10,000 different calling rates for a customer to keep track of. A carrier may wish to bill their customers on a LATA/OCN rate plan because their own wholesale costs come to them in a similar fashion and it shields them from being "cherry picked" by their customers.

C. Short Duration Call Surcharge Equal to 20¢ Per Minute

Over the past six months, at least four of the biggest wholesale phone providers have decided that "short calls" (phone calls that last six seconds or less) are creating expensive havoc on their telecom networks and that the providers are going to do what's necessary with punitive surcharges to price these nuisance calls off their networks . 

"For customers whose total short duration calls are more than 10% of total calls during a monthly billing period, a short duration call surcharge of $.02 per call will be assessed for ALL short duration calls.

Phone customers making a great many short calls (the $2,279 surcharge graphic at the top of this article was taken from an actual customer's phone bill) quickly see how convert this surcharge to a 20¢ per minute. The underlying cost of their phone campaign just doubled overnight.

D. The 34¢ Per Minute "Free Conference Calling" Surcharge

Google "free conference calling " and you'll find dozens of conference companies that appear to want to give any business totally free conference calls. The logical question is, "How can it be totally free?" Well it's never been free to the phone companies charged with connecting the calls and with the new XHCA surcharge it's going to stop being free for some unsuspecting business that think they are getting "totally free conference calls".

"Our wholesale providers have provided us with a separate, limited set of LATA/OCN’s that are billed to us at an extremely high cost. In order to ensure we can continue to maintain competitive pricing, we are separating out the rates for these extreme high cost areas (XHCA) and billing for calls to these locations utilizing separate rates. Please go to www.website.com/terms for a list of these locations and the applicable rates."

Click here to see those places in the US where this carrier might now charge you up to 34¢ per minute to call. (If you need look up the LATA/OCN on the list to see which area codes and prefixes may cause you to incur this surcharge then click here or visit TelcoData.us and type in the OCN from the list.

E. The Non-RBOC or "High Cost Area" Surcharge of 4¢ Per Minute

While the XHCA surcharge noted above is pretty new, the high cost area surcharge (otherwise known as the "HCA", non-RBOC or access arbitrage surcharge) has been around for some time but many carriers are only now starting to charge it.

"Carrier will monitor Customer's monthly call to identify excessive traffic originating from or terminating to high cost areas defined as high-cost LATAs and non-Regional Bell Operating Company ("RBOC") served telephone numbers. Carrier reserves the right to apply a surcharge of up to 4 cents per minute of use to the number of minutes by which Customer’s HCA and Non-RBOC outbound terminations and inbound originations exceed usual and customary call patterns for business users."

Most carriers want to see non-RBOC traffic stay under 25% of a customer's normal minutes. Some carriers will only apply this surcharge after a warning but many are now applying it as a standard course of billing.

F. Excessive Call Attempts Surcharge

This was the original surcharge conceived of to drive telemarketing calls away from a carrier's network. It is not currently an active surcharge (that we are aware of) because the carriers choose to move forward with the short duration call surcharge instead.