Overpaying Telecom

April 9, 2010

 

 

 

 

 

 

 

By Andrew Backover

For 6 months, Nelson Human Resource Solutions paid $1,000 a

month for 80 phone lines that weren’t being used.

The staffing company also paid $600 a month for empty voice-mail

boxes.

Workers would switch offices and order new service. But they would

not disconnect the old service, Nelson says. The Sonoma, Calif. firm

only discovered the problem after hiring a consulting firm to check its

telecommunications expenses.

Many companies like Nelson are throwing money away as bills

skyrocket for telephone service, cellphones, wireless handhelds,

Internet accounts and laptops connected to networks.

The cost of telecommunications now ranks in the top five expenses

for most companies, up from about No. 10 a decade ago, companies

and consultants say. Companies spend 5% to 35% more than they

need to, experts say, because they pay for services they don’t use. Or

they fail to find the cheapest calling plans. They miss billing mistakes.

And employees make calls they’re not supposed to. As telecom costs

rise, so does the potential for excessive expense.

“The waste is enormous,” says Scott Schaefer, CEO of QuantumShift,

which helps companies manage communication services. “Every

single company that has over 100 employees is waking up to the fact

that (communications) is one of their largest expenses . . . and the least

understood.”

The expense isn’t minor. This year, U.S. businesses will spend an

estimated $403 billion on local and long-distance telephone service

and equipment. That is up from $274 billion in 1998, says the

Telecommunications Industry Association. In 2004, the total will

approach $600 billion, or nearly twice the Pentagon’s annual budget.

Financial services firms, where fast communication is key, spend an

average of $3,000 per year per employee — about five times the

amount of 15 years ago, says Bill Moore of consulting firm

PricewaterhouseCoopers.

In a time of layoffs and belt tightening, more companies are eyeing

telecom budgets, says analyst Maribel Dolinov of Forrester Research.

And no item is too small. Investment banking firm Salomon Smith

Barney recently suggested that its employees stop dialing 411, which

costs about $1, to get phone numbers. A handful of branch offices

have banned it. Consultants who help companies rein in telecom

expenses say most businesses waste money because of:

* Billing mistakes.

 

 

Last year, refrigeration equipment and laundryservices firm Mac-Gray upgraded its telecom network linking

regional offices in 11 cities with its Cambridge, Mass., headquarters.

But when AT&T upgraded the service, it continued to bill Mac-Gray

for the old service as well. Mac-Gray, with 500 employees and $150

million in annual revenue, failed to catch the mistake for several

months because the bill was so complicated, it says. The overcharge:

$75,000.

AT&T reimbursed Mac-Gray — but only after Mac-Gray hired a consulting

firm to handle its telecom services and to help with the dispute.

AT&T won’t comment on customers. But even it says billing disputes

are more common as customers buy more services.

Businesses aren’t the only losers. A billing error caused the county

government of Lee County, Fla. to pay $13,000 too much for longdistance

service over 4 months this year, says telecom management

firm Stonehouse Technologies. The money was refunded after the

problem was found.

How often errors occur is disputed. Consulting firm Rand Associates

says its business clients see billing mistakes on phone bills about 80%

of the time.

Often, tax-exempt organizations, such as municipal agencies, are

wrongly charged state or federal taxes, says Rand President Rudy

Richardson.

Also, computer systems that turn telecom services on and off aren’t

always in sync with billing systems. So customers might get billed for

several extra days of service, says John Gonsalves, vice president at

technology consulting firm Adventis.

Phone companies dispute that billing mistakes occur so often. The

Federal Communications Commission doesn’t track billing errors.

BellSouth, for one, says its bills contain mistakes less than 2% of the

time.

Regardless, it is up to customers to catch billing errors. And few businesses

go through bills line by line. The monthly stack of bills for

Nelson Human Resource Solutions stood 8 inches high. “There was

no one to analyze the paper,” says Chief Financial Officer Deborah

Mings. It now has QuantumShift handle its telecom operations.

* Carelessness.

 

 

Companies and organizations cannot always blamephone companies. Pricewater-houseCoopers had one client that paid

 

 

 

$80,000 in monthly service charges over 18 months for 36 cellphones

sitting in a crate in a warehouse. “It’s not that clients are lazy,” says

PWC’s Moore. “It’s simply impossible to stay on top of it.”

Eisai Research Institute, a drug research firm in Andover, Mass.,

thought it was on top of it when it banned employees from calling 900

numbers frequently used as sex, astrology and gambling hotlines. But

Eisai forgot to put the same block on its fax lines.

This year, in 1 month, an employee ran up a $1,300 hotline tab. The

company will say only that the worker wasn’t calling a sex line.

“That’s a perfect example of . . . (what) can slip through the cracks,”

says Eisai Treasurer Paul Drahnak. He expects Eisai to save $100,000

a year by turning its telecom operations over to a management firm.

* Inefficient contracts.

 

 

Because of an outdated long-distance contract,law firm Paul Hastings Janofsky & Walker wasted $300,000 last year.

The Los Angeles-based firm was in the middle of a 5-year contract

that charged 7.8 cents a minute. When the contract was signed, the

firm saw it as a good deal. But long-distance prices have plummeted.

Businesses now often get volume discounts in the 3-cent to 4-cent

range. Finding the best deal, and anticipating market trends was

beyond the 800-lawyer firm.

“We just don’t have that capability,” says Chief Information Officer

Mary Odson.

Likewise, hotel operator Windsor Capital Group estimates it was

paying $100,000 too much each year on maintenance contracts for

telecom and other technology equipment in its 24 hotels.

One California hotel, for instance, paid 40% more than a Colorado

hotel did for a maintenance contract on telephone switch equipment,

which allows guests to use the phones. The contract was negotiated by

hotel managers, who aren’t telecom experts.

“They are in the guest-services business,” says Windsor Capital Vice

President Sam Sansone. It has since hired outsourcing firm United

Asset Coverage to handle its maintenance contracts.

Complicated contracts

Buying telephone service used to be simple. Before the breakup of

AT&T in 1984, customers essentially bought local and long-distance

service from one company.

But the splintering of AT&T led to hundreds of long-distance

competitors, each clamoring for business customers with slightly

different deals.

In 1996, when Congress mandated more competition in the local

phone business, hundreds of tiny competitors started offering service.

And wireless service, once a luxury, is now a staple. In fact, 51% of

workers with cellphones say their companies pay at least part of the

monthly tab, says research firm Telephia. Also, companies are paying

to connect more employees to the Internet.

As telecom expenses have grown, companies have struggled to

respond.

Most large firms have designated employees watching over telecom

and computer systems. But in small firms, the chore often falls to

chief financial officers, who lack expertise. “Every company in the

world can’t afford to have an expert in house,” says Eisai Research’s

Drahnak.

Also, telecom expenses can be hard to track. For example, Internet

access charges might fall under the budget of a company’s information

technology department. But cellphones, often purchased by employees

and then expensed, might fall under travel budgets.

Consolidating bills can be hard, too. Law firm Paul Hastings has

seven U.S. offices. It buys telecom services from 24 companies. The

bills came in so often, at different times of the month, that they sometimes

got lost or sat on desks until they were late, Odson says.

Getting help

Last year, Odson handed management of the $1.8 million domestic

telecom budget to QuantumShift. Odson expects to save $700,000

this year. One big help? QuantumShift found it a better long-distance

contract.

QuantumShift’s software also searches for billing errors and unused

lines. It consolidates bills, which saves time, and lets Odson more

easily order new services. And it lets her analyze expenses to a single

phone number.

Even after paying for QuantumShift’s services, Odson expects

telecom costs to be about 26% less this year.

Companies that help others cut telecom costs are doing a brisk

business. Privately held QuantumShift had 116 customers as of June,

up from 45 the year before. It posted a 300% year-over-year revenue

gain in its first fiscal quarter. Stonehouse Technologies recently added

20 employees, bringing its total to 60. Veramark Technologies says its

outsourcing revenue has grown 30% in the past 10 months.

Phone firms, too, are trying to cash in. AT&T’s consulting arm

recently redesigned a customer-service system for First Union. It will

save the bank $38 million over 5 years, says AT&T executive Randy

Johnston. That’s because First Union’s customer service agents will

have faster access to more information, which means it’ll take less

time to handle customer calls.

Just as regular consumers can save money on phone costs by shopping

for calling plans that fit their needs and checking bills for errors,

companies can save money by taking simple steps:

* When billing errors occur, report them to the phone companies’

customer service team — not the sales team, says AT&T.

* Make sure disputes are noted in computer systems. That way, a

response is likely to be faster. Also, customers won’t have their service

turned off because they didn’t pay disputed bills.

* After ordering new service, ask for a detailed explanation of the bill.

Companies that don’t pay attention could find themselves in the same

place as Mac-Gray Chief Financial Officer Michael Shea.

“You wake up some morning and say, ’Holy cow. How am I spending

$1 million on communications,’ . . . and no one knows.”

Our Perspective:

This is an old article that appeared in 2001. As the old saying go, “The more things change, the more they stay the same. We see instances like this happening constantly.

How much are you paying for Telecom or voice and data services. I thinks this presents a strong case on why you should be looking at this now!

For more information email george@hbsadvantage.com  or call 856-857-1230

Learn more by visiting us on the web www.hutchinsonbusinesssolutions.com

 

 

Verizon is up to their same old tricks …

We have been getting feedback from our clients that they have been receiving telephone calls recently from Verizon representatives asking to review their bill and promising savings.

 First, they will ask for a copy of your bill so they can provide you with a comparison of your charges.  Here is the old “bait and switch”, the comparison is incomplete. The base line charge ($15.00 per line) is listed but what they don’t show you are more important — all the fees and taxes associated with those charges. All carriers must charge these fees and taxes. What initially looks like a savings is nothing but deception. To do an apples to apples comparison ask them to give you all the fees and taxes, as they would appear on your bill.

 Buyers beware …

They are also pushing an offer of unlimited calling. This is the hook. You need to drill down and look at each individual line and examine the calling patterns for each phone number you have and all past invoices. Most likely, some of these lines have minimal usage and you will end up paying more for this feature.

 We have seen several examples of inaccurate phone line count.  Verizon’s proposal only indicated 6 lines when in actuality the client had 10 lines. Obviously, the bottom line of the Verizon proposal was going to look much better to the client, until he receives his first bill.

 More than you expect …

If you receive a call promising savings from Verizon, don’t be fooled! Please give us a call and let HBS review the proposal for you. Otherwise, you may end up paying much more for your basic services based on a false proposal.

 Hutchinson Business Solutions is an independent voice and data solutions consultant. Thru our strategic partnership, we represent over 50 of the major providers currently providing these services for business. We provide a free review of your current services and will shop your account to our providers, presenting an overview of the current market opportunities available for your business.

 To learn more about finding savings in the deregulated voice and data market, contact george@hbsadvantage.com or call 856-857-1230.

Find out more information by visiting our website www.hutchinsonbusinesssolutions.com