Carriers Make Money by Not Making Sense, Consultants Say

Corporate customers are hiring more consultants and “bill people” as phone bills grow more complex, often mixing taxes and capital fees in confusing ways, a consultant for a Fortune 100 company said. Often the problem is honest miscommunication, said Nancy Peckham, pres. of Visicom, a Wis. company whose clients each spend over $1 million yearly on telecom fees. Providers, especially the Bells, tend to put fees in “one lump sum,” rather than explaining them, she said. Customers can save significantly simply by ordering customer service records, but even those often come in universal service order code, which is “very hard to read unless you're trained to read it,” Peckham said.

Of course consultants attack bills as confusing: Their complaints are “self-interested,” a Bell source said. The more companies think Bells’ bills are confusing, the more business consultants stand to do, the source said. Some consultants didn’t entirely dispute that. “Confusion is good for the consulting business,” said Society of Telecom Consultants Pres. Byron Battles: “Our clients will come to us and say ‘I've read about this in the newspaper, I've heard about this, how is this going to effect me?'” But Battles disputed the allegation that consultants stir controversy to increase revenue. Regulation causes the confusion, he said, whether or not consultants are there to profit on it. Va.- based telecom consultant Rick Hathaway agreed, saying complex billing systems “beg the question, ‘What are the companies out there doing that don’t have somebody?'”

It costs to keep a consultant in a company’s corner. Having “someone who knows [billing] very well… it’s very expensive,” said Sara Uzel of Arlington, Va.-based Technology Trends Group. Tracking credits and debits and late fees and having “the sophisticated electronic system to do it” are prohibitive expenses for most enterprises, Uzel said -- and that’s apart from the confusion created by conflating taxes and fees: “It’s easier to pay a $500-$1,000 a month mistake than to pay someone.” And even companies that hire consultants can’t do it every month, she said.

“There are… different views on how to treat… regulatory and service fees for billing purposes,” the carrier source said. Whether they're “lumped into a single line item or displayed separately is a question answered differently by different companies,” he said. Competition decides what’s best for the market, he said; customers decide whether they want to see bills presented differently.

A Verizon source agreed. “Excellent billing is a crucial part of our customer relationships,” the source said, citing Verizon’s eBilling, Telecom Expense Management and detailed report services as ways to simplify billing issues.

Tax Line Items the Main Culprit

Tax line items cause the most confusion, Peckham said. Taxes vary by originating state, so tax line-items are “not necessarily always entered correctly, unless someone [at the client] goes and audits those taxes,” she said.

That’s so, said a billing outsourcer. “Normally there’s a line item that just says ’taxes and fees,'” said Michael Group Pres. Larry Treas. By the time companies see the problem, it’s too late, he said, because the massive customized contracts favored for such companies let carriers raise fees or “administrative costs” at will. “You're seeing more and more open-ended contracts,” he said, adding that radical technological changes and IT demands don’t simplify things: “It’s not just about cost-per-minute now. In the past it was more simplistic.”

A consultant doing high-revenue telecom business showed Communications Daily a bill containing an allegedly misleading line item of the kind cited. The bill, by a major carrier, was sent to a multimillion-dollar company. The item reads “PROP TX/REG FEES/USF SURCHG,” listing a $57.01 charge amid other separate line items reading “TX MARGIN FEE REIMBURSMNT,” “LOCAL COMM SERVICE TAX,” and “CARRIER UNIVERSAL SVC CHG.” The consultant -- who like most we interviewed, frequently encounters similarly mind-numbing arrays on clients’ bills -- described the mystery item as an example of the murky wording telecoms use in their bills.

It’s by no means illegal to pass a property tax along to the customer, the consultant said. “They could charge you a Popsicle Tax if they wanted,” the consultant added, “but it’s misleading,” because such a surcharge is revenue used to pay for overhead. By sticking it into a line item with “regulatory fees” and a “USF surcharge,” the source said, the carrier misleads the customer into thinking it’s simply one more tax. When such entries crop up, the source studies them to see if they constitute actionable offenses.

Bills must “contain full and non-misleading descriptions of charges,” according to Part 4 of the FCC truth-in-billing rule. The FCC wouldn’t comment on whether the “PROP TX” item violates that principle. One spokeswoman said the Commission reviews complaints case by case. But simple confusion isn’t enough, another spokesman said; violations occur when the a bill’s line-items, break-outs and footnotes are misleading as a whole.

Systemic Confusion; Change Unlikely

Billing transparency isn’t on most company managers’ minds when they sign telecom contracts, because the people choosing phone technology aren’t the ones who pay the phone bills, said Martha Buyer, legislative & regulatory dir., Society of Telecom Consultants (STC). When negotiating with a carrier sales representative, a telecom manager for “XYZ Corp.” will ask about “technology, routing, reliability, return on investment, and obsolescence,” Buyer said, but “you're not going to ask about the regulatory framework, or the billing.” Others agreed: Most end-users focus on the service being offered, not “the hidden costs, not the network physics, not the FCC,” said Ivan Sindell, an Alexandria, Va.- based consultant and former STC pres. But all those elements are nonetheless “limiting factors,” he said.

Carriers don’t automatically oppose such confusion, Buyer said; it means they make more money. “The contracts that carriers provide are fraught with traps and if you don’t look at it right you're not going to get what you need,” she said. One such “trap” is the outside reference -- line items pointing to external documents perhaps containing errors such as incorrect state taxes and charges for discontinued lines. When charges are legitimate, enterprise customers may have limited options, she said: “Once you find it on the bill it’s already too late, because you've already agreed to the terms.”

“You almost need a degree in telephony,” she said: “People don’t understand what’s in that bill,” an “ambiguity that carriers “are taking advantage of.”

“I've never gone into a client where I've found a bill that’s completely clean,” said Hathaway: “I'd like to think in many cases it’s not some surreptitious unethical or illegal activity… It’s just that the companies have complicated their billing systems so much, even they don’t know the mistakes they're making.”

Ultimately, “corporate consumers are not a terribly sympathetic lot,” said Buyer. “No one feels bad for Ford Motors when their bill is wrong, but the fact is that the bill is wrong” when line items mislead, and it’s wrong when it overcharges by other means. Buyer supports clarification of billing rules and judicial action when carriers break those rules, but doesn’t think that’s high among legislators’ or regulators’ priorities. Peckham favors state or federal legislation requiring better separation of taxes from carrier-imposed fees, she said. Some state laws do something like that, and in those locales business bills are itemized that way -- but the “methodology is very confusing,” with references to external documents and line items couched in code.

“My customers say it is problematic, Bells say it’s fair,” Treas said, urging itemized-bill rulemaking but adding that “it’s hard to steer a big ship with a small rudder.” Of general FCC hearings a few years ago on billing, he said, “all that came from that were small concessions from the Bells… What happens is the customer is the one that’s suffering.”