ANATOMY AND PATHOLOGY OF COMMUNICATIONS BILLING AND PAYMENT

Billing for communications equipment, facilities, and services has its roots in telephone service billing. For many years before 1984, AT&T’s local operating companies generated the vast majority of telephone bills. Pricing was based on tariffs accepted and filed with the Federal Communications Commission (FCC) and each state Public Utilities Commission (PUC). Basically there were two rate structures, one for business or other organizational entities and another for residential service. Pricing was a combination of a fixed monthly charge to subscribe to local service, plus an incremental charge for calls outside the local exchange area, also called a long distance call. Charges for long distance calls were made each time long distance service was used and calculated on the basis of a minimum charge for the first 3 minutes, plus a per-minute rate for each additional minute the call continued beyond the first 3 minutes. The basic minimum and additional minutes rates were also distance sensitive. The longer the physical distance between the end-points of the connection, the higher the rate. Go back and read this paragraph again.

So far, we have a basis and method for calculating charges for service. Nothing has been mentioned about extra charges for other fees and taxes. We can get by this point fairly quickly by using the simple technique our elected governing brethren use when exercising their awesome responsibility to levy taxes—simply tell the merchant to charge and immediately remit a flat percentage against an item or on the total amount. Maybe we should add on one other little detail. How many taxing entities are there? Hard to say, but we can estimate starting with one federal, 50 state, and thousands of local municipal and county entities who want to charge some small amount for the privilege of paying a telephone bill within the boundaries of the governmental jurisdictions where one lives and works.

Now we are at a point in our anatomy and pathology where we have written a high-level description of the method for arriving at the charges for one or a primary telephone line for 1 month of service. With the magic of simple addition and multiplication on an already complex process, we can contemplate printing and presenting a bill for payment. What does the bill look like? First there’s a summary of fixed monthly charges for subscribing to the service, complete with taxes. Then there’s the long distance calling summary, complete with details about the time the call started, duration, and charges for each call. For one call, or none, add one more page for long distance service. For the 21st call, add one more page. From the service provider perspective, we now have a streamlined process where we can bill for the majority of our customer base as long as they are single line customers. Oh, and by the way, because we are considering this from the telephone company’s perspective, we also have a streamlined provisioning process whereby every single order for changes or new service drives the single line billing process. What happens when someone wants a second telephone line? Simple answer: Install one and send a second bill each month.

By now your hair is hurting, or if it isn’t, then get ready, it may begin to hurt shortly. Sure it’s painful, but you must understand this picture, else communications cost management will remain elusive and without value. Remember, we are trapped in telephone service billing and payment before 1984, which means one bill for each telephone line, one payment for each bill. Not bad for residential and small business, school, church, library, or other organizational entity to deal with. Telephone service for the masses. What about the larger organization with a corporate headquarters and tens, hundreds, or maybe thousands of field offices? Or a state, county, or large city government with hundreds or thousands of employees in many locations, each with at least one telephone line. You guessed it; phone bills in boxes, not envelopes, measured in pounds, not pages.

The telephone company rose to the challenge, installing service, which works well, and delivering a bill for which payment is expected in due course. Now it’s someone’s job to validate the bill and pay. And with that, we have arrived at the point where it starts to make sense to consider communications cost management process and practice in large and mid-size organizations—business, non-profit, government secular, or whatever—the consideration is how many telephone lines are required and being paid for. And remember, this is before 1984, and only applies to telephone service, single line access to shared switching facility based services called plain old telephone service (POTS). What’s happened since 1984, you might ask. The simple answer is that beginning with the divestiture of AT&T and deregulation of the long distance communications industry, businesses and residential subscribers had to replace single line, single-service billing with triple billing and in many cases initially with triple payment, one for equipment, one for local service, and a third for long distance service. Stop and think about it—the number of billable items tripled. The amount of envelopes and postage tripled or maybe quadrupled.

Fast forward to 2003 and consider again that communications cost management is not just paying the telephone bill any more. What was a single bill changed into multiple bills because of deregulation and divestiture in 1984. Since then, technological advances and availability of commercial products and services from hundreds or thousands of potential suppliers morphed into hundreds or thousands of bills representing millions of transactions for data traffic, mobile telephones, pagers, two-way radios, remote site security and surveillance services, Internet web access supporting internal and external supplier, and customer transactions, as well as plain old telephone service. Now instead of one trusted supplier whose bill was (appropriately or inappropriately) trusted for so many years, we now have many suppliers requiring some level of validation and due diligence to comply with basic accounting rules, tax statutes, and fiduciary responsibility. Read this paragraph again. Not only are there common sense reasons to manage and pay communications costs wisely, there may be legal implications as well. Check out the Sarbanes-Oxley Bill of 2002 and talk to your attorney and an outside auditor.