Telecom Bill Cramming Impacts IT's Bottom Line

Unauthorized charges on enterprise telecom bills are getting more sophisticated and harder to detect.

In June, the FCC (Federal Communications Commission) announced plans to propose new rules to increase transparency and disclosure on phone bills in order to help protect consumers from "cramming", the illegal addition of unauthorized fees onto a monthly phone bills.

(Many Local Exchange Carriers bill their local telephone customers for services provided by other third parties including long distance carriers and other service providers, who may then sneak in the additional charges.)

In the past, these mystery fees stood out as charges for things like diet plans or yoga classes, but today the changes blend into the bill as line items for long-distance service, voicemail, or monthly fees.

It's tricky enough for consumers to spot cramming charges on their bills; it becomes exponentially tougher for enterprise IT groups that pay for landline and wireless services for thousands of users. On average, companies report that 23 percent of their telecom invoices contain errors on a monthly basis, according to the Aberdeen Group. And that's just the mistakes that get noticed.

"Even telecom managers can have trouble deciphering a telecom invoice," says Lisa Maclay, consulting telecom analyst for Hospital Corporation of American, a $30.6 billion healthcare facilities operator.

Most, however, don't even get that once over. They're mailed directly to accounts payable, which reviews them for any increase in charges. Most cramming charges will come in at less than 1 percent of the bill to avoid detection and get approved. And while one percent may seem like loose change, it can add up to hundreds of thousands of dollars given the average corporate wireless bill of $2.9 million dollars, says Hyoun Park, collaboration and integrated communications research analyst with the Aberdeen Group.

"Many of the charges appear legitimate, says Maclay, who finds cramming charges on about 40 percent of HCA's telecom invoices, most around $100 per invoice but one as high as $900. "In a business situation, with thousands of employees and thousands of phone numbers, the odds are against you."

The FCC recently announced enforcement action and proposed penalties of $11.7 million against four companies for cramming. But, according to a July U.S. Senate report on cramming, third-party charges on telephone bills are big business — for the third party chargers as well as the big telecom providers.

Telephone companies place approximately $2 billion worth of third-party charges on telephone bills every year, according to the report from the office of Senator Jay Rockefeller (D-WV), chairman of the Senate Committee on Commerce, Science and Transportation. And the telecom providers themselves profit from the practice, receiving a flat fee of $1 to $2 for each placed charge, the report stated.

In the absence of outlawing the addition of third-party charges to phone bills, the problem is getting worse, says Park.

"First of all, it can be difficult enough to understand if a call charge is based on cramming or is simply based on overage usage, long distance, or other carrier-approved charges on a bill," says Park. "Second, cramming can come from voice calls and text messaging. Consider campaigns such as texting 90999 to donate to Haiti. Based on campaigns like this, we know that it is easy enough to initiate a $10 payment to a random company or individual just by sending a few digits of information."

And now, malicious mobile applications can actually initiate cramming charges as well without the knowledge of the end-user. "What happens when an application auto-texts and racks up the charges on your bill?" says Park.

The key to managing cramming is straightforward. Dispute, dispute, dispute. "Carriers are typically held responsible for refunding any unauthorized charge as long as they are detected and disputed in a timely manner," says Park.

But that can be an arduous task. Until recently, HCA was disputing charges in house. It took an average of one hour per disputed charge, says Maclay. "With hundreds of these charges each month, it would take a full time employee to stay on top of it." Now the company is outsourcing telecom invoice management, including dispute resolution, to Emptoris.

Consistent device governance can also go a long way to managing unauthorized telecom charges. "When an enterprise can centrally manage its mobile device fleet with consistent corporate policies that are well enforced, it becomes much less likely that any enterprise device has legitimate cramming charges," says Park, who advises that IT lock down any device that has cramming charges associated with it to confirm either that the charges are not coming from the device or to determine how the cramming is being initiated.

One of the FCC's proposed rules would require that phone companies isolate third-party charges from the normal phone bill. In the meantime, says Maclay, "until all voice service telecom invoices are monitored every month for cramming charges, they will continue and eventually increase."

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