Telecom Bill Cramming Impacts IT's Bottom Line

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

By Stephanie Overby
Wed, September 28, 2011

CIO — 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.

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