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Updated 09/13/2008

Cut the Cost! A Guide for Telecommunications Expense Management ~ By Jack Bogle

The virtual financial collapse of many world-wide telecommunication companies has resulted in a reduction in the level of competition in the telecommunication industry. In some cases, the local market has become a monopoly again, and the long distance market has been reduced to only a few carriers. Given current trends, increasing numbers of areas will no longer have multiple service providers to keep competitive options viable and consequently users will suffer from a lack of real choice. Under such a climate, prices are likely to increase, unchecked by free market forces. At the same time, indications are that the area of telecommunication costs offers businesses a significant potential for savings.

Over the past few years, I specialized in phone bill auditing, telecom auditing and helping companies reduce their telecommunication costs. Plus, I have investigated telecommunication costs totaling more than $100 million for over 200 clients in North America. We found the greatest cost savings came from eliminating legacy voice services that were no longer used or needed. In many of those cases, services remained attached to accounts even after changes were requested or systems are upgraded. The second greatest savings came from local-toll and long-distance rate reductions, and third was from eliminating excessive data circuits.

I have advised financial managers to remember that telephone company service providers are not in the business of making competitive rate comparisons or saving you money. They sell telecommunications services and are not really interested in decreasing their own revenues through reducing customer costs. I believe that financial officers should treat telecommunications as a commodity rather than a service. If businesses can put aside the technology and the lingo and concentrate on the fact that they are simply buying calls each month at a rate, it will help them better understand how they can reduce the costs of those calls.

I recently completed a telecom audit of a large North American business and found that overcharging by telecom providers was a chronic problem for several of the business units, in various regions. Even the most reputable telephone companies experience problems with their billing platforms leading to consistent overcharging of their corporate clients. While this is a common problem, customers remain unaware of overcharges because bills are complicated and difficult to understand. The person responsible for corporate telephone expenses often lacks the knowledge and understanding of the company’s system to understand if charges are accurate. While over-charging is not necessarily the willful intent by the carrier to take advantage of their customers, errors are often made between the carrier’s sales/marketing arm where the rates get negotiated and their operations where the service gets provisioned. Unfortunately, mistakes get made – some benefit the customer and some don’t.

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