Re-posted from Feb. 2009
For those senior executives and business owners reading this, you may have found yourself asking why the amount you pay for your telecom services doesn’t match what you were quoted by the sales representative. The short answer to the question is that carriers play games with the pricing and if you don’t know the right questions to ask you could pay 20% to 40% more than you thought you were. It can be frustrating and it can make you look bad to the person you report to if the company has to write a check for more than expected. Or if you are the owner, it is literally money taken right out of your pocket. As an agent for quite a few companies, I have a pretty good idea what their tricks are. Over my next few posts I will give you my insights on some of these tricks and what you can do about them.
Trick #1 – When you are asking for a quote, you should ask them to itemize the quote, including surcharges. Every carrier adds surcharges to their invoice and it is considered a common practice in the industry. But the salesperson is responsible for providing you accurate information about what you should expect to pay. In my opinion it is not a valid excuse not to inform the customer of charges they will incur, even if they are called “surcharges” instead of something related to the service you are receiving. It’s the same concept as when you book a hotel room and you find out there is some additional surcharge that you weren’t aware of. Or when you buy new tires and they try to charge you a “disposal fee”. As long as they are up-front about the costs, you can make an educated decision. But if they spring them on you at checkout or when you pay the bill, it’s unacceptable in my opinion.
The truth about surcharges is that they stay in the pockets of the carriers. It would be the same as a fast food restaurant charging you a “register fee” on top of the cost of the burger and explaining that is it to cover the cost of the person running the cash register. Don’t we all assume that the cost of the product includes the overhead? Not in the telecommunications world. Some examples of the surcharges you may experience are:
Taxes – Do not confuse surcharges with taxes. Taxes are mandated charges of course and those dollars do go to the various government agencies. You don’t have to like them, you just have to pay them. These fall into the category of typical taxes and they vary but city, county and state so you may not always be able to get this information quoted ahead of time. But I typically assume between 10% – 12% for Federal, State and Local taxes.
I want to make it clear that I am not against telecommunications carriers making a profit. In fact, I want them to be profitable and financially sound because that means there is more competition. More competition is good for the industry in terms of innovation and pricing. But it is also good for…..for lack of a better phrase…..keeping each other sharp. Trust me, where there is limited or no competition, customers are at the mercy of the carrier and the result is usually appalling.
In my next few posts, I am going to write about the best ways to buy long distance, Internet services, negotiate contract lengths and other items to look for and negotiate. As I’ve indicated, you can experience a 30% difference one way or the other depending on how you negotiate these items. Thirty percent!! I daresay that if you could affect all of your costs by 30%, it could be the difference between strong profitability and un-profitability.
Trick #1 – When you are asking for a quote, you should ask them to itemize the quote, including surcharges. Every carrier adds surcharges to their invoice and it is considered a common practice in the industry. But the salesperson is responsible for providing you accurate information about what you should expect to pay. In my opinion it is not a valid excuse not to inform the customer of charges they will incur, even if they are called “surcharges” instead of something related to the service you are receiving. It’s the same concept as when you book a hotel room and you find out there is some additional surcharge that you weren’t aware of. Or when you buy new tires and they try to charge you a “disposal fee”. As long as they are up-front about the costs, you can make an educated decision. But if they spring them on you at checkout or when you pay the bill, it’s unacceptable in my opinion.
The truth about surcharges is that they stay in the pockets of the carriers. It would be the same as a fast food restaurant charging you a “register fee” on top of the cost of the burger and explaining that is it to cover the cost of the person running the cash register. Don’t we all assume that the cost of the product includes the overhead? Not in the telecommunications world. Some examples of the surcharges you may experience are:
- Federal Access Charge – just because it has the word Federal in it doesn’t mean it is a tax. It means that the Federal Government allows it. How nice!
- Federal Universal Service Fund – usually a percentage of the cost of the services. This money goes to pay for free services for others.
- PICC – “Primary Interexchange Carrier Charge”. This was developed when the local and long distance carrier were different and goes into the pocket of the long distance carrier…..who is typically the same as the local carrier these days. You can read it as “Profit In Carriers Coffers”.
- Administrative Recovery Cost – see Carrier Recovery Cost.
- Number Portability Surcharge – more profit
- Long distance billing charge – profit
- Cost Recovery Surcharge – the grandaddy of them all. It defies explanation.
- RFC Charge – this is my very favorite. When they run out of official sounding phrases and start using random combinations of letters, you know you are in trouble.
Taxes – Do not confuse surcharges with taxes. Taxes are mandated charges of course and those dollars do go to the various government agencies. You don’t have to like them, you just have to pay them. These fall into the category of typical taxes and they vary but city, county and state so you may not always be able to get this information quoted ahead of time. But I typically assume between 10% – 12% for Federal, State and Local taxes.
I want to make it clear that I am not against telecommunications carriers making a profit. In fact, I want them to be profitable and financially sound because that means there is more competition. More competition is good for the industry in terms of innovation and pricing. But it is also good for…..for lack of a better phrase…..keeping each other sharp. Trust me, where there is limited or no competition, customers are at the mercy of the carrier and the result is usually appalling.
In my next few posts, I am going to write about the best ways to buy long distance, Internet services, negotiate contract lengths and other items to look for and negotiate. As I’ve indicated, you can experience a 30% difference one way or the other depending on how you negotiate these items. Thirty percent!! I daresay that if you could affect all of your costs by 30%, it could be the difference between strong profitability and un-profitability.