Recover Telephone Overcharges, Obtain Rebates, and Cut Costs

While this article focuses on “hotels”, the cost cutting programs identified are applicable to any “franchise” in any vocation. 

One of the most annoying aspects of running a hotel is the constant barrage of unwanted solicitations regarding telecommunications services.  The analogy that comes to mind is the “boy who cried wolf” in that when an attractive offer actually comes along, the hotel executive and/or their telecom manager, just dismisses it.  And, even in situations where the solicitor engages the hotel executive in a conversation, most of the time, the hotel has already signed up for a term contract of 3 years, which has very significant cancellation penalties for early termination.  The “carrot” to the hotel for signing up for 3 years is that they will benefit from a larger discount than signing up for a 1-2 year contract.  The problem here is that all of these term contracts ensure that the hotel will not change its contract for the entire term by imposing what is called an “early termination penalty” clause that can be thousands of dollars. 

What if the hotel could obtain a savings without changing their current service providers?  And, what if this program even allowed those hotels who were under a term contract to be able to save money?

Now there is a new way for hotels to be able to obtain refunds on their existing telephone bills, without displacing their existing phone service providers.  Here’s how it works. 

A telecommunications auditor can provide a hotel with a no-risk revenue recovery opportunity that has a 100% chance of identifying over payments and/or future savings of 5-60% on all phone bills.  There are two types of audits.  The first variety generates monies to the hotel based strictly on refunds (rebates) available only on your 2006 tax return. The second one authorizes the telecom auditor to negotiate with the existing service providers, even those hotels under a term agreement, to obtain rate reductions from the existing vendors.  Either way, the hotel is “ahead of the game”, since this is “found money”.  The telecommunications auditor acts as the hotel’s impartial advocate, and doesn’t represent any phone company. The telecommunications auditor works on a shared benefit basis, sharing the savings on a 50/50 basis with the hotel for a three (3) year period.

The compelling rationale for the hotel to engage the services of the telecommunications auditor is that if they did nothing, they would continue to pay more than they have to and they would lose the ability to obtain refunds. There is a 24 month federal statute of limitations on recovering over charges on communications expenses.

The telecommunications audit covers every type of phone bill imaginable - all voice and data lines, including cellular and internet phone bills. The audit looks at over 80 different components in phone billing. 

According to the leading business, financial and communications industry sources, “If you haven’t completed a detailed analysis of your telecom bills in the past year, there’s up to a 90% chance you are being overcharged, possibly as much as 20%”.   

Let’s take a look at how telephone bills are paid at any hotel, or through any hotel management or hotel corporation.  First, the telephone vendor contracts are typically negotiated by the hotel management. Next, when the monthly bills come into the Accounts Payable Department, these phone bills are usually incomprehensible to the individuals reviewing them.  In fact, the bills are often designed to intentionally overwhelm the client with worthless and misleading information, while hidden costs are buried. This is known as the FUD factor – Fear, Uncertainty and Doubt – in telecommunications. 

Let’s take this a step further.  In order to understand just one of the ways that a hotel gets overcharged systematically on its phone bill, here is a real life example that happens every day.  A hotel negotiates a great rate with one of the top 3 name brand long distance phone companies.  For the sake of this example, we will call that long distance phone company, “American Tele-Monster”. The general manager of the hotel hires a new staff person and asks his administrative assistant to add two phone lines and one fax line for the new person.

The administrative assistant then calls the incumbent local exchange carrier, to which we shall assign the fictitious name of “Monopoly Local Phone Services”, and says, “I want to add a total of three new phone lines. One of them is going to be a fax line, and the other two are regular phone lines.”  The customer service representative for the local exchange carrier, Monopoly Local Phone Services, asks, “Who would you like to be your long distance carrier?”

At this point, the administrative assistant says, “American Tele-Monster is our long distance phone service provider. We want them to be our long distance carrier on these new phone lines.”  Then the customer service representative will ask “Who would like to handle your local toll calls?”. This is traffic that is not in your “local calling area” but not true long distance.

The hotel has to choose between the local exchange carrier and the long distance company and which one they choose can impact on the amount of the discount they receive from either. So, in the previous example, the hotel accounts payable department receives a bill from Monopoly Local Phone Services. All that the accounts payable department is going to do is simply cut the telephone company a check, so that they don’t have their phone services cut off.  However, the problem here is that these 3 new phone lines that were ordered are going to be included somewhere in the middle or end of the dozens of pages of phone bills or on a completely separate new phone bill that has to be processed every month.

If the newly ordered phone lines do show up on a separate bill they were probably not added to any existing contract and will be billed at full tariff rates for all calls. Once again the accounts payable department will simply cut a check and pay the bill every month. This can be the cause of one property receiving, processing and paying multiple phone bills every month and not knowing if the rates being charged are accurate or if they are getting all of the discounts that the hotel has contracted for. 

Does this conversation seem normal to you? Well, it is normal. 

Here’s what’s not normal. Did you know that all local phone companies make a huge amount of money on providing “billing services” for 3rd party service providers, who usually pay them 13-18% of the amount of money that they bill for them on your local phone bill? Third party billing allows all local phone companies to do business with anyone they choose, because third party billing is unregulated. 

So, in the scenario I constructed, instead of paying the contract rate of 4 cents a minute, the hotel is billed at the full tariff rate of 32 cents a minute (ballpark) or the “casual billing” rate that can be as high as $1.00 per minute for long distance traffic for the 3 new lines.  Instead of 6 second increments, the hotel is billed in 60 second increments, called “full minute” rounding, which adds an additional 20% or more to the cost of every phone call.  Think about this… 

The example I provided, which is wide-spread, is just one example out of dozens of how you can be overcharged on your phone bill.  And, frankly, in this case, both the local phone company and long distance company can insist they did nothing wrong.  And, they didn’t.

To solve this particular problem of “casual billing”, or more often referred to as “bleeding” in telephony jargon, your hotel should simply call your long distance provider and tell them you are going to be adding more long distance lines.  They will instruct you on exactly what you have to do to ensure that your phone lines get added correctly to your contract and will be billed at the negotiated rates. 

In the meantime, both the local and long distance companies are both happy. The local phone company provides a service to the long distance company in that, in exchange for the local company signing up new customers for the long distance company, they get paid about 13-18%. 

To be fair to both parties, understand that there are new business and residential lines that need to be added on a daily basis. My example, using business lines, shows you how the problem is generated.  And, while it is a common problem, it doesn’t even begin to scratch the surface of a telecom audit.  These telecom audits cover over 80 parameters of telephone billing. 

Getting back to third party billing, I want to make it clear that because it is unregulated, the local phone companies can allow all kinds of predators to prey upon unsuspecting customers. This is known as “cramming”. 

Let me give you a real life example.  Your hotel receives a phone call asking someone in your office to confirm that they want voice mail on the phone number that has been called, which is usually your main billed telephone number. The person answering the phone doesn’t think too much about this, and remembers that indeed there is voice mail on that number and says, “Yes”. 

In some States, you do not need permission to record a phone call.  So, this call gets recorded by an independent third party verification company and now the voice mail company that has a third party billing agreement with your local phone company has a new customer and the hotel management knows nothing about it. The “crammer” now bills you $20 per month per new voice mail box on your local phone bill.  The local phone company receives 13-18% of the $20 per voice mail box that you don’t even know that you have and that you never use. Usually, this billing goes on unnoticed for months and sometimes years. 

I remember reviewing a phone bill from an association and seeing a charge for “Psychic Hot Line”.  Again, this is third party billing.  Here, the local phone company gleefully makes 13-18% on the Psychic Hot Line calls. In this case, an employee of the association decided to make a Psychic Hot Line phone call while they were working in the evening, after everyone else had left the office. 

It gets even worse.  There are actual third party billing companies who “front” for adult phone line companies, so that their clientele can be billed by a “generic” sounding company, like “Intra-Professional Phone Services”, rather than an “adult” sounding company, such as “Phone Sex Unlimited”.   

Part of my own background includes having been engaged by the second largest telecom auditing company in the World (an Australian company) in 1997 to reduce the telephone costs of their clients. That was about 10 years ago. However, today, because of the complexities of the field of telecommunications, I personally utilize a telephone auditing service for my clients that can handle all types of voice, data, wireless, or internet services. According to my telecom auditor, complaints to the Federal Communications Commission during the year 2004 increased by more than 300%.  And, various watchdog agencies in the telecom industry estimate that approximately 90% of customers experience billing errors.   

Remember, the most compelling reason for you to engage a telecommunications auditor is that if you did nothing, you would continue to pay what you are currently paying.  And, there is no upfront financial risk.  If the auditor finds no past over billings or future savings, you pay nothing.    

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© 2006 Permission granted to BlueMauMau.com to print this article.

If you have a question about this article, or want to learn more about telephone auditing, please feel free to contact me by e-mail at bizamerica@aol.com.  Ron Feldman has been recognized by Who's Who In Lodging and Who's Who In California, and holds a U.S. Patent for an automated hotel reservation processing method and system. He has taught business services marketing at the undergraduate and MBA levels. He has saved McDonald’s corporation and its franchisee’s nearly $2 million dollars with his cost reduction programs.

Since 1994, Ron has been president of World Business Services, Inc., a consulting firm which help businesses improve efficiencies, and increase sales. He can be contacted through his office at 800-892-0879 (M-F) USA, or 718-240-5142 Monday-Friday (Outside USA). Or, Ron can be reached by e-mail at bizamerica@aol.com.