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Fighting back against telecom surcharges

Understanding the distinction between regulatory charges and the extras carriers pass along is a powerful weapon when negotiating contracts.

By David Rohde and Stephen Shea, Network World
October 06, 2003 12:09 AM ET

Network World - Running a corporate telecom shop often feels like playing the Whack-a-Mole machine at a carnival - you keep pounding down the moles but they keep popping back up. That's never more true than in the game of bill surcharges, in which every move by user groups or the government to rein in confusing bill add-ons soon is parried by an even more maddening and confusing line item from the carriers.

Don't be fooled. When a new line item pops up on your bill, it's all revenue to the carrier, no matter whether it's labeled as a tax, surcharge or pass-through.

From time to time the government tries to get the carriers to explain accurately who is responsible for the purported costs leading to each surcharge. But usually that just leads the carriers to break out some fees and combine others in a fashion that just barely complies with whatever the latest rule requires.

Your best bet is to understand why the carriers view the fees as an essential part of their revenue management - and then build these fees into the real cost of each of your network services, rather than thinking of them as government mandates, as the carriers proclaim.

That way you can bring your entire projected surcharge you spend into your carrier contract negotiations and apply the same principles of competitive leverage that you do with each service's regular rate elements such as tolls, ports, circuits and features. Tallying the real cost this way can help bring about overall contract concessions and credits, even if each surcharge is called "undiscountable" in the carrier's official service guide. But to add up these costs you need to know each carrier's surcharge platforms and what their plans are for them, because even some of the most obvious surcharges have new twists and turns.

Reform and results

Most users are familiar with the big surcharge for universal service, or universal connectivity, but recent changes in the rules have altered the challenge in managing these expenses.

Last year the FCC declared it was fed up with what had become increasingly blatant markups of the universal service fee by long-distance carriers. For much of 2002, the FCC said it needed 7.28% of applicable carrier revenue to fund certain telephony and Internet subsidies. Yet by the fourth quarter business customers actually were being charged 8.3% to 9.6%. And what really peeved the FCC was that AT&T  was charging residential customers 11%.

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