Carriers jump into auditing

A growing number of major carriers are in effect addressing the problem of inaccurate telecom bills this way: 'We'll be happy to review and audit those bills for you, but for a price.'

A growing number of major carriers are in effect addressing the problem of inaccurate telecom bills this way: "We'll be happy to review and audit those bills for you, but for a price."

"Almost laughable"

That's one users reaction to the idea of carriers charging for audits. What do you think? Click and join the discussion.

Third-party vendors started offering telecom bill-auditing services to large corporations more than 10 years ago because billing errors were common and costly. Since then carriers have improved billing systems but those systems remain far from perfect. According to Aberdeen Group, up to 12% of all service charges on corporate telecom bills are in error.

This has spawned a booming telecom expense management industry - one the carriers are increasingly trying to muscle in on. Companies are expected to spend nearly $500 million on telecom expense management tools and services this year, according to Gartner, an increase of about $120 million over 2003.

MCI already provides auditing services, Verizon is testing an offering, and Sprint has a toe in the water. AT&T officially denies any interest in providing such services, but one industry analyst told Network World that he has heard differently from the nation's largest carrier.

The carriers providing these services have a mountain of doubts to overcome.

"I'm skeptical," says Christa Degnan, director of supply-chain research at Aberdeen. "The carriers are getting beat up by enterprise companies who have woken up and realized how badly the carriers have been screwing them. Now the carriers are going to charge to bill them correctly?"

Another analyst also questions the service.

"It's like the fox watching the hen house," says Peter Firstbrook, program director at Meta Group. "Especially when you consider that 20% of the problem [for auditors] is finding the error and 80% is getting the carrier to pay up."

One customer who audits his own telecom bills monthly says he does not see any value in turning that chore over to his carrier.

"The carrier is billing me, so why would the carrier audit itself?" asks the IT director at a Massachusetts company who asked to remain anonymous. "They screw up my bills and then want me to pay to correct their mistake? No, I would not be interested in that service."

However, such skepticism is not universally shared.

RKA Petroleum, a Romulus, Mich., utility company, also has been auditing its telecom bills in-house. But the company "could greatly benefit from . . . audits of monthly bills from our telecom providers," says IT Director Jason Hittleman. He does not like how some independent auditing companies base their fees on how much money they save customers.

"We would be interested in such services from our carriers, even if they charged an additional monthly fee," Hittleman says. "The bottom line is that these types of services would save us time and money."

Looking for trouble

Independent auditing companies such as Avotus, Control Points Solutions (formerly Broadmargin and Teldata Controls), MSS Group, Granite Telecommunications and ProfitLine, typically search for three types of errors: math; non-compliance with contract terms; and mistakes with moves, adds or changes whereby the carrier continues to charge for a line that was canceled.

Some auditing companies charge customers based on savings found, but others charge a flat monthly fee for ongoing services whether they save a user $1,000 or $10,000 per month. The latter pricing method is most recommended by industry experts.

Just how much carriers are charging or plan to charge is murky.

Verizon is testing its bill-auditing service, which it likely will introduce to customers in a variety of flavors, including a pay-for service. But details on how much customers will have to pay have not been determined. Separately, MCI charges its outsourcing customers for its bill-auditing service, but the fees are part of a total outsourcing contract, not a line item that's specifically identified as bill-auditing services.

Verizon officials say the competitive landscape compels them to offer enhanced services such as auditing.

"Being just a plain old telephone company just doesn't work anymore," says Peggy Foley, director of billing systems and e-media at Verizon. "Just like every other company out there we have to be the most cost-effective and efficient, and we need to help users get the most bang for their buck."

Verizon plans to roll out its bill-auditing services next year. The carrier has a pilot bill-auditing and -analysis service underway with a Fortune 50 financial company, Foley says, although she would not name the firm.

In the pilot Verizon is analyzing only its own bills, not telecom invoices from other carriers, but the carrier intends to do both.

As for the criticism that bills should be accurate in the first place, Foley agrees to a point.

"Our billing should be accurate and timely," she says. "We should be doing analysis proactively and billing correctly and being sure we have the system functions and capabilities to do it. This is our long-term goal. A lot has improved in the last 18 months, but it's not perfect."

Verizon still plans to charge for its auditing services. Foley envisions a three-tier program. The first tier would offer a free self-service portal where customers could view their bills online and run a handful of reports. This feature is actually offered today for no additional charge.

The second tier would offer enhancements with "a human touch." There would likely be a nominal additional fee for the mid-tier service. The third-tier would have features ranging from telecom expense management to monthly bill analysis and bill payment, Foley says.

MCI is taking a different approach. The carrier actually has offered bill-auditing services to outsourcing customers for about seven years, says Bill Messerle, director of outsourcing service delivery. An MCI outsourcing customer typically hands over its telecom reins to the carrier, putting MCI in charge of everything from purchasing access ports from local exchange carriers to buying and installing new routers. In other words, MCI becomes the customer's telecom manager, which in many cases includes receiving all telecom bills. It's a natural environment to also support bill auditing for all a customer's service provider invoices, Messerle says.

MCI offers customers a repository for third-party vendor invoices whereby the carrier does "high-level evaluation, including historical trending and spot-checking," Messerle says. "If we find errors we do a targeted, deep dive and check invoices."

The latter includes verifying users are being charged the correct rates for all services and being charged only for services they currently use.

Messerle says more users are asking for this feature. "We are seeing more interest lately, which might stem from the complexity of services offered today," he says.

Sprint has taken yet another approach to telecom expense management. Quarterly, the carrier consults with its managed data service customers to go over their telecom usage, says Mickey O'Dell, product marketing manager. For example, if a customer originally bought 20 T-1s and five of those do not require 1.544M bit/sec of bandwidth, Sprint can adjust that and appropriately size the network on an ongoing basis, he says.

While Sprint is not offering a bill-auditing service, the carrier does review Sprint bills for managed service users that make the request, O'Dell says. The bill review is more of a line-by-line analysis, he says, and there are no plans to offer more detailed bill-auditing services.

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