How Carriers Try to Increase Your Spend in Tough Times

You are part of a business that exists to make money. And if you are in telecom or IT or sourcing, you’re basically viewed as a cost center, not a profit center. When the economy takes a turn for the worse, your job is to help the company save money to improve its bottom line, even as the revenue side of the house works on getting more from customers.

But the carriers are also businesses that exist to make money. When the economy takes a turn for the worse, they work on getting more from their customers. That would be you. So while everyone loves to talk about alignment of interests and "strategic partnerships," the simple fact is that when the economy is hurting, your need to save money by paying less to vendors runs smack into your telecom suppliers' need to get more money from … you.

The core of our practice is representing large users in telecom and IT transactions. Over the years, my sense is that suppliers seem to have more insight into the strategies employed by customers to save money than the customers have into the tools used by the carriers to extract more money. The purpose of this article is to level the playing field.

The carriers have a lot in their playbooks. Here are eight strategies that seem to be among their favorites:

Increase fees and surcharges, or dream up new ones

If you look at their form agreements and Service Guides, one thing you'll notice is that the carriers reserve unlimited rights to pass through (and increase) taxes, regulatory fees, and unspecified surcharges or "tax-like charges" whenever they feel like it. And although large customers negotiate improvements in the forms (like a requirement that decreases in taxes and regulatory fees be passed through, and occasionally an offsetting credit), the carriers fight very hard to maintain their "rights" in this area.

The reason--and the result--is that taxes and surcharges comprise something like 20% of your telecom bills. For local lines and PBX trunks, the figure can be closer to 30%. And despite statutes requiring carrier practices to be "just and reasonable," the regulators aren’t much help. When the providers’ practice of marking up universal service charges was pointed out to the FCC, the agency got very angry -- but not at the fees. It was just mad that the carriers seemed to be saying that the FCC had approved or required the markups, and rather than rein in suspect surcharges, the order it issued just said any surcharges beyond what the FCC requires had to be separately broken out and not blamed (directly) on the agency.