I was finally convinced there must be more to wireless expense management than I had thought when I noticed all the wireline TEM vendors merging or partnering with wireless TEM providers. For example, in March 2007, Tangoe merged with TRAQ Wireless, a well-tenured provider of wireless TEM. In July 2007, MGB Expense Management partnered with mindWireless, and in October 2007, Rivermine announced a merger with its long-time partner, BBR Wireless Management. Another wireless TEM provider, MobilSense, partners with many wireline TEM and call accounting vendors, including Telesoft.
To find out what the TEM vendors are trying to gain when they partner with the wireless TEM providers, I reviewed case studies on wireless cost savings and optimization methods and spoke to colleagues and telecom managers about their unique challenges in managing wireless costs. I then spent some time talking to Doug Stevens, the sales VP of wireless TEM provider MobilSense, and John Shea, the chief marketing officer of Rivermine.
I found there are two main ways in which wireless and wireline TEM are very different: volume commitment issues and device management. Let’s look a little closer at each, and then at some of the other concerns that come uniquely with wireless TEM.
Pricey Cellular Rate Pools
The difference in how cellular services are billed compared to wireline voice services is not trivial. With traditional wireline long distance services, the customer determines the minimum volume of minutes they will use over an entire year (known as the Minimum Annual Commitment or MAC), then negotiates a per-minute rate and commits to spend slightly less than what they expect. For example, a company might commit to pay a minimum of $60,000 annually, expecting to spend about $70,000, but knowing that any minutes they use will still cost whatever the agreed-upon per-minute rate is.
In contrast, wireless revenue commitments are based on monthly usage for either a single cell phone or for a rate “pool,” a number of minutes shared by a group of cell phones. Unlike the annual wireline contracts, wireless pricing plans can change as often as every few months and without notice to the subscribers. Month-by-month usage fluctuates more than usage that is averaged over an entire year, and wireless providers charge a significantly higher per-minute rate for minutes beyond the monthly usage allowance.
Although enterprise telecom managers would never pay AT&T, Verizon or Sprint five times as much per minute for wireline calls once the MAC was met, this is a common pricing policy for these same three providers’ wireless invoices, and customers have accepted it.
Recently, however, businesses have begun to realize how expensive these extra minutes can be, as well as how expensive it can be, on a per-minute basis, not to use all the contracted minutes. For example, suppose a business customer negotiates a plan that offers 700 minutes for $49.99 per month, which is a middle-of-the-road deal in today’s market:
At first glance it would appear that the effective rate is just over 7 cents per minute, but in order to actually get that rate the user has to use exactly 700 daytime minutes; no more, no less.
If the phone is used for only 350 minutes one month, the effective rate doubles to more than 14 cents per minute.
If the phone is used for 800 minutes the following month, and the extra minutes are billed at 40 cents per minute (again, a common charge), the effective rate is more than 11 cents per minute.
Pooling usage for multiple devices helps somewhat, but it does not alleviate the necessity of over-committing on minutes to avoid paying the terrible 40 cent per-minute overage charges. In response to this frustrating problem, businesses have begun requesting flat-rate plans with annual spend commitments that are more like the wireline plans—for example a commitment to spend $200,000 per year with every call billed at 9 cents per minute. Carriers will often accede to these kinds of arrangements, but usually they will withdraw other cost-saving plan features, such as free nights and weekends or free mobile-to-mobile calls. The net result is often still a rate that is much higher than advertised.
Plan Management Is A Big Deal
A well-negotiated contract is always a good idea, but another way to help avoid undershooting or overshooting your wireless pricing plan is to use what the wireless TEM providers call “optimization.” This is one of the main features attracting the wireline TEM providers to their wireless brethren, and one of the main reasons you might be interested in looking more closely at wireless TEM for your own organization.
