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Wrong Number?

Bill management software and outside experts help agencies untangle telecom billing errors.

Spending too much time figuring out your government's telecommunications bill and not enough time on your real job?

You're not alone.

Managing telecom services has become a major headache for many jurisdictions. And with the convergence of voice and data, as well as the explosive growth in wireless services, the situation could worsen.

More than 200 local and 1,000 long-distance service providers offer more than 36,000 rate plans, according to Teleconnect Magazine. Telecom costs are an organization's third or fourth largest expense, costing $3,000 to $4,000 annually per employee, which is roughly double the cost five years ago, according to the Aberdeen Group.

Additionally, any telecom firms -- especially the regional Bells -- that underwent recent mergers and acquisitions still use legacy software programs to spew out increasingly complex bills. "It's not that unusual for some organizations to receive a monthly bill in one to two dozen boxes," said Roger Oustecky, vice president of MSS*Group Inc., adding that the result is billing errors that can reach 80 percent of the total.

While all industries overbill, the telecom industry is considered a major offender, according to billing experts. The reason, they say, lies with industry consolidation that hasn't kept up with computerized integration of services. The lack of information sharing has led to an increase in errors. On the other side, organizations, including state and local governments, don't put the time and effort into processing and auditing the bills properly. "It's a low priority," Oustecky said. "Government telecom departments have other pressing needs to consider."

One of those priorities is money. While errors may exist in many phone bills, it costs most organizations more than $25 per month to review, process and pay one vendor telecom bill, according to MSS*Group. Multiply that times the thousands of bills the average state receives and suddenly bill processing turns into a major expense.

Problem Progressively Worsens
While few state or local governments simply pay the amount they owe telecom carriers each month and move on, it's clear the struggle to process, review and audit the bills is getting worse. Many manage their accounts using accounting software or special programs designed to process telecom bills.

Stonehouse Technologies Inc. is a major player in the telecom management field, its communications service software used in several counties and a number of states, including Alabama, Arkansas, Illinois, Indiana, Louisiana and Oklahoma. The software allows jurisdictions to track usage, billings, asset inventory and requests for service. For example, Arkansas runs the Stonehouse software program, called MONIES, on its IBM mainframe to manage orders, inventory, billing and other services for both traditional phone service and emerging wireless solutions.

Minnesota's experience with telecom billing is both typical and unique for states. The Department of Administration's Intertechnologies Division manages the states $22 million annual bill for local and long distance services. The department processes the bills, which are then turned over to individual agencies for payment, according to Bonnie Plummer, product manager for local and network voice services.

Telecom giant Qwest is the state's largest service provider for local voice calls. Because of the volume of business Minnesota does with the regional Bell, the firm has four of its employees dedicated to handling the state's account, one of whom works on billing issues one day per week. In addition, monthly meetings are held with the carrier to address those billing issues. "We do find errors on both sides [of the billing problem], but they tend to be internal posting mistakes," Plummer said.

The state's long distance provider, WorldCom, also works closely with the state on bill processing. In fact, WorldCom recognized that its unique contract with the state could lead to billing difficulties and reviews the bills on a monthly basis. As a result, the state often gets a credit memo -- less than $1,000, according to Plummer -- after the bill has been checked by WorldCom's marketing group.

The number of phone companies conducting business with Minnesota makes the state unique. "We've got 65 here, some of which are mom-and-pop operations," Plummer said. As a result, only three carriers offer electronic bills and payments, forcing the state to continue working with slower, more expensive paper processes.

Farming Out Headaches
Local governments might not have the amount of business to leverage the kind of customized service state governments get from telecom carriers. But they can have nearly the equivalent by outsourcing bill processing to specialists. That's what Douglas County, Colo., has done for the past two and a half years. Forced by budget constraints to cut back on staffing and find new ways to save money, the county decided to farm out its telecom bill processing to MSS*Group.

Bryan Richison, the county's finance manager, said the county spends between $50,000 and $75,000 per month on phone services and that the paperwork for processing the bills has continued to increase. For $3,000 per month, Douglas County pays MSS*Group to process the more than 1,000 billing units that show up on the five bills it receives from telecom carriers.

The firm breaks down the county's charges according to type (local, long distance, wireless) and summarizes the charges according to the Finance Department's accounting categories. They also prepare a monthly letter that highlights any trends taking place with the billing, such as a surge in international calls or potential cost savings that might interest the county.

While cost recovery and audits aren't the primary reason Douglas County uses the service, they have received credits for a few overcharges MSS*Group spotted. Mostly, it's the overall savings in labor that makes outsourcing so attractive. "I'd be hard press to hire a full-time person to do all the work MSS does for us for $36,000," Richison said. "They have two full time people going over our account. We couldn't put those kinds of resources into it."

Return on investment is one of the chief reasons organizations use MSS and other types of bill management services, according to MSS*Group's Oustecky. "We've seen some customers get 400 percent ROI just on the receivables," he said. "We take on the dirty work and bring back their efficiency."
With more than 20 years of experience covering state and local government, Tod previously was the editor of Public CIO, e.Republic’s award-winning publication for information technology executives in the public sector. He is now a senior editor for Government Technology and a columnist at Governing magazine.