KEEPING YOUR TELECOMMUNICATIONSCOSTS IN LINE
OR LOWER
Presentation by: Jerry Steinberg, Senior
Communications Consultant - Telesolutions Consultants 5/15/03
This is a summary of the presentation by Jerry Steinberg of
Telesolutions Consultants at the Illinois ASBO Annual
Conference.
Telecommunications costs are a top five expenditure of K-12
schools and school finances, as we know, is in a flux today
due to decreases of state contributions to the educational
fund and increases in labor and fringe benefit costs.
As we see it, the top 5 expenditures for schools are Labor,
Benefits, Construction, Energy and Telecommunications
expenses.
Most business administrators have gotten a good handle on
the labor, benefits and construction costs as they are often
pretty straight-forward (well, maybe not construction costs!)
but telecommunications costs can be a secretive, confusing and
overall hidden - written in a specific language.
In a recent interview with the Federal Communications
Commission, Commissioner Michael Powell even admitted that he
couldn’t read his phone bill- and that’s scary!
BIGGEST TELECOMMUNICATIONS EXPENDITURES
We find that the leading cost items are local phone usage,
then line rentals, then Internet access followed by equipment
purchases or leases.
Missing out on e-rate opportunities can also be a leading
cost item for school districts- revenues unrealized.
1. Local Phone Usage - The highest cost item
typically on a telephone bill that I review is the usage
charge. Usage is defined as local calls from 0 to 8-miles from
your serving telephone company central office; medium distance
calls from 8- to 15-miles and local long distance calls
generally 15+ miles.
SBC or the local telephone company generally is the leading
provider of local usage service although today there are quite
a lot of choices for local services including Competitive
Local Exchange Carriers or CLECs who are competitors to the
local phone company who either resell local phone company
service or who bypass and sell their own network services.
Local usage is generally more than 50% of your entire bill
and should be examined with a competitive eye as there is
great savings to be had in today’s telephone usage
marketplace.
We have recently assisted several school districts to
either change local carriers or to renegotiate with their
present local telephone carrier in a highly competitive
situation. We suggest several things including:
To plot your costs on a spreadsheet
Look for trends or spikes in your costs as an upward spike
could mean a contract is up or you have been slammed
Evaluate at least three competitive proposals that will
give you peace of mind
If the incumbent is working out well then give them a
chance to match any "great offer"
Double Check your present contract language to determine if
you have any contracts with significant liabilities if the
contract is broken
Double check vendor references as what may seem to be to
good to be true usually is!
Make sure when making a change of local and/or long
distance provider that you consider the
e-rate effect of the change
Also, make sure that a new long distance service doesn’t
steal your local long distance, as well
Use outside and independent professional assistance when in
doubt
Money is definitely out there to be saved!
2. Line Charges - Look at your local SBC bill or other
local telephone company bill and you will typically see just a
summary cost, e.g.$1,000 to $10,000 per month and then usage
charges. Buried in the monthly summary cost could be anything
and in my experience, I have found many interesting items
buried in telephone bills.
In one recent example, I found 56K Data Circuits- an older
form of data communications superceded by T-1 service) that
the customer changed to T-1 lines three years ago – but no one
bothered to call the phone company to have the lines removed.
The cost over three years was over $75,000. In another case,
we found an incorrect rate for a data line that was over
charged by $400 per month over 10 years.
We frequently find telephone lines that schools have
"plastered over" in reconstruction that should have been
removed. There are too many examples to cite them all!
In other cases, we have found that agreements for line
rentals have lapsed and rates have risen to the highest
possible rate – a month to month agreement.
As in some cases, we have found that contracts have been
signed for the highest line commitment level when a lower
commitment would have been much more appropriate.
So what you need to do is to investigate what is included
within your monthly charges. Do not simply pay the bill every
month.
Either have the local telephone company explain the bill to
you (possibly a good idea depending the expertise of the
person) or an outside professional firm that knows how to read
the codes properly.
3. T-1 and Internet Access - Another large expenditure,
we find, is that of Internet access and T-1 lines between
district locations on a Wide Area Network or WAN.
Questions to be asked include:
Are you using the Illinois Century Network?
What are you paying per month for T-1 service?
Are you connected between your schools with a T-1 Wide Area
Network or WAN using T-1s?
Is wireless a better and faster solution or not?
The Illinois Century Network or ICN, formerly the Illinois
State Board of Education Net or ISBENET offers Internet
service throughout the state of Illinois at a "distance
insensitive" rate meaning that it is usually much less than
other providers of Internet service.
Are you still paying under the old ISBENET tariff and if
you are or are not sure then you could be missing out on
significant savings. Some schools that are close to the ICN
pay "peanuts" per month e.g. $79 to $120 per month which is
virtually nothing after e-rate discounts.
Schools and libraries using other ISPs or Internet services
should consider the ICN and its low rates. A key benchmark is
if the monthly charges are over $400 for a T-1 line then you
need to examine your service and cost more closely as there
may be savings available.
Also if you are using T-1 lines between your locations in a
WAN or wide area network then you may be able to qualify for
lower monthly rates, as well, that are available through the
ICN.
We are not sales persons for the Illinois Century Network
but just recognize that they are a) generally the least
expensive T-1 Internet Service Provider, b) backed by a
tremendously fortified, central office type equipment location
downtown in the State of Illinois building and c) we have
several clients who use the T-1 service for both voice and
data communications via Voice over IP and rarely have
problems. So it is very reliable as well.
4. Equipment Purchases - Generally, equipment
purchases are made every seven to ten years or so for schools
but the expense can be very large- in the hundreds of
thousands of dollars one-time and maintenance in the thousands
per year. Today, there are many reasons that schools are
purchasing new systems including due to new construction, to
comply with the "new" e-911 law (actually it went into effect
in July 2001) and in many cases due to the age of the
telephone systems.
There are ways to cut back on the overall costs of your new
equipment purchases. One primary way to cutback on one-time
costs is to open it up to competitive bidding. To single
source your equipment purchase is almost a guarantee of higher
prices. Another way to cutback is to phase-in your
installation with offices in the first round or year and the
classroom next year. The last way is to be aware that
telecommunications costs can and must be negotiated. There are
many concessions available and even if a vendor is the lowest
cost provider they may not know it and be receptive to
providing deeper discounts.
Also, be aware that if your school district is in the
higher e-rate discount level that you may be able to qualify
for e-rate funding on your equipment purchases.
CONCLUSIONS
Schools just like most everyone else today are cutting back
on their expenses and sharpening their negotiating pens for
many services and equipment purchases and leases.
Telecommunications is one of the leading expenses of
schools and businesses and the key word in today’s marketplace
is to keep your contracts as short-term as possible, Have
someone from your organization responsible for keeping a chart
of telephone and data communications related charges and if
there are any spikes in charges up or down to find out why.
Be aware of the latest costs per minute and determine if
you are paying too much. Don’t hesitate to use outside
professional consulting assistance if you or your staff
doesn’t have the time or necessary expertise to do the job
correctly.
Negotiate for the best costs in any service or equipment
purchase or lease.
Good Luck!
Jerry Steinberg is the senior telecommunications consultant
from Telesolutions Consultants and can be reached in six ways
including: via snail mail 108 S. Third Street, Suite #3,
Bloomingdale, Illinois 60108 at the office phone at
630-351-6200, via e-mail jstele1@aol.com, via the Internet at
www.telesolutionsconsultants.com, via fax at 630-351-4162 or
via cell phone 630-240-3056.
