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Phone company interest rates and billing practices … I googled “Loan shark” and found some neat similarities!

By May 27, 2012 General

If you are looking for a good scare. Take a look at your next phone bill, or bill from your current broadband service provider. If it is one of the ‘big guys’ you might be a bit surprised when you see the posted interest rates in their fine print. Here are two examples.

  • Telco 1 example was 51.1%
  • Telco 2 example was 42.58%

Let’s have some fun with this one. I googled “Loan shark” and I found a definition from Wikipedia, the free encyclopedia. It stated:

“A loan shark is a person or body that offers unsecured loans at illegally high interest rates to individuals, often enforcing repayment by blackmail or threats of violence.

In Canada, section 347 of the Criminal Code makes it a criminal offense to charge more than 60% interest per annum. When you calculate what some of these providers charge in interest rates, reconnection fees, late fees and other administrative fees they actually operate above this level.

This is called Usury and it is the practice of charging excessive, unreasonably high, and often illegal interest rates on loans.

Why is this a problem?

I have noted in my over 1 year now as President at Frontier that in working with new client’s one of the largest frustration points is Telco Billing. Fact is, telco billing is seldom accurate and many end user companies hire people whom analyze telco billing to confirm accuracy – often with little success when challenging what seems to be irregular billing.

Telecom operators in many European countries were forced to meet strict legal requirements for both telco and subscriber expectations to prove that their billing processes work correctly and their subscribers are billed accurately.

In Hungary (as an example), there is legislation where the operator is obliged to meet a legal requirement (specified in the 345/2004 Government Act), which states that “telecom operators have to prove that their billing is accurate and customer rights are respected in the process”.

Some of the key requirements to be met:

  • Quality and reliability requirements for invoicing
  • Reports on faults and the measures to correct them
  • Strict quality requirements (no more than one incorrect rate in every 10,000 consecutive record)
  • Protection of personal data
  • Reports on unusual subscriber behavior
  • Multi-level process for checking billing integrity

In North America, not so much it seems…

What we have is the risk of non-compliance with the Sarbanes-Oxley act for US operators, which requires that their billing in ‘someway’ be accurate when reporting revenue. Inversely it also means that end user companies can not alone rely on telco billing as a reasonable representation of telecom expenses since it is customary to receive ‘true up’ or ‘catch up’ invoices months, quarters or even years later.

So, the protections in North America are more around the authenticity of billing to protect revenue integrity – which is not really the same as customer advocacy.

Do you think this is why people cannot understand their bills?

The Aberdeen Group posted a blog entry recently called “Why Money Doesn’t Matter in Telecom”. This report noted similar findings. As well , A Gartner Group analyst was recently quoted as stating that 12 to 20 percent of corporate telecom charges are in error, and 85 percent of such errors are in the carrier’s favor.


At Frontier, we have always made a commitment that our billing won’t arrive in a ‘box’. This means a few things. First, we don’t like paper, but Second, we rely on accuracy of our own billing. It is one of the ways that we differentiate ourselves.

Things to look for, Long Distance or Call Termination Costs that are accurately billed (Per Second, Six Second, Minimum Call Duration of 30 Seconds etc.). For WAN or Internet Services, unnecessary bursting charges or legacy plans that create inefficient billing are things we avoid entirely. Or my personal favorite – sites that are cancelled but still billing (don’t worry the credit is coming).

So, next time you get a bill, and it is wrong, and there are admin and late payment fees – and, their collections people call threatening to cut you off – remind them that in Canada at least, it is illegal to send an incorrect bill and threaten actions like terminating your service for non-payment on the basis of an incorrect bill.

And, your sales rep. likely does not want to help for two reasons: First (he, she) will get paid on the erroneous total and second, they are the proverbial ‘David’ battling ‘Goliath’ in their own organization trying to understand your billing – which history has taught me that they don’t understand either.

So, at Frontier….

We want to send a clean bill, you also want to pay a clean bill. It is that simple, and Frontier likes simple.