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Telecom Cost Reduction: Is an Unlimited or Measured Plan Better?

Telecom Cost Reduction - Simple Business SolutionsBundled and unlimited local and long distance usage plans are certainly appealing to small businesses, but know what you’re getting into before signing a contract.

7 Questions to Ask About Any Bundled or Unlimited Calling Plan

Make sure your provider answers each of these questions for each type of call:

  • Local
  • IntraLATA (a.k.a. Local Toll)
  • Intrastate
  • Interstate
  • Toll Free
  • International

  1. What is the total number of minutes included in the plan?

  2. If the limit is exceeded, what is the overage price per minute?

  3. What is the minimum billed per call within the bundled or unlimited usage plan (e.g., 6 seconds, 30 seconds, etc.)?
    Some telecom providers charge their customers a 1 minute minimum, even if the call was only 30 seconds long. What this means is that you will burn through your bundle of minutes more quickly (a 30 second call counts as 1 minute against your bundle) and that your effective cost per minute of use is higher than you think.

    The cost per minute you think you are paying: $0.050/minute
    The cost per minute you are actually paying: $0.100/minute

    ((30 second call length + 30 seconds to meet minimum) x $0.050/minute) = $0.050 call cost
    ($0.05 call cost ÷ 30 second call length) = $0.100/minute

  4. What billing increment is used to calculate usage within the bundled or unlimited usage plan?
    Some telecom companies bill their customers using billing increments (e.g., 6 seconds, 1 minute, etc.) which enable them to capture extra profit. For example, if you are on a calling plan that bills in 1 minute increments, and you make a telephone call that is 1 minute 6 seconds long, the telephone company will round that call up to the next minute and you will be charged for 2 minutes. That means you pay for 54 seconds you didn’t even use. Here’s an example:

    The cost per minute you think you are paying: $0.050/minute
    The cost per minute you are actually paying: $0.091/minute

    ((1 minute 6 second call length + 54 seconds for rounding) x $0.050/minute) = $0.10 call cost
    ($0.10 call cost ÷ 1 minute 6 second call length) = $0.091/minute

    If you think this analysis of billing minimums and increments sounds ridiculous, just remember that it takes approximately 30 seconds to leave someone a voicemail and approximately 30 seconds to send a fax. How many times a day does that happen in your business? When you total all the rounding that occurs over the course of a month, it can be a substantial sum of money.

  5. Is the billing minimum and billing increment different for overage minutes? If so, what is it?

  6. Are there any types of calls that are not included in the plan?
    Some telephone companies exclude certain types of calls from bundled or unlimited calling plans. This could include calls to extended local calling areas (also referred to as ‘bands’ or ‘ZUMs’), U.S. states and territories (e.g., Alaska, Hawaii, Puerto Rico, etc.) and some countries (for international calling plans). Understanding what is excluded will help you avoid surprises in the future.

  7. What are the terms and conditions of the plan?
    Often bundled or unlimited usage plans require a minimum contract term and subscription to other services and/or features. Understand these requirements completely because if midway through your contract term you delete a service, feature, or line, you may be subject to early termination fees on the deleted service, and you may nullify the special rate associated to your usage plan. This is real. I have analyzed telephone bills and found clients that were paying $0.65 - $1.00 per minute for Interstate calls. Also, I have encountered instances where an unlimited plan is not truly unlimited. In the fine print, I have discovered limits on what are supposedly unlimited usage plans. Always read the fine print.

So Which is Better for My Business?

As an expense reduction consultant, I have analyzed many, many telephone bills (It’s one of the reasons why I now wear glasses!), and found the answer depends on the circumstances of each client. Here’s how you can answer this question for your own business:

  1. Calculate the average cost per telephone line for your business as follows:

    • Cost for Telephone Lines
    • + Cost for Features (assuming the cost is included in the bundled/unlimited plan)
    • + Local Usage Cost
    • + IntraLATA Usage Cost
    • + Intrastate Usage Cost
    • + Interstate Usage Cost
    • +Toll Free Usage Cost (assuming the cost is included in the bundled/unlimited plan)
    • +International Usage Cost (assuming the cost is included in the bundled/unlimited plan)

    • = Total Monthly Charges

    • ÷ Total Number of Telephone Lines

    • = Total Cost per Telephone Line
  2. Compare the Total Cost per Telephone Line of your current telephone service to the Total Cost per Telephone Line of the bundled or unlimited local and long distance calling plan. If the cost of your current service plan is less than the bundled/unlimited plan, and you don’t anticipate a large increase in telephone lines or minutes of use, stick with what you have. If the bundled/unlimited package is less expensive, and you don’t anticipate a large decrease in telephone lines or minutes of use, it may make sense to switch.

Here’s an example:

A small business currently has measured rate service:


Quantity Unit Cost Total Cost
Telephone Lines 8 $26.00 $208.00
Local Minutes of Use 2,672 $0.020 $53.44
IntraLATA Minutes of Use 457 $0.040 $18.28
Intrastate Minutes of Use 323 $0.040 $12.92
Interstate Minutes of Use 124 $0.040 $4.96
Total Monthly Cost

$297.60

A telephone company approaches the small business and proposes an unlimited local and long distance calling plan package at $50 per telephone line per month (a total of $400 per month).

The measured rate plan in the example above is clearly the better option, saving the small business $1,228.80 per year. However, if this small business had more long distance usage and/or was being charged a higher price per telephone line, the unlimited calling plan could quickly become more attractive.

Now that you have an idea of what to look for, go grab yourself a cup o’ joe, cozy up with your telephone bill and really get to know it. Using the information from this post (and my last post - How to Read an ATT Phone Bill), devise a plan and take action to lower your monthly telecom expenses. Your bottom line will thank you!


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