Dear ILEC: You're Making a Big Mistake CLECs turn to automated reconciliation systems to keep tabs on access billing

Talk about billing systems. You have 35 employees in your cost of access office responsible for tracking and validating thousands of invoices sent to you by ILECs and IXCs every month. Sometimes the invoices are stored on tape, CD-ROM or other digital media, but often, much too often, they arrive as bundled stacks of paper piled on pallets, like so many cans of tuna. Handling that many carrier access invoices is too much for many CLEC bill audit offices to handle. “It’s a constant job,” says Bob Steger, vice president of cost of access at Frontier Communications Inc. “We get 8,000 to 10,000 invoices a month. That obviously keeps a lot of people busy, month after month.” A surprising number of carriers still manually pore over those invoices-which can be hundreds of pages long-because they lack automated systems to do the work for them.

But the avalanche of invoices is more than a staffing problem. Poor network element inventory, faulty provisioning data and just plain bad programming on both sides of the switch mean that those carrier access billing (CAB) invoices are often wrong. So wrong, in fact, that in any given year even small CLECs can lose millions of dollars in overcharges. Because they can’t document the ILEC’s billing mistakes, they often can’t dispute the bills with any confidence. “The problem is time,” says Jeff Boozer, vice president of product marketing for Billing Concepts. “You would be surprised how many CLECs don’t have a solution to do it at all. It just goes undone.”

“A telecom service provider can expect a 7 percent to 8 percent error in a complex CABS bill,” says Thomas Thekkethala, managing partner with Telecom and Technology of Denville, N.J. “If you have a carrier whose access cost is $100 million, that’s $7 million that doesn’t get to the bottom line. For the larger service providers, you’re talking about staggering sums of money.”

CLECS URGED TO RAISE BOTTOM LINE

Three years after the passage of the Telecommunications Act, investors are putting pressure on new competing carriers to get their bottom lines moving. And as the CLECs expand their OSS, they increasingly turn to automated CAB reconciliation systems to plug the leak in access cost. “If you take a look at the back-office maturity of the carrier, CLECs will invest their primary money into the network, then they invest in the billing system, and the last thing is back-office management,” says Yves Robinson, vice president of marketing for InformationView Solutions Corp. of Rochester, N.Y. “There is a tremendous amount of errors in CABS invoices that people knew they wouldn’t find unless they invested in this area.” RBOCs and IXCs have in-house systems to automatically audit and document data disputes; the CLECs that do have automated systems have little more than automated spreadsheets to track leased line activity, but they can’t verify minutes of use. “The new carriers focus on getting their ordering and billing, and not enough emphasis is put on the access cost management area,” Thekkethala says.

THE PAPER CHASE

Telecom and Technology is currently participating on a network cost management project at Electric Lightwave Inc., a CLEC based in Vancouver, Wash. In addition to providing local and long-distance phone service, ELI provides enhanced data services, such as ATM and frame relay in the Northwest. The company also owns and operates metropolitan area networks in Seattle, Spokane, Portland, Sacramento, Phoenix, Salt Lake City and Boise, Idaho. ILECs such as US West bill ELI for local loops and switched traffic. ELI also gets volumes of invoices from IXCs for long-distance call origination and termination. “When you are invoiced in the $100 million range per year in access cost these invoices tend to be large, especially the switched access ones,” Thekkethala says. “A typical CLEC or IXC does a lot of call origination and termination, as well as T1 leasing from the dominant RBOC in its region. Consequently, the RBOC creates dozens of billing accounts to invoice the CLEC/IXC at various times of the month, and they send paper bills because most CLECs or IXCs do not have the facilities to accept them electronically.”

Although some carriers send the invoices on tape or other electronic media, CLECs must still print them out, because they can’t put the electronic invoices into an automated system for comparison with their own records. “You have to have a system that gets the bill from the ILEC and puts the details into one bucket and the statistics from your own network into another bucket, so that you can compare the two,”

Thekkethala says. “If the ILEC bill says you had 10,000 minutes terminated at a specific end office and your network records indicate that you have only 2,000 minutes terminated to the same end office, you have a legitimate dispute that could be filed.” Comparing CDR usage and charges is extremely complicated. Each call can have dozens of rate elements, tariffs, and myriad tax requirements-and there are millions of calls. “The next thing you have to do is verify if the rates they used to bill you match the tariff they used to set those rates,” he says. CLECs also often have individualized contracts that have to be tracked, to ensure that special prices, such as volume discounts for T1 lines and tier pricing, match those agreements. “They have to be careful,” Thekkethala says. “There are new services that fall out of the normal purview of tariffs.”

OPPORTUNITY FOR DISPUTE

Numerous errors also pop up in provisioning and service activation data. “Your company orders five T1s, but gets billed for seven T1s,” Thekkethala says. “You also need to track and dispute service activation and disconnect dates. The ILEC records may indicate that the circuit was turned up on the 10th of the month, whereas your records may indicate that you accepted that circuit only on the 20th. This is another dispute opportunity.” And the reverse can happen when the circuits are disconnected, he says. The ILEC’s provisioning system notes that it’s disconnected, but its billing function doesn’t have a record of the disconnect, because the ILEC’s provisioning and billing functions often aren’t integrated. If CLECs can find a way to efficiently root out errors in the CAB invoices and document them during disputes with ILECs, Thekkethala says, they will almost immediately and dramatically improve their cost recovery and therefore their bottom lines. “It can mean the difference between a company being massively profitable or losing money. It’s like low-hanging fruit.”

“ELI management realized that in order to turn earnings positive they had to examine all the aspects of their cost structure,” Thekkethala says. “Because access is sometimes 50 percent of the cost of doing business, they had to find all of the different areas they could be disputing and winning from ILECs.” He says CLECs need four elements in place before they can implement a strong verification and dispute reconciliation process:
Access to accurate and standardized data on end office connections and circuit inventory, including T1s, circuit numbers, dates of activation, etc.
A network audit group with standardized business processes and practices to manage all disputes Automated tools to handle CAB auditing and reconciliation
Highly experienced auditors. “You need someone with the knowledge of the network itself” because they are critical to winning disputes with ILECs, he says. “If you’re not credible in your conversation, your odds of winning are low.”

POOR INVENTORY A COMMON PROBLEM

“Most CLECs don’t have those four elements,” Thekkethala says, “and for those that do, they don’t have them integrated to reap the rewards of cost savings.” The root of the problem may be inventory, he says: “I have not been at a CLEC or IXC that has a full, clean, logical inventory of the T1s, DS-3s, and other circuits. Their circuit inventory is not updated, so their ability to dispute is low.” Several carriers have spent up to $2 million to $3 million to inventory their circuits, but small carriers have to depend on an internal group, which often already has a big workload, to perform the audits.

An integrated management system made up of auditors and accounts payable personnel can organize and track disputes and keeps CLECs informed of where bills are in the dispute process. Such a group can present a unified voice and a constant point of contact during deliberations, which further increases communication between the parties, Thekkethala says. Strong business processes ensure that circuits and agreements put in place today are accurately recorded and accounted for further down the line. “It gives you credibility,” he says.

Telecom and Technology believes that the new business processes being implemented at ELI will raise the CLEC’s bottom line. “During the ELI case study, we focused on improving their processes, cleaning up data, putting in automated tools, and we continue to train the existing auditors,” Thekkethala says. “You’re going to see dramatic improvements.” ELI’s automation software will have four major functions: the ability to receive ILEC and IXC bills electronically and store them in standardized databases; receive feeds from the circuits in the circuit inventory and CDR electronically; automate reconciliation by comparing ELI’s CDRs with details in the ILEC’s invoices; and generate exception reports and track the bill through data collection, presentment, dispute and reconciliation. “Once our automation software is fully installed, I expect not only a much more efficient use of our human resources,” says Bob Staats, ELI’s finance director, “but a much more effective ability to audit and win billing disputes.”

FRONTIER SAVES MILLIONS WITH SYSTEM

Frontier (which merged with Global Crossing under an $11.2 billion deal in March) automated its switched-access CABS validation about three years ago. Steger says the automation saves the IXC “millions, definitely millions. Our cost of access is more than a billion dollars a year.” Before Frontier installed its CAB auditing system-Cost of Access from InformationView Solutions Corp.-a staff of 10 employees had to manually analyze and process huge paper invoices from NYNEX, Bell Atlantic, MCIWorldcom, Sprint and other carriers and enter them manually into Excel spreadsheets on a PC-based network. Mountains of paper records had to be saved and archived off site, for legal reasons and as reference material in case of future disputes. Call detail records were collected and stored in a mainframe computer in Dallas and sent to a Digital Equipment Corp. VAX system in Rochester, N.Y., where they were decoded and condensed into summary form. Detailed records were backed up to tape and deleted from the system, and auditors could access the summarized call detail records for 50 days.

The staff in Rochester would then manually review the invoices against these summarized records to determine whether there were over-billings from other carriers. “It was a painstaking process to attempt to document errors,” says Tracey Chaput, a former manager of cost access at Frontier. She drew a bleak picture in a report a few years ago describing life before automated reconciliation: “We had to depend on other groups to provide us with information via paper records, and a lot of detail simply was not available. Disputes were negotiated, meaning the company sometimes paid hundreds of thousands of dollars that it did not really owe.”

SYSTEM MANAGES DISPUTES

The new system, which has a custom-tailored warehousing application, continuously records every call and every switch to or from the ILEC and IXC, building more than 900 transactions per second into a Sybase relational database management system that includes workflow automation, Chaput says. The InformationView system, which runs on two Sun Microsystems SparcStation servers, automatically loads billing data received from other carriers and validates charges against the database, authorizes payment on verified invoices within predetermined limits and alerts accounts payable. It also manages disputed invoices, including flagging invoices not matching records, and automatically provides supporting data for analysts to use to dispute overcharges. The system also tracks disputed claims through resolution.

Auditors sitting at PCs access the Sybase using InformationView’s Open Archive optical disk extensions to two ATG Cygnet libraries. The system was installed with rewriteable 12-inch magneto-optical drives integrated into Cygnet Series 1800 optical libraries, but Frontier is upgrading to a disc array for more storage and changing the mainframe to an IBM 9000 for more processing power. The company now has about 400 gigabytes of summary data and can store up to 950 gigabytes. With the larger database, the auditors now have on-line access to 90 days of CDRs, 365 days of cost of access records and all CDR summary data. The system also generates several reports (including 13-month trending of monthly recurring charges) and dispute claim notification, and it performs audits such as circuit existence, rate audits, minutes of use, percentage of interstate usage (PIU), 800 database queries and directory assistance.

HUMAN STILL NEEDED

Now that the switched side is automated, Frontier is automating CABS verification for the dedicated side. But the system doesn’t completely remove errors, Steger says. “If the CDR data is not accurate it’s going to generate discrepancies that are really not discrepancies. If there is a programming error, the switch will miss a beat and a half hour of records aren’t sent-it looks like there’s an over-billing situation, and in fact there was no issue. And the system can’t make the decision to question something. You still need human intervention to make sure it’s valid. It takes a lot of people’s time to ensure that the system is telling them the right thing.”

Developers from InformationView and Frontier are installing a module to receive the dedicated billing and integrate it with the switched-side cost of access system, Steger says. The automation coincides with the installation of a SONET Frontier is building from Portland to Los Angeles, through Houston, Minneapolis, and on through Chicago, Detroit, New York City and down to Tampa. The first layer is already operational and will be followed by an IP layer in the near future, Steger says. “But we will continue to get bills from ILECs, anywhere from 1,000 to 1,200 a month, because we still have to get on and off the network.” The Cost of Access system modules will be installed in Detroit and at Frontier’s headquarters in Rochester. “We are changing the interfaces between our provisioning system and InformationView’s system as we speak,” Steger says.

Communications Software Consultants Inc. of Albany, N.Y., entered the access billing reconciliation game back in 1984 right after deregulation, says company founder Larry Davis. The system, simply known as CABS, was created after a group of telephone carriers in New York hired Davis to create a system to bill IXCs, he says. CommSoft’s product is present at about 50 sites, owned for the most part by smaller ILECs. “It doesn’t audit the switch,” Davis says. “What we take are the AMA records from the switch and feed them into the system and then summarize them by carrier, jurisdiction traffic type and by the exchange where the call began or terminated. And then we apply the various rate elements that are pertinent to that particular tariff.” The system performs a full audit trail, he says. “It tells you how many records were fed off the switch, this is why it dropped these records-if it was a duplicate, or if it was a kind of record you don’t bill for. It excludes but enumerates those records; it audits from start to finish.”

The software includes a comment file for each carrier, Davis says. “Each time they dispute charges, we know in their comments if their resolution is finalized or not. It also notes when you don’t want to charge them late charges. If there is a question about a particular invoice, that invoice will be kept open until it is resolved.” CommSoft is in the final stages of merging with Billing Concepts, which also has a CAB system. CommSoft’s system will continue to be branded separately and developed further to integrate new telecom regulatory changes and other industry trends, Davis says.

USING SS7 FOR VALIDATION

But some developers use other protocols to obtain more accurate call data, such as systems that can build CDRs based on SS7. One product, CDR7 by Hewlett-Packard, takes the SS7 message in the call setup, tears it down, builds a record of that call and outputs the details in Bellcore AMA format (BAF). The data is stored in a mainframe, where it can be analyzed to determine where traffic originated and terminated. “Some use the product exclusively for billing and verifying local traffic,” says Kenn Moisey, senior engineer of advanced technology at Illuminet, which provides software for HP’s SS7 systems.

But Moisey says Illuminet developers are working on using SS7-enriched data analysis to improve CDR retrieval and validation that will help CLECs argue their billing differences. One product, still on the drawing board, will use SS7 for service provider identification, Moisey says. For instance, when a call hits the tandem access to the CLEC switch, the identification of the long distance carrier is lost, making it impossible to bill that IXC. “All too often the CLECs are behind an ILEC access tandem,” Moisey says. “We’re working on a system that will be able to determine on a terminating call on an access tandem which carrier terminated the call. Existing switches don’t do AMA recording on two-way trunk groups. By using the SS7, we record the call on both sides of the access tandem and then generate one BAF record that pertains to the carrier that originates the call and where the call is going. Several CLECs have already approached us and asked, ‘What can you do for us?’ The problem you got now is an unbalanced billing system. They are able to go in and detail stuff they can use to win billing disputes.”

WHERE THE MONEY IS

And that’s the point: CLECs must have documented proof that they are being overcharged by ILECs and other carriers when they dispute their bills. Bad data and the inability to document billing errors leave carriers with little ammunition when disputing those incorrect bills. But the rewards for developing the documentation are high. Once CAB verification is in place, CLECs can review data and start collecting back overpayments. “You’ve got all that retro stuff you can pick up,” says Frontier’s Steger. “You can go back up to two years, that’s the statute of limitations.” Good documentation breeds confidence, which can bring victory over billing disputes. “It’s a mind game,” Thekkethala says. “The higher degree of confidence in the IXC or the CLECs, the more likely the ILEC will give in. One carrier won more than $50 million in disputes over the course of 12 months. … Another carrier won 25 percent of its access charges with one RBOC.”

“If you’ve got good data and a sufficient level of detail, their ability to refute becomes less,” says Steger. “Dispute resolution is quicker, and the percentage of disputes won becomes greater.”