Two Approaches to Paying Bills

A company can take one of two approaches in paying its telecom bills. In the first approach, depicted in Exhibit 1, the Accounts Payable department (A/P) pays all invoices without review and forwards a copy to the Telecom department for later review


Exhibit 1: Telecom Department Reviews Invoices after Payment
This approach ensures timely payment of carrier invoices and avoids service interruptions due to late payment, as most payment terms with carriers specify net 30. One disadvantage is the potential for overpayment, as the Telecom department typically runs lean on staff and may not have the resources to methodically review the invoices each period. Because the invoice is already paid, the Telecom department may not consistently review all invoices. Inertia often rules — payment is made without scrutiny if the supporting paperwork exists and the dollar amount is reasonably close to last period's payment.

In the second payment approach, depicted in Exhibit 2, A/P logs the invoices into the accounting system and sends all invoices to the Telecom department. The Telecom department reviews the invoices, notes and investigates exceptions, approves the invoices, and then forwards the invoices to A/P for payment.


Exhibit 2: Telecom Department Reviews Invoices before Payment

The second approach reduces the potential for overpayment, but also increases the potential of service interruptions or late penalties because the cycle time from invoice receipt to payment is doubled. The Telecom department may not have the capacity to review the invoices in a timely manner, or the invoices may get lost or misdirected in routing. Additionally, if the telecom department incorrectly disputes charges that are actually owed to the carrier, late penalties will accrue.

The second approach is generally preferred because billing errors are typically identified and resolved more quickly by the Telecom department. Companies that have their A/P departments pay the bill without the Telecom department first reviewing the bills may want to train an A/P clerk to perform the bill review. For this to be successful, the A/P clerk should have access to the Telecom department's circuit and service inventory and be aware of service connections, disconnections, or changes to validate the bills.

Local telephone companies

Local telephone companies are known by a variety of names according to their function. The following acronyms and terms are most commonly used to describe telephone companies.

LEC - Local exchange carrier. Every local phone company is an LEC, for example, Cincinnati Bell Telephone Company.

IXC - Interexchange carrier. Long-distance companies carry calls between exchanges (or LATAs) and are known as IXCs. One of the largest wholesalers of long-distance service is a company whose name is IXC.

BOC - Bell Operating Company. The 22 local telephone companies that were originally owned by AT&T were transferred to seven Regional Bell Operating Companies. Mountain Bell, Northwestern Bell, and Pacific Northwest Bell were all transferred to the RBOC U S West.

RBOC - Regional Bell Operating Company. At the time of divestiture, AT&T spun off 22 BOCs, which were managed by the seven RBOCs. Since then, the RBOCs and GTE have dominated the local service marketplace. The seven RBOCs were Ameritech, Bell Atlantic, BellSouth, NYNEX, Pacific Telesis, Southwestern Bell, and U S West. Southwestern Bell (now known as SBC Communications) has merged with Pacific Telesis and Ameritech. Bell Atlantic has merged with NYNEX and GTE. Now, there are only four RBOCs.

ILEC - Independent local exchange carrier, a local carrier that is not a part of the Bell System. GTE long boasted that it is the “largest independent LEC.”

CAP - Competitive access providers. These small entrepreneurial companies provide “access” to the public-switched network and bypass the incumbent LEC, such as Teleport Communications Group in the 1980s.

CLEC - Competitive local exchange carrier. After the Telecom Act of 1996, a multitude of CLECs started up, such as Adelphia, Nextlink, and SNiP. Due to changing market conditions and financial mismanagement, numerous CLECs have filed for bankruptcy, such as e.spire and Teligent. In addition to long-distance service, AT&T now offers local service in many markets, so AT&T can be called a CLEC.

ILEC - Incumbent local exchange carrier. If a CLEC such as Nextlink is operating in BellSouth’s region, Nextlink will refer to BellSouth as the incumbent carrier.