3 Options for Optimizing Your Telecom Product Catalog

This blog is an excerpt from our eBook with The CommLaw Group.

As a communications company, you face some of the most complex tax and regulatory rules of any industry. Whether you run an established business or you’re thinking about entering the VoIP, UCaaS, or other telecom market, it is important to understand your compliance obligations. Just as important … you need to comply while keeping your price competitive.

How do you do this? By optimizing your telecom compliance process!

Telecom product catalog optimization allows you to:

• Reduce over and under collection risk
• Ensures your products are priced competitively
• Helps you cover compliance costs without impacting margins
• Creates defensible positions in case of audit

What optimization options do you have to get started? There are typically 3 ways to optimize your catalog. They are:

Telecommunications companies often bundle different services together.  For example, a wireless provider may bundle talk, text, and “data” (Internet access) into a single, monthly charge.  Companies that provide “Cloud PBX” solutions often bundle regulated interconnected VoIP and non-regulated software into one service offering.

The entire bundle could be subject to various regulatory fees and taxes.  By “unbundling” the service elements within the tax engine and allocating a portion of the bundled price to each service element (supplemented by adequate disclosures to consumers), you can minimize the overall regulatory and tax burden by only subjecting the necessary service elements to required taxes and fees.

Optimization of a  telecom product catalog that includes bundled service offerings can reduce the regulatory and tax burdens of consumers by 50% or more through the application of lawful revenue allocation methods, enhanced invoice labeling, and appropriate accounting techniques.

2. Telecom Cost Recovery Fees

A Cost Recovery Fee is a discretionary, non-government mandated surcharge added to the Taxes & Fees section of a customer invoice. With the creation of a customized and defensible Telecom Cost Recovery Fee, a service provider can recover expenses associated with developing, implementing, and maintaining its “optimized” regulatory and tax compliance profile, along with various other costs.

In practice, if you are able to reduce the overall tax and fee burden on your customer by, let’s say, $20 per-month, you may choose to extend $10 per-month of the savings directly to the customer, while creating a cost recovery fee for yourself, but still saving the customer money overall.

A traffic study provides a means by which you can determine how much of your customers’ voice traffic is interstate (or international) versus intrastate.  The Federal USF contribution factor (hovering around 30%) is applied only to assessable interstate/international traffic.  The FCC’s “safe harbor” for VoIP allows providers to assume that 64.9% of VoIP revenue is interstate.  In conducting a traffic study, you might discover that a significantly larger portion of your traffic is intrastate and thus not subject to USF fees.

Here’s a traffic study example:

• $100 VoIP charge.
• Safe Harbor says that 64.9% ($64.90) is assessable for USF purposes.
• With the current USF contribution factor of 34.5%, the total USF charge in this example is $22.39.

Here’s another example after a traffic study:

• $100 VoIP charge.
• Traffic study determines that only 30% ($30.00) of the traffic is interstate and thus assessable.
• Using the same contribution factor of 34.5%, the total USF charge in this example is $10.35; a savings of $12.04.
  

This savings can then be fully passed through to your customer or you could choose to add in a cost recovery fee as outlined above.

To learn more about telecom product catalog optimization options for compliance get in touch! Or download our new eBook with The CommLaw Group - 5 Steps to Optimizing Your Telecom Compliance Process.