NOTE:   These columns are written for telecommunications professionals only.

IN THE PHONE ROOM – The•Mart Magazine - July 2006

By Mike Sandman

• PRICES GOING UP?
• DELL SELLING PHONE SYSTEMS?
• MISCELLANEOUS CHARGES ON YOUR PHONE BILL
• FCC APPROVES NEW VoIP PHONE TAXES

If you have tips that you’d like to share, give me a call at 630-980-7710, or e-mail me at mike@sandman.com. If your tip is published, it will be attributed to you, and you’ll get a FREE "Word Ad" in the classified section. To get your free "Word Ad," call The-Mart at 1-800-864-1199, and ask for Joy Brookshire. Opinions expressed in this column are strictly my own.

A few months ago, the Chinese company making our TKM Transfer Switches told us to "go away" when we tried to reorder them. We had been ordering them for many years. They told us they were too labor intensive to make. The Transfer Switches had six short wires that had to be stripped, attached and soldered at each end. How can it be too labor intensive to make something in China where workers get maybe 25 cents an hour, and there are a billion poor Chinese? They don’t have the money to build more factories, more places for factory workers to live, or the infrastructure to get those billion people off the farms.

I asked a Taiwanese vendor what he thought, and he said things are changing quickly in China. If they made $2 profit on each switch from us, they may be able to make $10 profit on each item if they used the same factory space and workers to make a more complicated device. He said it may take half a day to setup a factory line to make something, and they’d rather spend the time setting up for an expensive item that they can make many thousands of – not just a couple of thousand.

We redesigned the TKM Transfer Switch, and we’re making them right here in the US. We have several models in Black and Ivory, including with a terminal strip or 8 pin mod jack with a 568B pinout (just use a regular RJ-45 patch cord to connect it). The actual toggle switch with gold contacts inside the TKM comes from Taiwan, but everything else including the plastic box and circuit board are made here in the US.

PRICES GOING UP?

Prices of stuff with copper, steel, zinc and plastic are going up pretty fast. There’s a lot of plastic and copper involved in a phone system installation, and conduit and electrical fittings are zinc-coated steel. With the increase in zinc, pennies now cost the government 1.3 cents each (they’re probably going away entirely).

Anybody who takes credit cards is making less money these days. There are tons of cash back and airline mile cards out there - more than ever. It turns out the credit card companies have decided to simply add the amount of cash they’re giving you to the amount they charge the merchant when you buy something. Get 2% back from every purchase? The merchant pays 2% more to the credit card company for that transaction. The merchant has no idea how much he paid for that transaction until he gets the statement at the end of the month. It doesn’t matter. You end up paying 2% more in the end, anyway. You just get to pay 2% more for the privilege of funding the credit card company’s marketing programs. They just increased their profits by 2% since they were funding those cash-back cards themselves, in the past.

The cost of gas and diesel fuel is moving prices up for just about everything. As an Interconnect, you have to drive to every call – and the cost of fuel is double what it was a couple of years ago. If you have maintenance contracts, you need to figure the fuel into the next contract renewal.

Luckily, phone equipment is getting more reliable every year. It’s so reliable that when the customer doesn’t see you during the year, they wonder if they need the contract? Be creative in the services you offer like rapid response time, reduced cost or free remote programming, free replacement handset cords by mail, and checking their UPS batteries every year (before the power goes out!).

Everything shipped to you is more expensive, since UPS and Fedex have pretty hefty fuel surcharges. This month, the air surcharge is 16%, and the ground surcharge is 4.75% for both companies.

A couple of months ago I wrote that when the US comes out with a technology that reduces our dependence on oil, the economy will boom. One problem with that theory is that the price of oil is tied to nothing. In the past, oil has gone up substantially (like during an embargo), but went down pretty quickly to a point somewhere between the previous cheaper price and the really high price. When someone comes out with a good alternative to oil, the oil producers will simply reduce the price of their oil to make it impossible to implement the new technology. The profits are so obscenely high right now that the prices could come down tomorrow and the oil companies would still be making obscene profits.

As an example, some of the most exposed companies are extracting oil from sand in Canada (with a lot of the financing coming from other countries). This is much more expensive than pumping oil out of the ground. They’ve invested huge amounts of money in equipment to extract the oil. If the "real" oil companies decide to sell oil for $25 a barrel next month, which they could easily do and still make money, it would put the Canadian oil companies – the competition – out of business overnight.

Although it’s in short supply, some gas stations are selling E85 (Ethanol) gas, which is 85% corn alcohol. Only certain newer cars can run on it (my 1996 Plymouth mini-van misses by one year), and the mileage may be a little worse than with gas. E85 pricing varies widely, maybe by as much as 60 cents a gallon at gas stations in the same area. There’s certainly some gouging going on, which is turning off people who can use E85 in their vehicles.

While you can put E85 in a car that’s not designed for it, it can eventually destroy the fuel lines and gas tank. If you put it in accidentally, like I did at a gas station that sold E85 as "Regular" when I stopped for gas in Iowa, just use up the tank of E85 and fill it up with regular gas. E85 vehicles use special materials for the fuel tank and fuel lines, since alcohol will eventually corrode components designed for regular gas. A vehicle can be converted, but it’s probably illegal since by Federal law the vehicle needs to have emissions that are at least as clean as when run on no-lead gas. To do that, the computer and sensors in the car would need to be changed, which makes it a lot cheaper to buy a new car that can use E85 at 0% financing.

Through the Federal law that all converted vehicles meet original emissions, the government has pretty much killed the alternative fuel business. There were a bunch of kits for converting cars to run on natural gas etc. in the past. Now it’s illegal to sell a conversion kit unless it’s certified to meet the original emissions, which is nearly impossible for a manufacturer to do with every car that can be converted. There are no emissions on electric cars so an "all-electric" kit would be legal, but they don’t exist.

E85 production is ramping up, but it will be a while before the production capabilities make a dent in oil consumption in the US. Even if it costs the same as gas right now, if you can use E85 you’re sending a message to the oil companies, and the dollars are staying here in the US. Of course, E85 will be gone overnight if the oil companies reduce oil to $25 a barrel.

DELL SELLING PHONE SYSTEMS?

I received a call from a reader last month after one of his customers showed him an email from a Dell sales rep saying that they sell Nortel telephone equipment, and won’t be beat on price. The email said they also sell other types of telephone equipment.

I called Dell, who said this program has been in-place for around 18 months. They wouldn’t tell me how they install or service the equipment. It must be a secret?

If you’ve had customers buy phone equipment from Dell, give me a call at 630-980-7710, or send me an email at mike@sandman.com. I’ll talk about it here if I get some comments from Interconnects who’ve been effected.

Lots of companies have given their IT guy responsibility over their phone system. The IT guy is probably buying stuff from Dell anyway, and the IT guy figures he can install it himself (which may or may not be true), I can see this being a big deal for Interconnects in the future.

A friend recently took a contract job as a programmer for a large drug manufacturer in the Chicago area. The IT department was responsible for providing him with a computer and phone. They paid him to be a contract programmer for many days even though he had no phone and no PC. He was able to plan his vacation on his laptop, which they didn’t permit to be connected to their network (he connected to the Internet to book the hotels through his cell phone). Apparently nobody working there likes the incompetent IT department, which makes everybody look bad. He said the large IT staff was clueless on basic PC hardware, basic networking, basic software, and basic databases. Maybe IT isn’t much of a threat after all, or maybe they’ll be responsible for the downfall of America?

MISCELLANEOUS CHARGES ON YOUR PHONE BILL

We all know that the phone company will add all kinds of crazy stuff on your phone bill for other companies (like 900 calls). They put it on your bill, and they'll often take it off if you complain. If you pay them, that other company gets paid. Most phone companies won’t disconnect your phone service if you don’t pay these charges.

Last month, the Chicago Police warned residents that they can get charged up to $2,425 a minute if they call some scam phone numbers setup in the Caribbean, in the 809, 284 and 876 area codes. The police are saying that some victims were charged more than $24,000 for a call. I called the police to try to verify the story, but wasn't able to find anyone who said they actually saw a bill like that, but they did verify that they put out the warning. I can't picture AT&T (SBC, or whatever) actually having the guts to put $24,000 on someone's phone bill?!?

It looks like the cellular phone companies are also doing billing for other companies. A company named m-Qube sells some kind of ring tone and picture subscription service for cell phones at about $10 a month. We found this monthly charge on one of our cell phone bills, which Cingular immediately agreed to remove. It had been there for maybe six months. We don’t know what it was for, or how it got authorized.

Just goes to show that someone knowledgeable should be responsible for approving the individual charges on each bill, rather than simply having someone in accounting pay the bill. One credit card company lets a company put a $60 charge on all of their customer’s credit cards each year, for some kind of credit protection service. Since it has to be disputed, I wonder how many people actually pay it?

In addition to scam charges on phone and credit card bills, we get a couple of official looking invoices a month for being included in a "directory." If you look on the bill, you’ll usually find some small print that says it’s not a bill. You’d think the government would put these crooks in jail, but they don’t. You’ve just got to be smart enough not to be ripped off.

If you think it’s just small companies and individuals that are crooks, you’re wrong. The pressures on big companies to make more money than the previous year makes them to do some pretty bad things. A few years ago, SBC was caught selling unlimited local phone service in the Chicago area. It was unlimited, except for locals calls to ISPs for Internet access (from a dialup modem). Needless to say, most of the people who signed up for the unlimited service got phone bills for a lot more than the flat rate they were expecting.

AT&T (SBC) runs a lot of radio ads in the Chicago area for all kinds of crazy sounding specials. At the end, someone is talking very fast, telling you about all of the exceptions and limitations. Apparently there are so many exceptions and limitations that they can’t fit them all in, so they tell you to go to their web site, or call a toll free number. Just for laughs, I occasionally go to the web site or call the phone number. When I can find the web page, or call the number and get a recording, I really can’t understand what they’re talking about. Some of the 800 numbers they give out in the radio ads are disconnected. Maybe they didn’t pay their phone bill?

SBC bought their LD service from WilTel until SBC bought AT&T last year. WilTel was recently bought by Level 3 Communications. Some have attributed an outage in Vonage service for a few hours last month to problems in the WilTel/Level 3 network after the "merger."

Both the Vonage phone network and their web site were down. If the Vonage subscriber had a "network unavailability" forwarding number programmed (like a cell phone or landline number), calls to the Vonage phone number were forwarded to that number. Network unavailability forwarding is available from some VoIP providers, and is used to forward calls to another number if the VoIP provider can’t communicate with the VoIP box on the subscriber’s broadband connection. The forwarding won’t work if the VoIP service’s switch goes down, but that’s less likely than problems with an Internet connection.

If your customer is crazy enough to receive incoming business calls over a VoIP service, it’s critical that they put in a network unavailability number. Who knows how long their Internet connection could be down, or how long the power could be off in their office where the VoIP device is located?

There are more and more companies providing virtual PBXs every day. A company gets a bunch of phone numbers like regular VoIP, but they add features like 3 digit calling between extensions. They may also be able to use "industry standard" VoIP phones with buttons and displays, rather than single line phones. While in theory it could be dependable, there are so many points of failure that it’s literally insane to use it for business use. The Public Switched Telephone Network (PSTN) also has an incredible number of points of failure, but it was designed for reliability. It’s much more reliable than any other technology of this scale ever deployed. The need to reduce costs seems to have driven the managers of many companies to insanity.

FCC APPROVES NEW VoIP PHONE TAXES

The FCC approved new Internet phone taxes last month. They voted to require all VoIP phone services that connect to the public switched network to contribute to the Universal Service Fund. You already see these charges on regular LEC, CLEC, cellular, DSL and payphone bills. The fund subsidizes phone service in rural areas, and also funds the E-Rate program that puts Internet service in just about every school and library in the US.

It applies to companies who complete calls to real phone lines, but not services that simply connect two computers over the Internet, like Skype, which can’t connect to a real phone number (at this writing).

Even with the added Universal Service Fund charge, you’re still going to save on taxes compared to a real phone line, although some states are trying to get the VoIP companies to put regular sales tax on VoIP phone bills.

The FCC made a rule a few months ago requiring that all VoIP companies provide E911 service on every line. Even with the rule, most VoIP phone services still don’t have E911 available everywhere, but they’re signing up new subscribers anyway (against the FCC rule). I wonder if there will be an FCC police force to make sure every VoIP phone number works with E911? Maybe they’ll be empowered to force their way into every premise in the country without a warrant to see if 911 works correctly from the VoIP phone?

That might make sense if the technology behind VoIP phone service didn’t make it nearly impossible to ensure that it worked with E911. Going to visit your Aunt in Greece? Unplug your VoIP box and throw it in your luggage. Take it out and plug it into your Aunt’s broadband connection, and you have a local US phone number in Greece. Most of the VoIP companies actually sell their units for this purpose. Of course, when you accidentally dial 911 from your Aunt’s house in Greece, the police will come to your house in the US – even if you hang-up. The FCC’s E911 rule is about as goofy as it gets considering the technology.

Next month, I’ll talk about AT&T’s new privacy policy. It says that if you get DSL or their new TV service, they "own" every piece of information they can get on you, and they can sell that specific information on what you do on the Internet and what TV programs you watch, to anybody they want. If you use AT&T’s DSL, I could buy a list of every web site you’ve visited using their service. Doesn’t that make AT&T’s cheap DSL look good now?

I’ll also have a review of Vonage, Packet8, AT&T CallVantage and Verizon VoiceWing VoIP phone services, which seem to be the services with the best voice quality. The bottom line? You can save a lot of money making outgoing calls with these VoIP services!

Finally, next month I’ll tell you how I can get all of the information off your company’s computer network, no matter what kind of security you’ve put in place. This is scary.