Smart Talk On The Phone

Today's new telephone systems are more versatile and less expensive than ever.

By Doran Howitt | 
 

Buying too small a telephone system is the biggest and most expensive mistake most buyers make," says Harry Newton, president and founder of a New York City book publishing company. Newton speaks from his own experience. His company has already outgrown the telephone system it purchased within the past three years.

Newton's system is built to handle nine telephone lines -- nine connections to the outside world -- more than enough, Newton thought when he bought it for his company, which then had six employees. So confident was Newton of the new system that he installed the necessary cables inside the walls, along with the electrical wiring, when he remodeled his office.

But the nine lines quickly turned out to be too few. First of all, Newton added a hands-free intercom, which uses up two lines. In addition, as sales volume grew, so did the percentage of orders received by phone -- from 10% when the system was new to more than 30% today. This required two "800" toll-free lines for customer orders, leaving five other lines free. When American Telephone & Telegraph Co. cut rates for its wide area telecommunications service (WATS), Newton faced a further crunch. The same service that once was too expensive for his small business now could save a considerable amount of money on his long-distance calls. But bumping two more lines for the WATS service would leave only three direct-dial lines free -- too few for his bustling office, now with 11 people. "How could I have known that my business would grow so much?" Newton asks today. "How could anyone in a small business predict that?"

There is more than a trace of irony in Newton's questions, for he writes, and his company, Telecom Library Inc., publishes, books on telecommunications management -- or how not to buy the wrong phone system for your business. His newest book is Guide to Key Systems & Mini-PBX's.

Newton's own misjudgment is perhaps understandable, since he and his company are riding the coattails of a boom in the telephone equipment industry. In 1968 the Federal Communications Commission ruled that one maker of mobile phone equipment (tiny Carterphone, no longer in business) had the right to connect its devices to AT&T lines. That decision and subsequent FCC rulings have turned what was once a veritable Bell monopoly into a battlefield on which more than 60 "interconnect" manufacturers are vying for a piece of the action.

What this means for small business is that what was once a straightforward task -- putting in telephones -- has become exceedingly complex and, as Harry Newton's experiences demonstrate, fraught with risk. Yet this same competition in the telecommunications industry is leading to more and more salient benefits for the savvy buyer.

"Telephone bills are the biggest -- and fastest-growing -- uncontrolled cost in American offices today," says Newton. Despite the sometimes baffling array of systems on the market, a wise selection of one of the new "smart" telephones can bring technical advances while saving money.

How does one know whether or when to start looking for a new telephone system? Obviously, if a business is expanding or moving, or if its current agreement with Bell is expiring within the year, it is time to consider alternatives.

There are also less obvious questions to ask.Has the company's business changed since its present system was installed? Is it doing more long-distance calling than it used to? If so, it may be able to take advantage of "least-cost routing" (see box, page 66). Does the company receive more incoming phone calls than it used to? It may benefit from "call distributing," a feature airlines use that places incoming calls in a queue. Does the long-distance bill reflect employee abuse? Perhaps the company needs "call restriction," which prevents some individuals from making certain kinds of calls. Are crucial workers often away from their phones and therefore hard to reach? Maybe the company should have "call forwarding" or even a public address system built into the phones.

In a survey of 1,023 INC. subscribers, 43% said that their company's business activity had changed since their present telephone system was installed -- making it likely that the system no longer served them will. Even if your business hasn't changed drastically, some of the telephone features now available may make phoning easier or more convenient.

The first issue most business managers wrestle with in planning a new phone system is whether to leave Bell and "go interconnect." AT&T's ability to muster armies of repair workers and resources to tackle a big problem is its greatest selling point. In INC.'s survey, 43% of the respondents said they wouldn't consider buying equipment from an interconnect supplier, while 51% said they would.

Bell equipment usually proves more costly than interconnect, because Bell currently rents, rather than sells, equipment. But Bell rental rates vary widely. Prices are cleared by public utility commissions in each state, and an identical system can cost three times more in one state than in another.

Says Paul Daubitz, president of ATI Telemanagement, a Boston-based consulting firm: "Some managers completely ignore interconnect as an option; others get so caught up in the excitement of 'going interconnect' that they neglect to give [Bell] a chance to present its case. You cannot make an informed decision without knowing the pros and cons of both sides."

Buying new phones the right way takes time and requires careful discussion with employees to examine the flow of current telephone traffic and determine how communications could be improved. Consultants who help large companies acquire new phone systems spend as much time analyzing the organization's business procedures as assessing hardware.

Start by asking employees whether they have trouble getting outside lines, or whether customers complain of receiving busy signals. Have the receptionist inquire whether callers have had any trouble getting through. How many incoming calls fail to reach the intended party?

Outgoing telephone traffic should also be evaluated. Look at phone bills. Where do the calls go? How many are intrastate and how many are long distance? What are the most frequently called areas? What is the average duration of calls in these categories? How many local "message unit" calls are made? Do they go predominantly to a single exchange? Are employees overloading the system with personal calls? This information helps determine the mix of telephone service required, helping to pinpoint the proper hardware.

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