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Telecom Expenses High for Small Businesses

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April 2004--Small businesses may be spending disproportionately more for telecom services than larger businesses, according to a study released last month.

The study, conducted by Telenomic Research for the U.S. Small Business Administration, showed firms with between five and nine employees paid about $50 per employee for local and long-distance phone services, compared to an average $21 per person for firms with 10 to 500 employees.

Telecom services can be a major expense for small businesses. The businesses surveyed said they paid an average of about $550 each month in bills for telecom services. The majority of this cost--83%--was for local, long-distance and wireless phone service.

Some industries spend more than others on telecom services, the study showed. The finance and insurance industry spent the most, with telecom bills averaging a whopping $1,800 each month. The manufacturing, wholesaling and transportation industries were also big telecom spenders, with bills averaging $700 to $800 dollars a month. Farming and agriculture businesses spent the least, only about $200 a month. Retail businesses also had fairly low bills, at around $380 a month.

Cellular phones, used by 73% of small businesses, were a primary telecom expense. In fact, a fourth of businesses surveyed said they spend more for wireless phone service than for local and long-distance service combined.

The study showed Internet access has become another necessary telecom expense for small businesses. About three-fourths of small businesses surveyed had Internet access, and of those connected, 60% had broadband, or high-speed, access.

For businesses that do have broadband access, however, a new technology called Voice-over Internet Protocol (VoIP) may soon help lessen telecom expense. About 3% of small businesses surveyed said they have begun using VoIP services to conduct telephone-like conversations over the Internet, allowing them to bypass telephone company expenses all together.

Worldwide, VoIP seems to be gaining ground with small and medium businesses. In a report released April 1, New York consulting firm AMI-Partners announced they expect over 100,000 more small businesses worldwide to begin using VoIP over the next year.





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