From the April 1998 issue of Startups

If Business Lesson Number One is to make the sale as easy as possible for your customers, a toll-free number helps you do just that. Customers can ring you up whether they're calling from a pay phone or from out of state without having to dig around for change or worry about their long-distance bills.

If you want to get an 800 number today, though, expect slim pickings--you're down to about 2,000 numbers to choose from. To help the situation, the dwindling supply of toll-free numbers was restocked in 1996 with the introduction of the 888 prefix.

But two years later, the initial 8 million available numbers has dropped to, at last count, less than 2 million. To keep up with demand, the always mindful Federal Communications Commission (FCC) has slated an 877 toll-free prefix for release sometime this spring.


Mie-Yun Lee is editor of the bimonthly Business Consumer Guide and BuyersZone (http://www.buyerszone.com), an Internet buying service. She is also co-author of The Essential Business Buyer's Guide (Sourcebooks Inc.).

For Whom The Phone Tolls

Does your business rely on orders for most of its revenue? If so, a toll-free number has become all but mandatory. In fact, lack of toll-free communication may well be interpreted as "Yes, we're too cheap to care about our customers."

Having a toll-free number also helps give your company a big-office feel. That can be a real boost when you're working from home.

Fortunately, changes in phone networks and new programs have made toll-free (or inbound) service affordable for even small budgets. Choosing a toll-free number is as simple as dialing the number you want to see if anyone answers. If you hear an operator message, a follow-up call to a toll-free service provider will tell you if the number is available. (In some cases, even when you get an operator message after dialing a number, it may be owned by a company that has restricted the areas from which it will accept toll-free calls.)

Meet The Carriers

Toll-free service is offered by virtually every telephone company. Your local phone company should be able to provide a list of carriers you can consider; most markets offer between 10 and 30 carriers to choose from.

It used to be that the "big three" long-distance carriers--AT&T, MCI and Sprint--controlled about 90 percent of all inbound traffic revenue. While they are still the major players, "second-tier" national providers such as Cable & Wireless, Frontier, LCI and WorldCom have steadily chipped away at that base. In fact, WorldCom has taken a sledgehammer approach with its recent acquisition of MCI.

A second group of carriers consists of regional resellers. Unlike the national providers, a regional reseller will sign up companies located only in certain states. Keep in mind that a smaller sales area does not mean the service area is similarly limited. You'll still be able to receive toll-free calls from wherever you wish.

Local phone companies comprise the last group of inbound carriers. These companies can directly provide toll-free service only within a small region, usually just a portion of a state. Calls that come from outside this region are generally handled by a long-distance carrier, with the local phone company responsible for all billing.

Who's Got Your Number?

Figuring out which service is best for you depends on the nature of your business, so take a moment to think about your customers. Are most of them located in or outside your state? At what time of day will they be calling? How long will the calls last? How many calls do you expect each month? Answering these questions will help you pinpoint which type of plan would work best for you.

If most of your calls will be coming from across the nation, look for a low interstate rate. These days, most carriers charge the same per-minute rate regardless of whether the call comes from the next state or 3,000 miles away. By shopping around, you can find rates ranging from 8 cents to 20 cents per minute.

You will occasionally run across rates that vary according to the distance the call travels. Keep in mind that even if some of these banded rates are lower than other flat-rate programs, they are not necessarily a better deal unless most of your calls come from nearby states.

Are most of your customers located in-state? Then pay special attention to your intrastate rate. These rates refer to the cost of calls that originate from within your state. They're not the rates you'll hear about first; in fact, you may even have to prompt a sales rep for this pricing.

Generally, you'll find your local phone company offers some of the most competitive intrastate rates. However, high setup and monthly fees may make this option much less of a bargain than it initially appears, so investigate carefully.

No matter where your calls come from, there are a few features you should always look for when comparing carriers:

  • Short-call minimum. This is the minimum amount of time that every call is billed. Thirty seconds is the minimum acceptable call length. With a short-call minimum, you can make sure you won't get penalized too much for those "Sorry, wrong number" calls that will inevitably come in.
  • Shorter billing increments. This is the amount of time at which calls are billed after the initial call minimum is fulfilled. Look for a plan with billing increments that are no longer than six seconds. By all means, avoid full-minute rounding--by doing so, you can save 10 percent to 15 percent on your bill, according to Ty Cukr of Cable & Wireless.
  • Minimal pay-phone charges. Recently, the FCC agreed to allow pay-phone operators to charge 28.4 cents for every toll-free number dialed using their pay phones. This fee, or some marked-up version of it, is then passed on to the owner of the toll-free number. If you anticipate your customers will use pay phones to call you, look for a small surcharge. Otherwise, have the number blocked so that pay-phone calls are not accepted.
  • No or low setup and monthly fees. If you don't expect to receive a lot of toll-free calls, these costs can represent a large portion of your overall calling costs. Give serious attention to plans with no or minimal ($5) monthly charges.

The Art Of Negotiation

Haggling is perfectly normal when dealing with toll-free service carriers. The easiest discounts to obtain are on setup and monthly charges, which are frequently waived for new customers. Often, all it takes to remove these charges is to ask.

You can also negotiate discounted rates based on your expected calling volumes. If a discount requires a minimum amount of calling, make sure you'll be more than able to meet those monthly requirements before agreeing to it. If your calling volume declines over time, you could get stuck with costly bills to fulfill your commitment.

Similarly, if you expect your call volume to increase, make sure to avoid any plan that will not increase your discount as your account grows. If the carrier allows users to switch commitment levels, make sure any term commitment will not begin again with each adjustment.

Another common discount comes in the form of a term agreement, which offers lower rates if you sign up for a one-, two- or three-year contract. Unless it's an amazing deal, we don't recommend getting pulled into any kind of term commitment. This is a very competitive market, and price structures change frequently as companies come up with more creative ways to win customers. You don't want to close yourself off to even better deals.

Whatever discounts you agree on, make sure to confirm them in writing--sometimes you'll be promised rates or discounts that don't make it to your first bill. Having everything in writing also helps ensure there are no fine-print requirements that may trouble you in the future.

Dissatisfied with your service? No problem. You can switch carriers easily and still keep your number. If it's a matter of pricing, though, give your current carrier the opportunity to meet or beat the better pricing. The good news is, at least in the area of toll-free service, the customer is still king.

A Few Hang-Ups

Don't forget that every incoming toll-free call costs you money. In an ideal world, all the calls you receive will be from potential customers. But the reality is that no matter who is calling, you'll have to pay for each inbound call. If your toll-free number resembles, say, the IRS complaint line, you'll still be billed for all the misdialed calls.

To ward off any potential problems, make sure the carrier is willing to deal with problems of this type in the initial stages of your toll-free service. If they aren't willing to work with you, it's best to look elsewhere.

It also makes sense to hold on to your toll-free number for a month without printing it on brochures or letterhead. That way, you can make sure the number is a keeper before you commit marketing dollars to it.

Finally, be sure to track whether callers start asking for a company that you have not been previously mistaken for. More likely than not, these callers are dialing a number that used to be owned by that company or are misdialing a similar number. Either way, you pay.

Company: AT&T
800 number: 222-0400
Interstate rate: 14.5 cpm (cents per minute)
Call rounding: 30/6 (initial min. billing time/subsequent billing increments in seconds)
Monthly Fee: $5 (waived for first 6 months)

Company: Cable & Wireless
800 number: 486-8686
Interstate rate: .9 cpm (cents per minute)
Call rounding: 30/6 (initial min. billing time/subsequent billing increments in seconds)
Monthly Fee: $0

Company: Frontier
800 number: 236-2233
Interstate rate: 14.0 cpm (cents per minute)
Call rounding: 18/9 (initial min. billing time/subsequent billing increments in seconds)
Monthly Fee: $2

Company: LCI
800 number: LCI-6556
Interstate rate: 9.9 cpm (cents per minute)
Call rounding: 30/1 (initial min. billing time/subsequent billing increments in seconds)
Monthly Fee: $4.95

Company: MCI
800 number: 950-5555
Interstate rate: 21 cpm (cents per minute)
Call rounding: 18/6 (initial min. billing time/subsequent billing increments in seconds)
Monthly Fee: $10

Company: Sprint
800 number: 877-7253
Interstate rate: 15 cpm (cents per minute)
Call rounding: 30/6 (initial min. billing time/subsequent billing increments in seconds)
Monthly Fee: $5