Telecom Auditing

So you’ve decided to enter the telecom market. You’ve made the hard decisions such as – “do I make the capital investment, buy a switch, and become a facilities-based carrier?” or, “do I resell another carrier’s wholesale services until the timing is right to make the switch?”

You’ve hired some key personnel, completed all of the regulatory and tariff filings required to do business in your market areas, and negotiated your Interconnection Agreements with your underlying providers. You begin ordering services and turning up customers – and then it happens:  You start receiving what seem to be incomprehensible invoices for your network services! Depending on your business type, your bills may include the following:

  • Switched access FGDs 
  • Special access circuits 
  • UNE loops
  • Local/Transit interconnection trunks 
  • 911/Operator trunks 
  • Private line longhaul circuits
  • NNIs
  • LD invoices from your underlying carriers

Now what? Who’s going to audit, approve, and correctly code these invoices? What tools will they have to perform this task accurately and efficiently? Do you house this function in the Network Engineering/Ops Department or the Accounting Department? While it may seem like an Accounting function, how can the bills be verified if your accounting personnel doesn’t know the difference between a DS3 and an OC3, or a channel term from a cross-connect? Another important matter is how are you going to get your billing data? Paper? Electronic feed? 3rd party vendor? These are all questions to consider as you begin to establish your bill auditing functions.


Telecom services and network typically rank among your highest expenses, so it makes sense that companies would put a lot of emphasis on ensuring these expenses are scrutinized pretty closely each month, right? Wrong! My experience, having been in telecom auditing for over 25 years, has been that most companies do not do a very good job of accurately reviewing their telecom expenses. In fact, statistics show that companies that do a poor job of network cost auditing can leave as much as 10% of their Cost of Goods Sold (COGS) on the floor every month, which can have a significant impact on profitability.


There are many factors to consider when determining the process for telecom auditing, but here are a few that are key to the successful management of these expenses.


Network Inventory Management – it is absolutely essential to maintain an accurate tracking of network inventory. This function can be accomplished using anything from an excel spreadsheet to a high-priced Facilities & Engineering database.  The auditor must be able to verify that the circuit ID on the invoice is valid and still in service.

Contract Management – you should maintain a database that includes important terms and conditions from your vendor contracts, including effective dates, renewal terms, applicable rates, minimum revenue requirements, and termination liabilities.

Least Cost Routing (LCR) Database – a manageable LCR database (with historical tracking of rate changes) that can be used to verify the LD/Int’l rates of your wholesale carriers. 

Detailed Accounting Code (G/L) Structure – be sure that the coding is detailed enough so that you can clearly identify your costs.  You should have the ability to “drill down” when you start looking at your monthly variance reports and have to explain, for instance, why your directory assistance costs increased significantly.

Rates Database – is a critical piece of the puzzle.  The auditor needs to have somewhere to go to verify the rates that are being billed are correct.  And, you want to be sure they don’t spend all their time having to reference multiple documents, different ILEC’s tariffs, etc.

OSS Support – here is where many companies go completely astray.  How are you going to make sure that once a customer’s loop or circuit gets disconnected that the billing actually stops? Having a process in place that allows the LEC billing data to be bumped up against the internal billing database to verify the customer lines are still active is PRICELESS!

I’m sure there’s not a CFO or Accounting Manager out there that hasn’t questioned their company’s COGS at some point and wondered if in fact the expense were actually reviewed and verified. While the Network Audit team is a cost center and not a revenue generator, it can be the difference between a successful company and a failed one.





 Telecom Regulatory Compliance Checklist for Startups - Small



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