In exchange for guaranteed low rates, many businesses sign a term agreement with their long distance carrier. The contract specifically states what the rate per minute will be, and indeed, each call is calculated based on that rate. In a perfect world, your carrier would tally up all of your minutes for the month and multiply by the contracted rate to arrive at your bill. In many cases, though, at the bottom line, the average cost per minute comes out higher than what's clearly written in the contract; sometimes by as much as 100 percent. How do phone carriers pull this off legally and within the framework of their contract with you? The method is call rounding.

A Penny Here; A Penny There
As a general rule, the various types of rounding combined will add about 10 percent to 20 percent to your bill overall. If your average call is longer than five minutes, read no further. Rounding will have very little impact. But if the bulk of your calls are very short (i.e. under one minute), watch out! You might be getting ripped off. After reading this article, you'll understand how rounding affects the cost of a phone call. The next time you negotiate a contract for long distance service, you'll know what to insist on.

There are several ways that a carrier can manipulate the cost of a call. Most are subtle and the results are based on convenient mathematics (convenient for the carrier, that is). They include time rounding, call-length minimums, decimal rounding and cost minimums. In many cases, they can easily turn a monthly bill of $25,000 into $30,000 or more.

Multiplied over a full month of calls, this difference can add up to hundreds, or even thousands of dollars.

Hidden Trap
While you can typically determine if you have six-second rounding just by looking at the call lengths (i.e., 2.1 or 2:06 versus 3), some carriers display the fractions of minutes but bill in full-minute increments. The best way to check is to find a call, for example, that is 1.5, 2.6 or 3.4 minutes and verify the math.

In this scenario, call-length minimums add at least 11 percent and as much as 200 percent to a typical short call. To determine how your company's calls are rounded, look at a page of call detail from a recent bill.

Tips to Consider
Insider Tip #1: When quoting rates, telecom salespeople will refer to these types of rounding as 18/6 ("Eighteen and six"), 30/6 and 60/6 respectively. The first number is the minimum length per call and the last number is the increments thereafter. 6/6 is the best option.

Insider Tip #2: Even the carriers that use 6/6 or 18/6 rounding on domestic calls tend to have at least a 30-second minimum (30/6) on international calls.

As if time rounding wasn't enough, there's more. In Part II, we'll expose how carriers hit you with a double whammy and manipulate the actual cost itself through decimal rounding and cost minimums — all perfectly legal, and all under the radar. We'll also include some tips on how to combat these practices.

About the Author
Yosef Rabinowitz is managing director of TBRC Cost Recovery, LLC, a telecom expense management firm located in New York City. His company helps companies and not-for-profits of all sizes recover money from billing errors and to contain costs going forward, typically on a contingent-fee basis. TBRC is jointly owned by Shanholt Glassman Klein Kramer & Co., CPAs, PC, in New York. Yosef can be reached at yosef@tbrc.com.