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June 09, 2009

Discount Plans

Many vendors offer discount plans for use of their special access services. These discount plans are outlined in the vendors’ tariff, usually under section 7 (Special Access) or a separate discount plan section. Most discount plans are centered around DS1 and/or DS3 circuits, however, some vendors also offer discounts on higher level circuits. Typically, discount plans offer the customer a specified percentage off of the month-to-month rate if the customer keeps the circuit in service for a specified term. However, some vendors have other plans that might offer a reduced rate based on rate zone, price band, or commitment level. Vendors often use a designated USOC to differentiate the discounted rates with the non-discounted rate. Easy auditing can be done to verify the correct discount rate if you reference the tariff and then build a simple report to pull in the circuits with the non-discount rate USOC. You can determine whether the circuit billing the non-discount rate should be billing the discounted rate.

Also, discount plans may offer additional discounts to the customer for non-recurring charges, early disconnects, and other penalties. For example, Verizon offers a reduced non-recurring charge of $1 on an install of a channel termination if the customer participates in their CDP or NDP discount plans. In addition, for the Verizon CDP plan, the customers are not assessed a termination liability charge for an early disconnect. However, if the circuit disconnects before one year of service, a minimum billing charged is assessed. As with the MRC for the circuits on the discount plan, NRC’s are usually billed with a designated USOC which also makes for easy auditing.

Some disadvantages of discount plans are commitment terms, true-ups and shortfalls. Usually the discount plan calls for the circuit to remain in service for a specific period of time (term). The terms are typically 1, 3, 5, or 7 years. If the circuit disconnects before the end of the term, then the customer will be assessed a penalty (usually a term liability or minimum billing charge). Also, some discount plans require a certain commitment level to be maintained throughout the discount period. For example, a vendor may offer a discount based on the number of DS3’s in service for a particular rate zone. The vendor will do an annual “True-up” to see if the correct number of circuits were in service throughout the year. If the customer failed to meet the quantity outlined in the discount plan, then the customer will be charged a shortfall. This shortfall can be validated by running a report to count the number of DS3’s that were in service during the annual review period.

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