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Consumer Alert: Buyer Beware

Telephone and DSL rates have dropped sharply since deregulation. However, one little known fact that the "new guys on the block" won't tell you; the newer, smaller phone companies may charge you for thousands of dollars in fraudulent calls.
Written May 20, 2010, read 1179 times since then.


A few years ago a representative from a small local phone company came to visit our office. She promised corporate telephone and DSL rates that were about half those of Verizon, the firm that we were currently using for all of our telecommunications services. On the surface, it looked like a great deal.

Fast forward 8 months. It's Memorial Day weekend. Our office is closed. Someone hacks into our phone system and makes $18000 worth of international calls. The following Tuesday morning our office manager has three voice messages from Verizon, Sprint, and AT&T, all saying that they detected fraudulent activity on our phone lines over the holiday weekend. Our phone system had been compromised.

Apparently, when someone hacks into your phone system, they have a choice of which long distance carrier to use. The big three immediately waived the charges, we changed all of our passwords, and assumed the issue was resolved. Then, about a month later we got a phone bill from Fibernet (the small telecomm firm we had switched to) for $12,000! No phone calls, no offer to waive the charges, nothing - just a giant bill.

When our office manager called this firm to have the fraudulent calls removed she was told that was impossible. Fibernet only rents the phone lines from the big three phone companies, so since they have to pay the big three, we have to pay them. 

This went on for months. Whenever I received a bill from Fibernet I would call and complain. The Fibernet representative would invariably promise to look into it and call me back, then immediately forget all about me as soon as he/she hung up the phone. 

Then, we got a higher bill, this time with interest tacked on and a letter threatening to turn us over to collections. Another phone call. Another promise of a follow-up and a resolution - another ball dropped. Another bill. 

Then, Fibernet gave us a deadline by which to pay in full or else they were going to ruin our credit. I called again. This time they tried to negotiate. They offered to split the bill with us. I told them no. 

They insisted I file a police report with our local police to report an international cyber crime (yeah, right - our small town police department is equipped to launch an international man hunt). 

Finally, I resorted to black mail. I told their VP of Operations that if they didn't waive all charges in full, that I would go to all the newspapers in the Pittsburgh area, and explain that if any business is using this firm and their phone system gets hacked, Fibernet will come after them for thousands of dollars in fraudulent calls, whereas the big three will simply waive the fees.

I pointed out that this was a huge competitive disadvantage for Fibernet and other small telecomm companies who don't own the lines, and I was pretty sure he didn't want this information getting out.  Silence on the other end of the line.

Oddly enough, and after lots of posturing and a lengthy debate where he accused me of making the calls myself (yes, I have many friends and relatives in Afghanistan, Turkey, and China!) he waived the fees and we never got another bill. 

Bottom line, if you're not dealing with the phone companies that actually own the lines, you are putting yourself at considerable financial risk. You could be saving money in the short term but setting yourself up for a protracted legal battle in the long run if you choose to do business with these "one off"  phone companies.

Just recently, we had another small phone company come calling. I was interested. Their rates were great. Again, about half what we were paying with Verizon.

I asked them the obvious question. If our phone system got hacked would they waive the fees? I wanted something in writing stating that we would be held harmless if anyone ever hacked into our phone system again. They stalled. They side stepped. They finally asked if we would be OK splitting the cost of the bill with them if the hackers came calling. I said no. Then I did some research and found out that they were part of Fibernet - simply operating under a different name. The gentleman who tried to sell me the service had vigorously denied having any affiliation with Fibernet just one day earlier. 

Tip: To get a better deal with one of the big three (Sprint, AT&T, Verizon) simply get a written quote from one of these folks that comes to your door, and Verizon, at least, will usually match or come close to matching that rate.

If you are not using one of the big three phone companies, ask your telecomm vendor what happens if your phone system gets hacked. Are you responsible for the calls? If they act squirrelly, get out of that contract as soon as you can and hope you don't get hacked beforehand. Phone systems are very easy to hack into these days.

BEWARE, the telecomm sharks are swimming right outside your office door, and protecting your credit has never been more important than it is right now.

Uniontown, Pennsylvania 
Mona McGraw

Mona McGraw is Founder of NuRelm, an Internet software/services firm that develops Web-based tools for business professionals.

NuRelm helps companies sell more and increase efficiency.

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Learn more about the author, Mona McGraw.

Comment on this article

  • VP of Sales, SalesBlog! Author 
Meridian, Idaho 
Chris Lott
    Posted by Chris Lott, Meridian, Idaho | May 25, 2010

    Just as in any services industry-offering, especially with contractual agreements, check references thoroughly. Aligning yourself with a reputable consultant/broker can help. So many times the end user sees the savings at the cost of credibility and quality. If its too good a deal then it usually is.

  • Small Business Consultant 
Seattle, Washington 
Karrie Kohlhaas
    Posted by Karrie Kohlhaas, Seattle, Washington | Jun 07, 2010

    Mona, dare I say I enjoyed reading your article? I know it was a bad experience for you, but you share it so well and offer valuable insights to business owners who may never have thought of these issues.

    I'd like to see more Biznik articles that include relevant personal experience as well as tips and tricks. Wonderfully done!

    I see you've written a lot of articles on other topics and I look forward to checking those out as well. Great to have you in the community! Hope to get to know you better.

  • CPA, Accountant 
Irvine, California 
Shaun Lawrence
    Posted by Shaun Lawrence, Irvine, California | Jun 17, 2010

    Glad I took the time to read your article. With how expensive Verizon is I looked at small firms a few years back. Never made the jump and glad I didn't. Thanks for taking the time to write a warning story like this.

  • President/COO 
Uniontown, Pennsylvania 
Mona McGraw
    Posted by Mona McGraw, Uniontown, Pennsylvania | Aug 24, 2010

    Thanks to both Karrie and Shaun for your nice comments. I try to write on relevant useful topics.

    That Fibernet company made me so angry with their unethical, underhanded practices that I wanted to warn others not to do business with them.

    I couldn't believe they tried to lure us back by blatantly lying to us about their name!

    It really does pay to check references and, even better, check online for any negative experiences. Granted, sometimes online rants are blown out of proportion, but at least it may give you some heads up if there are lots of negative comments about a particular firm.

  • Payment Card Processing, Credit/Debit Card Merchant Services, Gift Cards, PCI Compliance 
Gig Harbor, Washington 
Timothy Sternling
    Posted by Timothy Sternling, Gig Harbor, Washington | Aug 25, 2010

    I am glad that I ran across this article. It's nice to know about this.

    Thank you.