The payphone surcharge

Prior to the Telecom Act of 1996, payphone owners received no compensation for 800 calls from their payphone. Their $1,000 payphone equipment was being used for free, and the “free caller” tied up the phone, preventing a paying customer from using it. Today, this has changed. If a caller dials an 800 number from a payphone, the long-distance carrier handling the call must pay the payphone owner $0.28 for each call. This small amount of revenue slowly trickles in, but in the high-overhead payphone business, revenue from the surcharge makes all the difference.

Saving money by using a customer-owned payphone

Besides using a payphone provided by the local phone company, a business may decide to use a private payphone company, or purchase and install its own payphone. Either way, the principle is the same. Many convenience store chains use private payphone companies such as the People’s Telephone Company, one of the largest private payphone companies.

The private payphone company installs and maintains its own payphone at the convenience store. If the local phone company already has a payphone on-site, which is usually the case, the private payphone company requests that it be removed. The local company will require a letter of agency signed by the site owner prior to honoring any of the private company’s requests.

Once the old payphone is removed, the private payphone company orders a line from the local phone company and physically connects its payphone to the line. All installation costs should be absorbed by the private payphone company. The company should also pay the $40 bill for the line each month.

Before removing its payphone, the local phone company will probably send a sales representative out to the site owner to try to convince him not to change anything. Most of the time it is too late, because private payphone companies usually sign 5-year contracts with their customers prior to contacting the local carrier. Customers considering signing one of these contracts should contact their local carrier first. If the local carrier can offer a similar commission check each month, then the site owner should not change. Local carriers normally offer commissions on coin revenue only, not long-distance revenue.

As expected, the private payphone vendor will pay the site owner a monthly commission on both the coin calls and long-distance calls. To handle all of the operator-assisted calls and long-distance calls, the private payphone company contracts an OSP, such as AT&T, Sprint, or Opticom, one of the leading independent OSPs.

Saving money on semipublic payphones

In many states, a site owner does not have to pay for a semipublic payphone. There are varying definitions for the term, but usually semipublic means the payphone is accessible to the general public. The classic example is of a payphone at the back of a loading dock. Even though the loading dock itself may close for business at 5 p.m., the payphone is still available for someone walking by. In this example, the business should be able to get the local phone company to stop charging it for the payphone each month. On the other hand, the phone company may just decide to remove the phone at that point.