Reducing Uncollectible Revenue from Residential Telephone Customers

J. L. Showers and L. M. Chakrin
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J. L. Showers: Bell Laboratories, Crawford's Corner Road, Holmdel, New Jersey 07733
L. M. Chakrin: Bell Laboratories, Crawford's Corner Road, Holmdel, New Jersey 07733

Interfaces, 1981, vol. 11, issue 6, 21-34

Abstract: Motivated by a dramatic growth in Bell System uncollectible revenues, a set of uniform, objective, and nondiscriminatory credit-granting practices have been developed which will apply to the 12 million new residential telephone customers each year and result in an annual reduction of $137 million in bad debts. These savings will be factored into the regulatory rate-setting process, and thus a substantial benefit will accrue to the telephone customer.The cornerstone of the new credit procedures is a set of credit-scoring rules to determine which new telephone service applicants should provide preservice security deposits. By more accurately identifying high-credit-risk applicants and requesting deposits only from them, the reduction in bad debt can be achieved with fewer total deposit requests. These new credit-scoring rules were developed through what is perhaps the largest credit study ever done, involving the credit profiles and telephone payment histories of over 87,000 customers. As a consequence of the study, a new methodology for constructing simple but effective credit-scoring rules has been developed which could be of general use in a broad spectrum of applications, including credit problems of other industries as well as other “classification” or “screening” problems.

Keywords: industries; communications; cost/benefit analysis (search for similar items in EconPapers)
Date: 1981
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