What is an EDI Kilo-Character?
Prior to the Internet, private Value Added Networks (VANs) took care of moving EDI data between trading partners. While business before the worldwide web seems a lifetime ago, it is necessary to consider that time to understand the background of kilo-character (KC) charges and why they no longer make sense in 2022.
At the end of this piece we will tell you about Integral Group's Flat Rate pricing alternative that eliminates the hassle of KC charges.
So, pre-Internet, VANs stored the data in electronic mailboxes on their servers and used high speed telephone lines to move the data from one VAN to another. Customers would use regular telephone lines to send and receive data from their mailbox on their chosen VAN.
The telecommunications companies charged VANs a fee based on the speed that data was transferred through the telephone lines. They spoke in terms of packets of data and bits per second, whereas today the industry speaks in terms of megabits per second through the Internet – exponentially faster.
Using the telecommunications companies’ billing practices as a model, the VANs came up with the idea of charging customers a fee for every 1,000 characters of EDI data transmitted. Hence the KC charge was born. If you look at an EDI transaction like an 850 Purchase Order, it’s made up of a bunch of characters strung together.
Here is an example of what one line item on a purchase order (850) looks like - it has 48 characters:
PO1**32*CA*12.34* *CB*000555555*UA*002840033333~
Add up the number of characters in each 850 plus every other EDI transaction transmitted during the month, and you get the total number of kilo-characters. For example, 250,000 characters of EDI data equals 250 KCs (250,000 / 1,000 = 250). At $0.20 per KC it would cost you $50.
Businesses find this problematic because of the difficulty predicting monthly invoice charges. One month a VAN bill might be $130. The next month it might be $140, then drop down to $120 the following month. When costs keep shifting, you need to question every invoice. Are we overpaying? Did our VAN make a mistake on our invoice? In the KC invoicing scenario, the simple question - “How much is EDI going to cost us each month?” does not have a simple answer.
A VAN or EDI service provider would typically respond with “it depends on how many KCs you use”. The onus is on you as the customer to trace the KC fluctuations back to your trading partner activity. That process is time-consuming and at odds with the very nature of EDI automation.
The Alternative to KCs
Counting KCs made sense before the Internet. Today, measuring KCs has become meaningless and should be removed from the EDI cost equation. There are a few alternatives to KC charges for you to consider.
If your trading partner supports direct FTP or AS2, you can bypass the VAN entirely and eliminate KC charges altogether. If you outsource EDI, your service provider might charge you transaction fees instead of KC fees. Transaction fees are easier to understand than KCs but the cost still fluctuates each month. If your EDI traffic is consistently high, you might be able to negotiate a flat monthly fee from your VAN.
At Integral Group, our Flat-Rate Pricing keeps your costs low, simple and predictable: we do not charge KC fees or transaction fees.
Let’s Talk about how our Flat-Rate Pricing can help you.
At the end of this piece we will tell you about Integral Group's Flat Rate pricing alternative that eliminates the hassle of KC charges.
So, pre-Internet, VANs stored the data in electronic mailboxes on their servers and used high speed telephone lines to move the data from one VAN to another. Customers would use regular telephone lines to send and receive data from their mailbox on their chosen VAN.
The telecommunications companies charged VANs a fee based on the speed that data was transferred through the telephone lines. They spoke in terms of packets of data and bits per second, whereas today the industry speaks in terms of megabits per second through the Internet – exponentially faster.
Using the telecommunications companies’ billing practices as a model, the VANs came up with the idea of charging customers a fee for every 1,000 characters of EDI data transmitted. Hence the KC charge was born. If you look at an EDI transaction like an 850 Purchase Order, it’s made up of a bunch of characters strung together.
Here is an example of what one line item on a purchase order (850) looks like - it has 48 characters:
PO1**32*CA*12.34* *CB*000555555*UA*002840033333~
Add up the number of characters in each 850 plus every other EDI transaction transmitted during the month, and you get the total number of kilo-characters. For example, 250,000 characters of EDI data equals 250 KCs (250,000 / 1,000 = 250). At $0.20 per KC it would cost you $50.
Businesses find this problematic because of the difficulty predicting monthly invoice charges. One month a VAN bill might be $130. The next month it might be $140, then drop down to $120 the following month. When costs keep shifting, you need to question every invoice. Are we overpaying? Did our VAN make a mistake on our invoice? In the KC invoicing scenario, the simple question - “How much is EDI going to cost us each month?” does not have a simple answer.
A VAN or EDI service provider would typically respond with “it depends on how many KCs you use”. The onus is on you as the customer to trace the KC fluctuations back to your trading partner activity. That process is time-consuming and at odds with the very nature of EDI automation.
The Alternative to KCs
Counting KCs made sense before the Internet. Today, measuring KCs has become meaningless and should be removed from the EDI cost equation. There are a few alternatives to KC charges for you to consider.
If your trading partner supports direct FTP or AS2, you can bypass the VAN entirely and eliminate KC charges altogether. If you outsource EDI, your service provider might charge you transaction fees instead of KC fees. Transaction fees are easier to understand than KCs but the cost still fluctuates each month. If your EDI traffic is consistently high, you might be able to negotiate a flat monthly fee from your VAN.
At Integral Group, our Flat-Rate Pricing keeps your costs low, simple and predictable: we do not charge KC fees or transaction fees.
Let’s Talk about how our Flat-Rate Pricing can help you.
For a more detailed view of how kilo-characters fit into EDI, download the whitepaper What is EDI and how does it work?.
If you feel that your EDI system or service provider doesn't provide the solutions you need - in the manner you need them - read our blog post How To Choose the Right EDI Service Provider.
If you feel that your EDI system or service provider doesn't provide the solutions you need - in the manner you need them - read our blog post How To Choose the Right EDI Service Provider.