The Totally Bizarre & Wild World of Telecom Carrier Agreements
Pro tips for negotiating a telecommunication agreement that doesn’t handcuff your business
A quick disclaimer:
We’re NOT attorneys. Nor do we want to be attorneys. But we do have access to some very good attorneys (should you need it).
Now, here’s the thing:
What we ARE is telecom solution providers, which means we provide well-vetted, best-in-class carrier solutions and we do it all on our own custom invoice. Since we’ve been doing this for over 50 years collectively, we have looked at literally hundreds of agreements and therefore been able to help service as our clients’ advocates to negotiate best-in-class terms. As a result, we’re able to deliver to you a simple agreement that is user-friendly and covers both your needs and ours.
How does this service make us stand apart?
If you’ve ever looked at a traditional telecom agreement, then you’ll probably agree that they tend to be more of a book than a contract. They have terms that even people in the industry have to look up on occasion, which tends to mean very little for those who don’t deal with them on a daily basis. Those who have been in the industry long enough can likely remember a time when they were bitten on the butt by one of these telecom books (agreements) that are almost always meant to be one-sided — and yep, you guessed it, not your side.
The good news is the industry has changed quite a bit in recent years. Resellers like EnableIP aim to bring you out of the chaos and into the light by doing something very few companies will do — that is, we’ll discuss how you can get favorable terms with your telecom agreements because we already offer everything listed below (and more)!
So strap on your seat belts — here we go.
Without writing a book here (which we could), these are some of the more common “gotchas” when it comes to telecom carrier agreements, as well as some of the additional terms that can be negotiated.
Note: We intentionally chose not to discuss price because that’s the one item that rarely gets overlooked during negotiations. We find that most customers tend to do a pretty good job there. The points listed below are often found in fine print and easily overlooked, which can really cause major frustration and pain for your company.
The goal of most carriers is to commit you to as much possible every month as they can. In return, they’re going to provide you with favorable rates and terms overall. In most cases, the carrier is going to request as high as 100% of your original order as a commitment. However, we’ve seen carriers waive the commitment or provide a zero commitment, but there are other areas where they have you committed as well (which we’ll cover shortly).
If you see a “zero commitment” promise, this isn’t the time to breathe a sigh of relief. Keep reading because they’re probably getting it somewhere else in the agreement. Your goal as the customer should be to get this to 0% (or at least to 50%). The carrier will play ball here, you just have to ask.
Terms tends to go hand-in-hand with the commitment, and (once again) the carrier is always trying to get the longest possible term they can from the customer. Most carriers prefer to lock you down for at least 3 years, but often aim for up to 5 years. In some circumstances, longer terms work well for both parties, but this tends to be when construction is involved and the customer needs a way to avoid build-out costs.
So why should long terms be avoided?
Because in most cases telecom services tend to get less expensive over time. In fact, they’re often described as in a race to zero, and some people predict that telecom services will be metered like a utility. While we’re not there yet, it’s true that telecom services do continue to go down.
Let’s say you lock-in a long-term contract, but in a couple years the costs are 10-25% lower (or obsolete for that matter). In this scenario, you’re basically screwed — which is why you should be wary of signing anything that commits you to more than 2 or 3 years.
Fortunately, this is absolutely another area where you can negotiate with the carrier. Remember, they want to earn your business and this is a competitive industry.
Loop & Port
We’ve already discussed other areas where there may be commitments. The loop (or “last mile”) and the port — whether it’s internet, MPLS, or some other traditional telecom port — may also carry its own commitment, which is often buried in the fine print of the agreement.
For example, we’ve seen agreements that require the customer to keep the service operational for the full-term (whatever that may be) or they will incur a 100% penalty for early termination. We’ve actually seen language like this for both the loop and the port. This doesn’t happen 100% of the time, but it’s often enough that you need to be cautious of it.
Like everything else, your loop and port commitments are also negotiable. The thing to understand is that the carrier does have some risk, but it’s not for the entire term. So why should they impose a full-term penalty on the customer? In our opinion, they shouldn’t — and they don’t because we get this either removed or down to 1 year.
No carrier wants to make it easy to terminate early, but they are willing to make exceptions. Business downturn, unforeseen events and technology refreshes are common examples of why a carrier might make an exception when it comes to early termination agreements. All of these are reasonable ways to get a carrier to work with you when you ask.
In addition, the fees or percentages that are imposed in the early termination clauses are negotiable as well, so ask for them. Don’t forget, they want to earn your business.
The practice of auto renewals is just downright ugly.
Picture this all-too-common scenario:
You have a 3 year term with a telecom company that has an auto-renewal clause. This clause says that you must inform the carrier that you don’t want to renew by using the specified format (as specified in the agreement) and in the specified timeframe (usually 60 days before the end of the term). If you fail to follow these steps, the carrier will assume that you want to renew and will automatically do it for you for the same term as the original term. Now you’re on the hook with them for the same terms and price for the next 3 years, or you have to pay an outrageous fine to terminate the contract “early.”
In our opinion, this is a despicable practice and not one that you should ever allow in your agreement. The simple way to prevent this from happening to you is to ask for an auto-renewal term on a month-to-month basis. This means you have the ability to move your business and end your agreement with a 30 days’ notice after the initial term. Don’t take no for an answer here.
We recommend that you have an attorney look over your telecom carrier agreement before signing to parse through all the legalese. These terms can either cause a great deal of frustration or be a feather in your cap.
It also helps to have a trusted telecom consultant at your side to make sure you’re getting the best business terms and pricing available. If it’s not EnableIP, that’s okay. But we can certainly cover your assets as good or better than anyone in the industry!
EnableIP is a telecom solutions provider founded by Wired Networks’ founder Jeremy Kerth and head engineer Steve Roos after they realized there was a deep market need for helping mid-size businesses establish better uptime rates for their Wide Area Networks (WANs). Armed with the best-in-class carriers and partners, Jeremy and Steve set out with a bold plan: Guarantee better uptime rates than the industry standard of only 99.5%.
Their bold plan became a reality. EnableIP’s solutions guarantee clients 99.99% (even 99.999%) network uptime. But we don’t stop there. Many telecom providers promise high availability network solutions but fail to deliver because they’re in the business of providing services, not solutions.
That’s the EnableIP difference: We deliver highly available networks by providing a complete system (called “Cloud Assurance”) that ensures 99.99% or above uptime.
We deliver this bold promise by:
- Owning the entire customer experience. From pricing, contracting, ordering and provisioning to installing, servicing and billing—we do it all! This means no stressful negotiations, confusing setups, or finger pointing if something goes wrong. We actually deliver on our promise.
- We manage the entire system, and monitor and manage issues as they occur so you can focus on your business—not your network.
The EnableIP solution is like no other. Contact us to get started and experience the difference of a system that truly delivers on its 99.99% network uptime promise.