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Top 10 Telecom Contract Mistakes

When it comes to telecom negotiations, most telecom managers have a difficult time. I see far too many contracts riddled with unacceptable clauses and limitations, shackling companies with sub-par terms and conditions, bloated pricing, and even obsolete technology.

[Negotiating telecom contracts]

This isn't really the telecom manager's fault. Like many of us, most came up through the ranks of engineering, architecture, and design -- none of which provides optimal training for carrier contract negotiations. And frankly, there's no great way to learn how to negotiate contracts -- other than by trial and error. In the interests of learning from others' errors, then, herewith a "top 10" list of the most common telecom negotiations mistakes.

No. 1: No "out" clauses. The single most powerful clause in a telecom contract is the "termination without penalty" clause, invocable in a range of situations, which gives companies leverage when making requests from carriers.

No. 2. No business flexibility. What if your organization merges with another, or divests part of its business? Your contract should flex to accommodate changes in business.

No. 3: Overly granular minimum-annual-revenue commitments (MARC). Why is it any of the telco's business how much you spend on wireless vs. wireline, or voice vs. data? If you have to have a MARC (and they're decreasingly required, see No.4), it shouldn't stipulate how you spend money with a carrier -- just how much.

No. 4: MARCs that are too large. The purpose of a MARC is to provide the telco with a guaranteed revenue commitment throughout the duration of the contract. But not all telcos require such a guarantee -- emerging and alternative providers, in particular, are often willing to forego MARCs. And even traditional telcos will often step down from the size of their MARCs when pushed.

No. 5. Missing service-level agreements (SLA). The purpose of a network is to get your traffic from point A to point B reliably, securely, and in a timely fashion. But too often, the carrier doesn't commit to doing any of the above. SLAs ensure that they do -- or suffer the consequences.

No: 6: Sub-par turnup times. Even when SLAs exist, many carriers won't commit to specific circuit installation times. Instead, they weasel-word with promises such as, "circuits are typically turned up within 60 business days". First off, 60 business days is 12 weeks (84 calendar days). And second of all, the "typical" turn-up time means exactly nothing if it's your circuit that's six weeks late.

No. 7: Lackadaisical account management. An organization's satisfaction with its telecom provider generally has more to do with the quality of the account management than with anything else. Yet, too few contracts provide any recourse for poor account management. Customers should have a say in how they're treated -- and by whom.

No. 8: Technology lock-in. Unbelievably, many contracts require termination penalties when the customer wants to shift from an older technology to a newer one (say, from TDM trunks to SIP trunking). Hello? So long as you're buying services from the same provider, contracts shouldn't lock you in to a particular technology.

No. 9: Too-long contracts. Many IT organizations agree to unreasonably long contract terms, in the hope of avoiding the pain of contract negotiations as long as possible. Don't succumb to the temptation: Keep contracts as short as feasible (ideally, three years or less).

No. 10: Inaccurate or incomprehensible billing. Carriers should be responsible for providing accurate billing. Telecom managers should post payments of any contested bills to an escrow account -- and put the burden on the carrier to sort out what's correct.

The bottom line? Negotiating a solid telecom contract can pay big dividends.

Clarification: In my last column, Mobile Device Management In an Age of Paranoia, I used the example of a doctor given a speeding ticket to illustrate the dangers of warrantless searches of mobile devices.

A California police officer wrote to correct that example. He clarified that warrantless searches apply only in cases of arrest. Speeding tickets (and other traffic stops) constitute detentions, not arrests. However, if the subject of the traffic stop refuses to sign the ticket, he or she may then be arrested.

So my example should have been that the doctor was arrested after refusing to sign the speeding ticket.

The larger issue, however, remains.

Johnson is president and senior founding partner at Nemertes Research, an independent technology research firm. She can be reached at johna@nemertes.com.

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