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 The
Best Customer Contracts Give the Provider and the Customer Equal
Rights by
Dan
Baldwin, TA Founder & Executive Director
But
providers are not highly motivated to ensure customers' contract rights
are equal to their own so it's a bad assumption to think that you can
"just trust" that any contract is fair without a full reading of it.
Editor's note: This article is not written by an attorney and does not
constitute legal advice. Consult your own attorney before making contract
decisions.
How
to Get the Best Customer Contract
1. Start with lots of lead time
2. Read the agreement with a
conspiratorial mind
3. Invite lots of smart vendors to
compete and check references first
4.
Understand and own the design of the solution
5.
When possible, split the business and get a shorter term
6. Have a telecom attorney review the
final agreement
7. Use the "gotcha" checklist
1. Start with lot's of lead time (at least two
months)
Many customers invite contractual disaster by waiting until the last
minute to even start the telecom contract dating game. "We're moving our
office in two weeks - shouldn't someone call our phone & Internet provider
about getting service at the new location?"
By the time many customers get a contract in front of them to sign they
are out of negotiating time because of the four to six weeks lead time to
get voice and data/Internet circuits installed after the contract is
signed. Any contract signing delay leads to days without service after a
move.
2. Read the agreement with a conspiratorial mind
Assume the agreement has a clause somewhere that allows the provider to
make any changes they like at any time - without offering the customer
similar freedoms.
Assume the agreement incorporates additional terms from an unseen or
undocumented addendum or website.
Assume the provider has no intention of ever letting you out of the
agreement once you sign, whether they deliver what you think you're
contracting for or not.
 3.
Invite lots of smart vendors to compete and check references first
Providers and their salespeople will only work as hard as they have to to
get a deal they want. Start with lots of suitors and hassle the heck out
of them until some of them start to drop out. Until some vendor says, "We
don't want your business that bad" you've not asked for too much.
You'll want to check references first because working with multiple
vendors or agents is a big time consuming hassle. By checking references
before deciding who you want to deal with ensures that you're not wasting
time dealing with vendors or agents who really don't know what they're
doing. It will also give you an "executive summary" type view of who your
winners might be in case you need to close the competition early.
4. Understand and own the design of the solution
When it comes to connecting a multilocation office environment over a
converged voice and data network, there are as many different possible
designs as there are vendors to choose from. If each vendor is pitching
and quoting a different design then it's practically impossible to compare
the value of one quote against another and all but impossible to get one
vendor to lower their price because another "is offering the same thing
for less".
Assuming a customer or agent has a long lead time before a decision must
mbe made, the best (and cheapest) way to get the best design at the lowest
price is to have multiple vendors propose their best designed solution
after the customer or agent describes the parameters of the problem(s) to
be solved.
During the first round of vendor presentations let the vendors explain in
great detail how their designs work and are priced - both up front and in
the long run. Once the customer understands all the solution design
choices the customer should pair the competition down to the favored
designs and challenge the vendors to explain why their design is better
than the competitors.
Once the "challenge phase" is complete the agent and customer should then
make a final decision as to which solution would work best for them - even
if it is a blend of all the proposed solutions. Once the customer "owns"
their own solution design they should then challenge the remaining vendors
to then offer the best prices and contract terms to deliver the chosen
"customer design".
If a customer simply moves forward with a specific vendor's "proprietary
solution" the customer should abandon any hope of negotiating a equitable
contract and simply give the proprietary vendor signature authority to
their bank account.
5. When possible, split the business & get a shorter term
Do
this only when you're contracting for generic services that are indeed "splitalbe"
since this tends to really aggravate the very vendors you're trying to get
the best out of. The best times to split business are when you're trying
to get broadband Internet pipes into separate locations.
Not only does splitting the business over separate networks increase
diversity in the event of a network outage, it gives you the ability to
compare "apples to apples" especially when it comes to "taxes and
surcharges". I recently had a call center customer who put equal types of
traffic over two different resellers. In comparing their bills month after
month I quickly learned that one reseller's taxes & surcharges equaled 21%
of the total invoice while the other reseller's taxes and surcharges
equaled just 11% of the total - a very significant 10% difference for
almost identical traffic.
Always ask for a shorter term. The only real leverage a customer ever has
is the ability to legally move their business to another provider. If
you're only six months into a three year term you can pretty much forget
about any carrier flexibility. Two year terms are almost always the best
term to sign since for the first 12 months you're still enjoying "the best
design at the best rate" and in the second year you've got great
negotiating power because you're agreement is going to come up for
renewal.
Of course splitting business and asking for shorter terms assumes that
both the customer and/or the agent helping the customer have more money
than time as managing different providers and making contract decisions
more often burns up extra management resources.
 6.
Have a telecom attorney review the final agreement
The bigger the agreement the bigger the risk of disaster. The price of a
good telecom attorney looking at a final contract serves two
valuable functions.
First, an attorney is the only entity qualified to give a business
decision maker "legal advice" on a contract. Second, having a
telecom attorney look at a contract gives a separate set of new eyeballs a
chance to find something the customer or agent may have overlooked.
How much should you spend on a legal contract review? Well if you've
already saved yourself 10% or more by using a telecom agent to negotiate
your best deal, it would seem prudent to invest some of that savings in
buying a written opinion of an attorney as to recommended upgrades. Do
make sure you get the attorney recommendations in writing though as most
provider attorney's won't even begin to consider anything request that
does not come to them from another attorney.
To minimize the amount you spend on a telecom attorney's legal opinion of
the agreement, send the attorney the agreement with your own written
opinion of concerns and what your specific negotiating strategies have
been with the provider up until the attorney got the agreement. Be sure to
specifically spell out those areas you want them to focus on. If you ask
the attorney to just "look at everything" make sure you tell them what
your total legal budget is and ask if that budget is enough for a full
written legal opinion.
7. Use the "gotcha" checklist
The following checklist is by no means all inclusive - it's just a
starting point. It's all the things I check for on behalf of my own
clients. Go through this checklist and document your own thoughts in
advance of sending the agreement and your written thoughts to your
attorney.
It's unreasonable to expect that a provider will amend their agreement to
accommodate a customer's desire to protect themselves from every "gotcha"
that appears below. (Some providers - especially the big ones - will not
even consider changing any part of their agreement.) The most
important use of this "gotcha" list is to fully understand all the risks
and "gotchas" that can happen before signing an agreement.
1. Renewal clause (auto or revert to high rates)
In "the good old days" when everyone was nice, the provider simply let the
customer keep paying the same contract rates on a month-to-month agreement
after the initial contract term expired. Today, one of two "bad things"
happen at the end of the initial agreement. First, the agreement will
"auto renew" for another term equal to the initial term (at rates that are
likely no longer very competitive) if proper notice is not given
(sometimes 90 days or more in advance). Second, the customer falls out of
the agreement's "favorable rates" and starts paying "non-discounted" rates
until the agreement is renewed or the customer moves to another provider.
In any event, it's very important to pay attention to how the agreement
ends at the end of the initial term and to determine before the contract
starts who will attend to the making sure one of the "two bad things"
don't happen at the end of the initial term. Negotiations to renew the
agreement or switch providers should begin not later than six months prior
to the end of the term. this gives the customer a full 90 days to find the
best deal forward before having to give a 90-day notice not to renew.
2. Add-on services added to existing or
new separate agreement
Many agreements state that new add-on services must be contracted for
separately and not added to an existing agreement. If a customer accepts
this sort of agreement then the customer will almost certainly loose their
negotiating power when the initial agreement comes up for renewal because
all the circuits they added after the initial contract will still be bound
to the provider.
If add-on circuits must go onto a separate agreement make sure you order
all conceivable circuits in advance and simply dictate that their
installation be several months after the initial turn up.
3. Quality and functionality guarantee
Before contracting for services make sure that the services ordered will
perform the function they are being ordered to perform at a sufficient
level of quality as this is not a given. Too many customers and agents
assume that since a provider has a "Quality of Service" or "QoS" standard
that "everything will work".
One customer of mine ordered a dedicated Internet T1 that worked just fine
when they were just surfing the web but stopped working as soon as they
decided to put voice over the circuit. We both assumed that any old
Internet T1 circuit can be used to pass VoIP traffic. That turned out not
to be the case and now we are trying to get the problem solved which might
have been avoided if we had the provider stipulate in advance that the
Internet circuit could handle VoIP to some level.
4. Multivendor coordination (who pays the other
vendor for screw ups?)
The turn-up of many circuits (or after installation repair) often requires
that coordination and expense of many different customer vendors. Will the
customer need to pay for all their extra vendors to babysit one vendor to
make sure that all the vendors' services are working together?
Murphy's Law dictates that even when a circuit vendor says "call your
phone/equipment guy as our circuit's ready to turn up, when every one gets
in the same place (at $125 an hour per vendor) the circuit vendor will
find some problem that wasn't there before and blame it on the local loop
provider. Who pays for the extra idle vendors standing around?
Many vendors will apply "installation discounts" to pay for the other
customer vendors that need to be involved. Try and accurately predict what
these expenses will be and get a clause that says the circuit vendor must
pay whenever the circuit causes problems that require the customer to pay
their own vendors to help with the fix.
5. Time to dispute mistakes
Maybe 25% of all new customer invoices are correct after all installation
and start-up monthly charges have been applied. Why so low? A conspiracy
of some sort no doubt. In any event, many providers will have it in their
agreements that anything not disputed by a customer in a ridiculously
short time period can not be later disputed and must be paid. Have this
time period extended or be sure someone is accountable to audit the
invoices and file needed disputes prior to the end of the contracted time
period.
6. Time to get out of agreement if other party makes
changes
Almost all providers have some clause in the agreement that basically
gives them the ability to change any part of the agreement. The "customer
friendly" vendors balance this clause with one that allows the customer a
certain time period to opt out of the agreement during the term after
notice of some provider change has been given.
Try and get reasonable terms here including:
A. Provider must give notice in writing at least 60 days in advance.
B. After provider notice has been given in writing, customer has 30 days
to opt out of the agreement with the provider.
C. If customer opts out of agreement then provider will give customer 60
days after the customer's decision to transfer services to a new provider
while still paying for services under the original agreement.
7. Installation interval guarantee
8. Extended demarks, who supplies
routers, professional install or "drop ship"
9. Taxes & surcharges in writing
10. Minimize the contract term & usage
guarantee
11. "Meet or beat" competition clauses
12. New technology clauses
13. Bill review clause
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