The old adage you don’t know what you don’t know is important for enterprises to remember when it comes to telecom and IT contracts. Below are some notes from a recent TEMIA Best Practices Call.
Don’t Sign a Contract without Talking to Our Members
Most TEM and MMS providers ask for a chance to reviewer all contracts before clients some them with carriers and other service providers. Enterprises should coordinate these activities 6 to 12 months before the contract expires.
TEMIA members have insights to address “standard or boiler plate language” which may have terms and conditions and other provisions that are burdensome for enterprises.
Carriers and service providers have many valid reasons for charging ETFs. Providers incur expenses for which they may charge set up fees. These fees can help carriers with capacity planning. There may be other costs that providers must consider when making investments in their networks. MARCs and ETFs are designed to protect the carrier in the event that the enterprise cancels its service. Closely related to ETFs are Minimum Annual Revenue Commitments (MARCs). Some carriers make it an annual commitment others make it a monthly commitment.
With a reasonable annual commitment most enterprises will probably reach its obligation before the end of the contract. This will allow an enterprise to terminate the agreement without a penalty. Ideally the MARC should be based on the gross or tariffed rates not the discounted rates. They should also include surcharges and other fees in calculating if the MARC has been met.
Avoid escalating MARCs the increases can be difficult to meet especially if the company suffers a slowdown in growth, a divestiture or business downturn. Beware of clauses in contracts that leave discretion in determining what constitutes a business downturn up to the service provider. Many times the clause will deny items within your control such as using a new technology or divesting part of your company. Instead it may limit the exclusion to acts of God, force majeure, earthquakes.
Most TEMIA members can suggest contract language to avoid or minimize additional penalties. One suggestion would be to add this language: “No additional ETS above the remaining term of the circuit.” (Enterprises should check the language with legal counsel before implementing this language.) Why are shortfall penalties calculated on 100 percent of the commitment amount if 45 percent of the costs for the service are pass through with a local carrier that wouldn’t exist if you are not using the service?
On the last TEMIA member Best Practices call, several participants shared news that a cable provider has begun to charge an additional 20% Early Termination Fee (ETF). This fee comes IN ADDITION to the termination fee in the contract terms for a shortfall if a contract is terminated prior to the end of the term of the contract. Enterprises appear to be getting this notification when they attempt to terminate a service.
The enterprise should be in charge of who sees your phone records and for what purpose. Carriers usually want to protect the terms of their deal, but confidentiality may prevent a TEM provider from processing and validating bills. Don’t sign a contract without talking to our members.