TelAssess : Newsletter Article Library - Unclear Telecom Contract Carries a High Price

Newsletter Article Library -

TTCM Savings Area: Contract Performance
Published In: Volume 2 Issue 2
Date: June, 2003

Unclear Telecom Contract Carries A High Price

When is "domestic voice" not really "domestic voice?" In a telecom contract, of course!

Recently we worked with a client who needed to evaluate why a large volume of calls were being billed at a rate other than the expected "domestic voice" rate they had contracted for.

Our plan to clear this up was straightforward. First we broke down their contract into each of its separate billing categories - there were over 40 of them! Next we used our proprietary software to extract the data from their billing CDs and recompile it, placing each call into the appropriate billing category. Finally we evaluated the charges associated with those calls against the pricing provided for in the contract.

Sure enough, a large number of calls were being charged significantly higher rates than the contract indicated. They were domestic calls, and they were voice, but they weren't "domestic voice". A careful reading of the published rate schedules referenced in the contract revealed a fine-print clause which excluded Intralata calls from the "domestic voice" category. Unfortunately, this client's call pattern required a large number of those calls and therefore a large amount of extra expense.

These types of language gaps are a common pitfall in telecom contract terms and MUST be identified and clarified before signing any deal. But they aren't the only reason that knowing your contract inside and out is critical.

As with most contracts, what you pay, and what you pay for, are based on the combination of price and terms. As the previous story shows, it's the terms that can eat you up just as much as the pricing.

Obviously, entering into a long-term telecom contract should never be taken lightly. One missed detail can cost a company thousands in increased charges. Here are a few more areas in your terms section that are well worth mastering. And please do not hesitate to call us if you have any questions. TelAssess experts have been involved in literally billions of dollars worth of contract value projects. We have the expertise to insure your next contract is the most favorable one possible.

Volume Requirements	If your contract calls for a spend total that you can't reach, you may encounter significant shortfall penalties. Even though you reach those spend minimums now, changes in your business or changes in telecom technology can drop your spend later on, and have you staring at potential penalties.
Contract Duration	Your term should be based on prevailing market conditions. If prices are dropping, keep it short and vice versa if prices are rising.
Rate Stability	Are your prices really fixed, or are they merely discounts off of tariffs that can be raised at any time?
Call Categories	Does your contract specify all of the categories of calls that you incur? How do you know? Have your bills been fully analyzed to insure that your carrier hasn't "bundled" some expensive call types in with others?
Exclusivity	Does your carrier require you to place all of your business with them? If so, they can hold you hostage for new services that weren't planned for when the original contract was signed.
Renewal Terms	Does the contract provide for automatic renewal, or does it provide for options that increase your flexibility? Can you take advantage of a "good faith" extension while negotiating?
Installation Waivers	Are they willing to give you a break on these items? Will it apply to new services you order later?
Business Downturn	Are you protected in the event of a sudden, unexpected drop-off in your business that forces you to cut telecom services?
Technology Shifts	What if technology changes require that you modify your network? Can you migrate to these changes without penalty and at preferred rates?
Expiration Dates	Are your expiration dates tied to a master agreement or are they independent?
Signing Bonus	Most carriers have a little something extra to give as a final inducement to sign with them. This can even apply to a renewal with your current carrier.

As your telecom contracts get larger, the risks get higher. TelAssess encourages its clients to have a clear understanding of everything in their contracts because these are the rules you'll have to live by throughout the term of the agreement.

And bear in mind that even if you ask these questions, you will need to be able to assess your vendor's response in terms of real-market validity. In a recent Tech Update article on ZDNet, telecom industry guru Don Carros likened customers negotiating directly with carriers as "Lambs to the slaughter" because of the substantial advantages carriers possess in knowledge and tactics.

TelAssess offers contract optimization and negotiation services, which can significantly improve the terms and prices for your telecom services. Our experts have been involved in negotiations totaling billions of dollars in contract value. To learn more, please visit the Contract Optimization section of our website or call us today at 800-657-1595.

To read more about contract performance services from TelAssess, click here.
To ask one of our experts a question (no cost, no commitment), click here.