Great! After reading this article you’ll be ready to negotiate that next contract like a seasoned pro. The first steps to successful telecom contract negotiation begin by simply understanding the key areas which most contracts are based.

Sound simple? It is, so let’s get started!

Telecom Contracts: Do We Really Need Them?

Businesses sign contracts for all types of telecom services. In fact, you may have contracts in place for local, long distance, wireless, voice and data, etc. Keep in mind that the information contained in this article can be applied to just about any telecom contract negotiations.

A telecom service contract is an easy way for a service provider to lock you into a predetermined rate structure and set of conditions for a specified period of time. Having contracts in place makes it easy for a carrier to count customers. Multi-year contracts also help solidify the customer base - in other words, they can count on predictable revenue.

Contracts can also be to your advantage as well. Having contracts in place eliminates the guess work when conducting routine audits of your telecom services. You’ll never be able to verify that your accounts are being billed correctly without using contract terms and rates as a comparison.

The 7 Key Elements Included in Almost All of the
Telecom Contracts You’ll Sign

Listed below are seven common characteristics and elements that will arise when negotiating your telecom contracts. Use them as a “checklist” before you begin. It’s best to know what you want before negotiations get under way.

Keep in mind that the best deals seem to materialize when there is the element of “win-win” involved. Concentrate your negotiations on just two or three critical items that will make the biggest difference and have the most value to you and your company.

1. Most carriers will combine different offerings to maximize overall volume and revenue. Today more than ever, carriers are fighting to be your one-stop shopping for a variety of telecom services. The fact that they CAN offer you every telecom service, doesn’t mean you should follow their advice. Handle one at a time, then see how the overall package can be put together for your benefit and maximum savings for your company.

2. All contracts will require a minimum volume commitment. This commitment is usually in terms of pre-discounted revenue per month. Variations could include annual usage, net revenue amounts or total minutes of usage. Determine your level of commitment based on previous months or years. Be aware that there are often additional sub-commitments included for specific service elements. FACT: The more volume you offer the carrier, the better rates you’ll be able to negotiate.

3. All require a minimum term commitment.
Two or three year terms are most common, but contracts can be written for shorter or longer periods. Like volume commitments, the longer the term - the better the rates. Service providers are usually willing to renogotiate an existing contract , even if only half the contract remains. Before renegotiating an existing contract, be sure that there are no early termination penalties or fees in the existing one.

4. The net rates are usually expressed in terms of specific discounts off regular published rates.
However, some express specific rates in lieu of service guide pricing. Bottom line? Be sure you know which is which during negotiations! Always be sure that you know the EXACT terms of the agreement before you sign on the dotted line.

5. Some published rates may be specifically waived.
Such waivers are common for installation charges and certain elements of private line pricing. Make it a point to ask to have these kinds of charges waived during your negotiations. After all, you won’t get it unless you ASK!

6. Most contracts include a provision that is included for promotional and other credits.
These are applied at scheduled times to off-set costs of converting from other carriers’ services. Be sure to make specific notes of these credits at the time of negotiation so that you can be sure they were actually credited in the future just as the contract reads.

7. All contracts provide for penalties if violated.
Sounds basic but….ALWAYS be sure you understand the penalties and costs associated with violating the terms of the contracts you sign. Penalties and fees can be substantial so make sure all contract information is provided to new employees who will be overseeing telecom should the original negotiator leave the company or is transferred.

Business Downturn and Technology Clauses

While not always offered by the carrier, many businesses are now asking for business downturn and technology provisions.

For example: A business downturn provision would allow a customer to renegotiate the agreement if the company cannot meet its minimum commitment levels due to unforeseen changes in the business itself (i.e. bad economy, layoffs, etc.). Usually a carrier will renegotiate a lower commitment level in exchange for a longer term commitment.

The Technology Clause protects a customer if they decide to change services to more advanced technology, resulting in lowered usage levels on initial services. An example of this is a company moving from a private line network to a frame relay or virtual private network.

Successful telecom negotiation can mean a huge difference in your company’s “bottom line” telecom expenditures. Plan your strategy. Familiarize yourself with the basics, and always remember: Everything is Negotiable!

About the Author
Robert Potter is Vice-President and Senior Consultant for TelCon Associates, Inc. TelCon Associates has helped companies of all sizes reduce and manage telecom expenses for more than 35 years.