Great prices, lousy terms? How not to let your carrier sabotage the deal

You might have thought that the IP convergerce era would have brought in easier networks and simpler contracts. You know, buy one service from one carrier, have it do everything, sign a single document where all the conditions for buying that service are lumped together, and plan to work 9-5 during the term of the deal.

Of course, things haven't worked out that way. Complexity is built into the very act of installing new technologies that render faster and more flexible results for end-users. That's true for the network engineering side, the provisioning and service levels, and the contract deal itself.

One way in which we see this is in the carriers' reaction to innovative mechanisms in terms and conditions. Carriers like to set up a game of whack-a-mole whereby they try to offset apparent new flexibility in one contract idea with a straitjacket somewhere else.

The reason they usually get away with this relates to a simple truth in telecom and networking: Nobody rips out an entire network at once and immediately replaces it with another. New services are usually additive. That gives carriers a self-replenishing supply of rate elements on which to sneak in restrictive conditions that prevent you from riding down the market price.

We often see this in both explicit and implicit terms that apply to individual circuits. A per-circuit term plan that applies to a newly installed circuit (often a very high-cap metro or national circuit, and/or a new WAN technology such as Ethernet or an MPLS-like add-on to an Internet connection) has the effect of canceling out a "no-commitment" overall deal. Controlling the procurement process within your company is key here. Carriers know that new or naive CIOs who want to "make their mark" by forcing telecom vendors into what are superficially no-commitment, top-level contracts are fodder for this kind of misdirection.

A stealth variant of this is an innocuous-sounding "minimum payment term" slipped into a separate pricing schedule for a new data and/or VoIP service being rolled out to many locations. If the term is expressed as applying to a certain percentage of the affected circuits, and the service involved is your growth platform, then you've bought yourself a treadmill: A fixed percentage of the installed circuits subject to a minimum payment term will become a continuously increasing number of circuits installed at later and later dates. By the time you've finished rolling out your network, the minimum payment term of this one element will exceed the expiration date of your overall contract.

Try re-negotiating lower rates in the middle of this kind of deal, and you may see that what seemed like a good price at the beginning of the contract can no longer be matched to the market. What you want instead is an airtight deal that flows to your benefit from start to finish on both prices and terms, where each quantitative and qualitative element complements all the others.

These are the kinds of critical considerations you must know about at the beginning of your procurement process rather than the end when it's too late. They're what my TC2 colleagues Jack Deal and Larry York, along with LB3's Andrew Brown, will be addressing in a session called "Blueprint for a Successful Procurement: 7 First Steps to Maximize Leverage" at the 2010 Telecom Negotiation Conference in Washington, D.C. on March 11-12.

Past attendees of Telecom Negotiation, chaired as always by LB3's Hank Levine, will tell you the conference is about as chock-full of meaty detail as anything they've ever gone to. I'll also be speaking along with a number of other TC2 consultants and LB3 attorneys about the latest in the art and science of negotiating fully coherent telecom deals that actually deliver market-based benefits both now and going forward.

Check out the full agenda and other conference information. I look forward to the opportunity to see you next month here in Washington!