More telecom contract tips

Negotiating terms and conditions of a telecom contract

OK, you're in the home stretch. You've issued your telecom RFP, assessed the responses and concluded your contract negotiations. You've got rates you can live with and services that represent a net improvement over what you're getting now. You're done, right?

Not so fast! The last, but crucial, step in negotiating a telecom RFP is to nail down the contract terms and conditions. Actually, it's not exactly a last step. You should have been stressing the service-level agreements (SLA) and overall Ts-and-Cs discussions with carriers. But what tends to happen is that both sales folk and techies leave a lot of this conversation to the legal eagles. And that's fine, as long as you and your legal team are clear on what clauses to shoot for in the final discussion. Here are some key ones:

* The right to walk if you're unhappy, with no termination penalty. This is the big-kahuna clause in telecom contracts. If you can negotiate a clause that says you can terminate the contract, for any reason, with no termination payments, you're home free. You don't need any of the other clauses in this list.

But realistically, that's not likely to happen. So your challenge is to define the circumstances under which termination payments will not apply. Generally, this has to be a fairly catastrophic situation, such as the network overall failing to perform. (One of my clients calls this the "sucky network" clause.) The gotcha is that you need to define "failure to perform" in ways that are both meaningful to you and objectively verifiable. One circuit going down once in a while isn't failure to perform - but losing connectivity from all sites to your data center for several hours might well be.

* Failure to comply with SLAs. You need to spell out what happens if the telco fails to comply with defined SLAs in one of two scenarios: chronically (cases in which the telco misses the SLA somewhat, on an ongoing basis, but is still within 10 percent to 20 percent of stipulated performance) or acutely (cases in which the telco misses the SLA drastically, such as disconnecting your entire data center, as noted above). Most companies will shoot for refunds in the first case and the right to walk in the second.

* Mergers-acquisitions-divestitures clause. This gives you the right to renegotiate the contract if either you or the telco substantially restructure your business operations during the life of the contract. For example, if your company sells off the division responsible for most of the traffic, you shouldn't be bound by the previous minimum annual revenue commitment.

* Technology migration. This is particularly important in a world that's moving to VoIP . You'll want to stipulate what happens if your voice traffic drops below a certain amount because of VoIP. Generally, carriers will maintain your rates as long as you meet overall revenue commitments with them -- that is, if your data use goes up correspondingly as your voice drops. But don't assume this -- negotiate it.