Key Issues in Negotiating The Ever-Expanding Scope of Telecommunications Services Agreements

Transcription

1 Key Issues in Negotiating The Ever-Expanding Scope of Telecommunications Services Agreements Presented by C. Douglas Jarrett, Partner Keller and Heckman LLP Washington, D.C. Conference on Negotiating Telecommunications Deals User Deals October 11-12, 2001 Atlanta, Georgia Sheraton-Colony Square Hotel

2 Overview of Presentation Characteristics of Early Agreements Core Transport Services Scope of Agreements Two Major Regulatory Developments Data Communications Reshape Services Agreements Increased Complexity in Telecommunications Services Agreements Multi-Track Negotiations Risks Inherent in Comprehensive Services Agreements 7/1/2003 2

3 Characteristics of Early Agreements 3-Year Term-- --Standard Bundled/Not Customized Offerings Minimum Annual Charge (MAC)/Minimum Monthly Revenue Commitment (MMRC) in almost all deals Significant economic penalties for Customer s early discontinuance or failure to meet the MAC or MMRC Negotiations Focused on Economic Matters Limited to Telecommunications Services 7/1/2003 3

4 Core Transport Services Domestic and International Inbound & Outbound Interexchange Switched Voice Services Dedicated Access Services Frame Relay Services Private Line Services ATM Services Wireless (mobile) Services 7/1/2003 4

5 Scope of Services Core Transport Services Internat l & Domestic Voice, Frame Relay, P/L and Dedicated Access Services ATM Service IP-Enabled Frame Relay and ATM Services Wireless (Mobile) Additional Services Global Voice, Frame Relay, ATM, P/L and Ded. Access Services IXC-Provided Domestic and Global Local and Access Services Managed Services Internet Based Services 7/1/2003 5

6 Scope of Services Internet-Based Services Remote Access Service IP-VPNs Internet Access Services Hosting Services Managed Data Storage Services 7/1/2003 6

7 Two Major Regulatory Developments Detariffing of Interstate and International Telecommunications Services Tariffs Replaced with Price Lists and Service Guides Local and Intrastate Services Still Tariffed Bundling of Enhanced Services and CPE with Telecommunications Services 7/1/2003 7

8 Data Communications Reshape Services Agreements Margins on Voice Services Decline Mixture of Myth and Reality Access charges have declined dramatically Other Services Offer Improved Margins for Carriers Data Communications Managed Services Global Services Local Services Benefits of unified data networks reinforce demand for carrier accountability and one-stop shopping 7/1/2003 8

9 Data Communications Reshape Services Agreements Until Recently, Data Services Characterized By: Bandwidth as principal differentiator Customers received the same quality of service per service and carrier Purchase decisions based on price and comfort level with carrier Purchase decisions not influenced by SLAs or technology assessments 7/1/2003 9

10 Data Communications Reshape Services Agreements Today s Market for Data Communications Services is Characterized by Choices IP Services v. Basic Services Internet-Based v. Dedicated Networks Managed Environment v. Transport Only Domestic and Internat l v. Global Services Managed Internet Access Hosting Services v. Collocation 7/1/

11 Increased Complexity in Telecommunications Services Agreements More Options and Service Dependencies Integration of Core Transport Services w/internet- Based Services and Diversity of Enterprise Communications and E-Commerce E Requirements Managed Services and Internet-Based Services have Multiple Customer-Determined Elements Router configuration, financing, management, and maintenance Options in firewall and intrusion detection services Managed Services and Core Transport Services 7/1/

12 Ascendancy of Service Level Agreements SLAs Define Service Quality SLAs Describe How Service Quality is Measured SLAs Set Operational Expectations SLAs as Trigger Points for Contractual Consequences 7/1/

13 Multi-Track Negotiations Operational Issues Help Desk, Notification Processes and Reports Network Architecture /Variable Components SLAs Quality of Service/Operational Expectations Administrative Issues Pricing Business Terms Legal Terms and Conditions and Contract Structure 7/1/

14 Risks Inherent in Comprehensive Agreements More customer-determined options and more interrelated services create a multi-faceted relationship between carriers and customers Managed Services environment increases the complexity of agreement and service dependencies More extensive discussions and planning between counsel and client Identify key service and operational dependencies Address financial commitment demands of carrier 7/1/

15 Risks Inherent in Comprehensive Agreements Migration to IP-Based Services and Internet-Based Services warrants use of meaningful acceptance tests Single service provider w/ subcontractors v. independent business partners having separate agreements A major issue w/ Global Services Competitive Pricing Reviews for Regulated and Non- Regulated Services Transition Obligations 7/1/

16 Risks Inherent in Comprehensive Agreements Contract Structure One comprehensive agreement v. multiple agreements Ease of administration Single set of legal terms and conditions Service Dependencies and Aggregate MAC Risks of Industry Consolidation Dealing w/ the implications of Section 271 in Services Agreements 7/1/