Circuit Contract Terms for Negotiations
The regional bell operating companies (RBOC) frequently purchase DS0, T1, or T3 service from other carriers, as do many other firms. These are then resold to the customer. This was once regulated by the FCC including the price they paid for it which meant they occasionally resold the service to larger customers for less than the actual cable owner would have. They also tend to have access to the providing carrier’s equipment which means they can troubleshoot service issues themselves and sometimes resolve it. They can also offer one support contact for all connections. There are some small businesses that do nothing other than negotiate carrier pricing and terms. Try to get a bid from all LECs if there is more than one. If there is only one still do due diligence and be sure to look around to see who else can at least enter a bid. You will be very happy to have a competing bid latter in the process and it will give you a better frame of reference. If the second bid is not going to be cheaper don’t actually dismiss them. This doesn’t mean you want to give it any of you time, you just want to use them for leverage, and maybe some useful information about your other bidder they may not advertise themselves. Remember nobody else knows what they bid unless you tell them.
Length of cable ownership is a big deal to a service provider. The cabling might not cost much to leave connected but the installation is very expensive. This clause usually lasts for more than two years. However many companies have gotten burned with this being too long and having issues with not being able to upgrade the connection as bandwidth needs increase due to a mistake in a previous contract negotiation. Avoid anything longer than 4 years and get an upgrade clause. You may wish to specify termination costs for early termination. If a renewal clause is built in be sure that it does not set the price. This is still a part of IT with a fast moving market that may have radically lower prices when renewed. Note: Providers will frequently install a cable with more capacity than the one being used but only activate one channel leaving a very liberal set of upgrade options available with minimal installation expense to the provider. Ask for this but don’t sacrifice redundancy. It is wise to specify in the agreement that redundant cables may not be in the same trench and go through different central offices whenever possible. Using the same central office is a risk so be sure to have a clause requiring optional release from the agreement for one of the circuits and notification whenever it is done. There should be a provision in the service that covers reliability and provides clear compensation for excessive issues that affect the business from functioning. This is not a replacement for a backup circuit and there are technical issues that prevent some backup connections from functioning when needed. You can also state that the central office (co) a circuit goes through be disclosed. Consider specifying the conditions under which the circuit can pass through the same CO but remember that what is said during contract negations only counts if it’s in writing.
Try requesting that for the last portion of the committed term can have the price renegotiated, even though the service is still required. This helped the author’s employer crawl out of a very unfavorable pricing situation on a long term agreement a year early without changing vendors using extensive contract negotiation. Also many companies have successfully signed agreements with two vendors and moved business between the two depending on which one currently gave the better offer. Be warned you may get a less favorable result despite retaining significant leverage over the vendors and you may need to be constantly negotiating with both. However this protects you from any unforeseen issues with the vendor and allows you to force their hand if ever needed.It may be in your favor to negotiate all of your data circuits, phone circuits, long distance, and cell phone contracts with the same company depending on who is negotiating with you. Look for anything the vendor wants besides money. Can you offer anything creative such as cabling rights, a testimonial or case study of how great they are, reduced installation effort, or exchange your firm’s product instead of cash? Advertising their residential service to your employees or customers? Is there anything they can offer you that is not on the table? Can you save money by using their webserver? Do they provide any disaster recovery services? Be very specific if they agree to DR services and test it; many firms have found DR services unavailable or insufficient when actually needed. Be sure to take full advantage of everything during contract negotiations, and this is more complex than just money. Try to get their non-monetary chips on the table upfront and use your non-monetary chips to avoid raising your price. Many of the things on this page will work as non-monetary bargaining chips.
Please continue on to: negotiation tips for circuit contracts.