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Foot-Dragging on Telecom Contracts a Risky Business

by Timothy Faust

Buyers of network and telecom services have an increasingly wide range of options to choose from, as aggressive newcomers as well as established global players take innovative and aggressively priced solutions to market, and as European-based carriers make new investments into their North American operating models.

Despite this dynamic and competitive climate, industry giants such as AT&T and Verizon in many cases continue to present challenges to enterprises who are looking to quickly update their contract commercials to reflect prevailing market conditions. The behavior exhibited by these carriers offers a stark and unflattering contrast to some of the industry upstarts who are making strides in making it easier to do business with them. Instead, the big boys are effectively lowering the bar in terms of response time on contracting and moving from agreement/award to contract execution, particularly in cases where discounts and price reductions are involved.  While delays are often blamed on lack of coordination between silos – and while this is certainly an issue – it’s hard to avoid the suspicion that on a simple renewal of services the major carriers will stall as long as possible in order to delay savings.

In one instance, an AT&T customer experienced a six-week delay on a turnaround to a very manageable renewal of an existing services contract. While account teams are apologetic, you get the sense that they’re simply absorbing the punches and that it’s all part of the game plan.  Escalations are typically met with more apologies and little action. Adjustment credits to accommodate the delays are possible but not a given, and some carriers won’t agree to apply the credit within the first several months of a new term – all signals that this is a strategic financial directive coming from the top down.

In most cases, customers are understandably unwilling to reverse an award since that would only mean further delays and disruption. But the established incumbents are playing a risky game – at some point, frustrated customers will determine that if a snail’s pace attitude towards renewals becomes the norm, the alternative of entertaining open RFP competitions and transitioning to new providers will begin to look more attractive. And that’s a scenario the incumbents want to avoid.

About the author

Tim provides clients with network cost analyses, market rate pricing guidance, qualitative carrier evaluations and hands-on contract negotiation assistance for telecommunications services.