Telecommunications Services Agreements and the Four Corners Defense
A guiding principle for attorneys and their clients when negotiating telecommunications services agreements is the four corners defense. No, not the end-of-game defensive strategy devised by the legendary Dean Smith for his UNC basketball team, but the straightforward strategy of keeping the terms and conditions of telecommunications services agreements within the four corners of an agreement.
Due to deregulation and migration to IP-based services, telecommunications tariffs have largely disappeared. The process started over twenty years ago. In the United States, local exchange TDM voice services, DS-1 and DS-3 special access services and some intrastate interexchange voice and private line services remain tariffed. Consistent with FCC decisions dating back to the 1990s, the major wireline and wireless carriers and the MSOs have replaced tariffs for telecommunications services with a combination of end-user (consumer, small business and enterprise) agreements and online service guides. Broadband services have always been offered through some combination of end-user agreements and online terms and conditions.
These service guides were initially required by the agency to disclose standard prices for de-tariffed services and to be made available to the public at the carriers’ principal offices or online. The scope of the terms and conditions in online services guides has expanded substantially and, in many cases, replicates the one-sidedness of tariffs. For enterprise customers, service guides currently offer the services providers’ service descriptions, service level agreements (SLAs) (sometimes), standard rates and charges, and policies such as the Authorized User Policy (AUP) for Internet access service. Several services providers also post a comprehensive set of general legal terms and conditions and related definitions.
Several online service guides are almost impossible to search. URLs in customer agreements related to potentially relevant online web pages often prove to be dead-ends. However unfriendly the online design and integration of service guides, the overarching concern is that services providers reserve the right to modify unilaterally all aspects of their service guides including service descriptions, SLAs, pricing schedules, privacy and authorized user policies (AUPs) and, as applicable, the provider’s online general terms and conditions. Some services providers insist on an indemnity from customers for violations of the provider’s AUP for which the provider reserves the right to modify at any time. In some instances, the general terms and conditions in the services guide not only conflict with the terms and conditions in the executed agreement, but may impose additional or supplemental customer obligations and conditions that are not readily trumped (excuse the pun) by a standard precedence clause in the executed agreement.
Some services providers push the envelope even further, asserting that the customer’s sole remedy for services providers’ unilateral changes to the service guides that are “material and adverse” to the customer is the customer’s right to discontinue the affected service on sixty (60) days-notice. Apart from excluding the customer’s right to damages, replacement services to multiple customer locations (sometimes a hundred or more sites) cannot be sourced, provisioned, and tested and the customer’s traffic cannot be reliably migrated to replacement services in sixty (60) days.
This brings us back to the four corners defense. The agreement executed by the customer and the services provider should provide for fixed rates, as opposed to percentage discounts of the rates in the online services agreements; services providers invariably reserve the right to change the rack rates in their service guides with virtually no notice. The written agreement should also exclude “shadow” general terms and conditions in the service guide as opposed to relying on a precedence clause. The minimum response to the services providers’ provision authorizing changes to the service guide that are “material and adverse” to the customer is to secure a six-to-twelve-month transition period to migrate to replacement services, not sixty (60) days.
There is one caveat on changes in wireline services. The major telecommunications carriers are now transitioning their networks from TDM technology to IP-based services. (The MSOs’ networks are largely IP-based.) The FCC is accommodating the carriers’ efforts to minimize regulatory delays and burdens on ILECs in implementing this transition and in replacing copper loops with fiber or fixed wireless technologies. The core networks of the major services providers are well along in this transition, but the transition in special access services varies considerably in terms of location and the ILEC provider.
Enterprise customers should press their wireline services providers on (i) the status and projections for completing their IP-transitions, and (ii) the transition plans for the ILECs from which the services provider will be acquiring special access services.