Overview of Telecommunications User Deals

Transcription

1 Overview of Telecommunications User Deals Prepared by C. Douglas Jarrett, Esq. Keller and Heckman LLP 1001 G Street, NW Washington, D.C Jarrett@khlaw.com

2 Overview of User Deals Introduction Challenges for Counsel Original Deals Expanding Services Packages Regulation

3 Introduction More services being aggregated Telecommunications and IP services Managed services Customer locations Data center-based services CPE Global/Rest of World services Local Exchange Services

4 Introduction Notable Exceptions Mobile Wireless Services Specific Applications Point-of-Sale Requirements Service to Remote Locations Very High Density Requirements Systems integrators Local Exchange Services

5 Introduction From Regulated, to Largely Deregulated Procurements Formerly Tariffed Services From highly formulaic arrangements to increasingly flexible commercial deals Competition, multiple mixes of services, new technologies and deregulation impact services providers business plans and negotiating strategies

6 Original Deals Introduction Regulation Challenges for Counsel Expanding Services Packages

7 Original Deals When Increasingly thereafter What Aggregation of existing services, not customized services Individualized, servicespecific pricing Min. revenue commitments Multi-year deals, often 3 years Early term. liability Negotiations mattered

8 Original Deals Customer Interests Aggregate expenditures Elicit competitive bids Access to additional services at discounts Improved customer support Mitigate the filed rate doctrine Carrier Interests Compete Ability to respond to RFPs Facilitate additional sales to customer Revenue assurance Customer retention

9 Regulation Original Deals Expanding Services Packages Introduction Challenges for Counsel

10 Regulation I Telecommunications Services Deregulation Non-dominant interexchange carriers Permissive detariffing rejected by courts Tariff changes on one-day s notice AT&T Tariff 12 Contract Tariffs Mobile wireless service FCC implements legislation, forebears from rate and entry regulation, preempts state regulation CLECs authorized under Telecom Act of 1996 RBOCs deemed non-dominant for IXC services RBOCs secure authority under Section 271

11 Regulation I Detariffing Telecommunications Act of 1996 authorizes FCC to forebear from regulating telecommunications carriers/services (47 U.S.C. Section 160) FCC detariffs interexchange services Interstate services (includes bundled special access) International services July 31, 2001 Interstate and international services detariffed Service guides required. See 47 C.F.R. Sec Mitigates the filed rate doctrine

12 Regulation I Customer Premises Equipment Deregulated; detariffed; and cannot be bundled with telecommunications services. (Computer II ). CPE may be bundled with Wireless services (1992) Other telecommunications and information services (2001)

13 Regulation I Information Services (Most IP-Based Services) Deregulation FCC defines, deregulates enhanced services Computer II ( ); See 47 C.F.R. Sec (a) Telecommunications Act of 1996 expands the concept, codifies information services, 47 U.S.C Sec. 152 (20) Virtually all Internet and IP services classified as information services distinct from and not regulated as telecommunications services

14 Regulation II International switched services Accounting rate benchmarks for services between U.S. and international destinations International Simple Resale ( ISR ) International Settlement Policy ( ISP ) Waivers

15 Regulation II Interstate Switched Access Rates Effects ILEC interstate switched access rates Major reductions, changes in 1997 and 2000 Adjusted annually See Trends in Telephone Reports, Industry Analysis and Technology Div., Wireline, Competition Bureau, August 2003, Tables Available at

16 Universal Service Fund Regulation II Telecom Act of 1996 expands scope of services and entities eligible for USF support USF obligation assessed and recovered from carriers retail revenues paid for interstate (and international) telecommunications services Telecommunications carriers recover USF from end-users. Assessment % adjusted quarterly by FCC 2 nd Quarter 2004 Assessment: 8.7% USF rules tweaked in 2002 Major proposed changes on hold

17 Regulation II VoIP Regulation Focal point of contention between (a) regulatory/social/public safety policies premised (incorrectly) on expanding telecommunications services revenues, and (b)migration to and growth of IP-based services

18 Regulation II Special Access Proceedings Proposal to establish metrics and standards for ordering, provisioning and maintenance of interstate special access services In the Matter of Performance Measurements and standards for Interstate Special Access Services, CC Docket No , Notice of Proposed Rulemaking, FCC (rel. November 19, 2001). AT&T Petition for Rulemaking to reform (lower) rates for interstate special access services. Public Notice, DA , RM No (rel. Oct. 29, 2002) Writ of Mandamus in D.C. Circuit

19 Expanding Services Packages Regulation Challenges for Counsel Original Deals Introduction

20 Expanding Services Packages Services in Original Deals ( ) Service Packages 2004 Service Packages Customer Objectives Service Provider Objectives

21 Services in Original Deals Interexchange Switched Voice Services Interstate and international Interexchange Private Line Service Interstate and international Special Access Service

22 Interexchange Switched Voice Services Major Services Outbound Inbound Calling Card Audioconferencing Pricing Concepts Billed in Arrears Usage Sensitive Billing Increments a. Per Minute b. 6 sec. increments w/ 18 sec. min

23 Private Line Service Description The initial data service Dedicated path between two or more locations Still widely-used Pricing Concepts Non-recurring charges Fixed recurring charge Elements Mileage Capacity/Bandwidth Billed in advance

24 Special Access Service Description Links customer prem to IXCs /ISPs POPs DS-1, DS-3, OC-N and Fiber Rings ILEC service resold by IXCs Pricing Concepts Non-recurring charge Fixed recurring charge Elements Mileage Capacity/Bandwidth Billed in advance

25 Services Original Services ( ), plus Frame relay and ATM services Managed services Wireless services Global/Rest-of-world services Higher capacity special access and fiber rings Videoconferencing

26 Services 2004 Original Services ( ), Services , plus Internet access service Other IP-based services CPE-based IP-VPNs VoIP services Data Center-Based Services Managed hosting/ remote data storage Managed security services Managed remote access IP-Enabled frame relay and ATM services Local exchange service (Less) Wireless service

27 Pricing Customer Objectives 2004 Improved pricing over current deal Competitive, market-based rates at inception and throughout the deal Customer-specific business objectives Technology decisions Managed services or not Quality and reliability of services selected Security/Sarbanes-Oxley objectives

28 Customer Objectives 2004 Improved Customer Support Account Team Trouble resolution Response Timely reporting for trouble resolution and SLA performance Accurate Billing Timely provisioning

29 Service Provider Objectives 2004 Acquire or retain customer in competitive environment Revenue assurance High (and multiple) annual expenditure obligations Be customer s exclusive or primary services provider Bundle more services

30 Service Provider Objectives Sell more services, solutions or managed services as opposed to only interexchange transport services Minimize staff resources required to support services Deliver quality service that meets or exceeds customer expectations

31 Challenges for Counsel Expanding Services Packages Introduction Regulation Original Deals

32 Know Thy Client Challenges for Counsel Risk Analysis Document Challenge Process Challenge

33 Know Thy Client Motives for Procurement Cost savings, additional services, technology change, service provider change/diversity Client s timeline Challenges for Counsel Critical deal points Internal review/approval process

34 Know Thy Client Challenges for Counsel Current agreements Services providers Dates projected for meeting minimum expenditure obligations Expiration date(s) Rate stabilized transition period(s) Role of consultants

35 Challenges for Counsel Risk Analysis (What happens if....?) The Client Changes Downsizes/divests or expands/acquires Wants new technology/architecture The Market Changes Prices, technologies The Service Provider Changes Acquisition target, Chapter 11 Abandons the market Disputes Arise

36 Challenges for Counsel

37 Challenges for Counsel Document Challenge Master Agreement Service Schedules, Attachments, etc. Service Guide Tariffs

38 Challenges for Counsel Document Challenge Master Agreement Service Schedules Tariffs Service Guide

39 Challenges for Counsel Document Challenge

40 Process Challenge Challenges for Counsel Negotiations begin before the RFP Probably before you were involved Consistency is essential Make sure your team reads from the same script Present a united front Shifting positions undermine a party s strategy and objectives

41 Process Challenge Challenges for Counsel Engage decision makers Distinguish roles of vendor s product managers, counsel, account team, SMEs and offer managers Be thorough, comprehensive and timely in proposed revisions/redrafting of agreements -End-