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Prevent and Resolve Telecom Disputes

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The major carriers (including AT&T and Verizon) include contract terms in their network service agreements designed to put enterprise customers on the defensive and to reduce their leverage in …

The major carriers (including AT&T and Verizon) include contract terms in their network service agreements designed to put enterprise customers on the defensive and to reduce their leverage in contract negotiations and when disputes arise (as they inevitably do).

Even second-tier carriers like CenturyLink, Level 3, XO and Windstream salt their contracts with unreasonable, one-sided terms that cause headaches for unwary enterprise customers.

This presentation discusses how enterprise customers carriers can maximize their ability to prevent and resolve disputes with telecom carriers.

Published in: Technology, Business

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  • 1. Prevent [and Resolve] Telecom DisputesHank Levine Justin Castillohlevine@lb3law.com jcastillo@lb3law.com Organized by March 7, 2012 © 2012 Levine, Blaszak, Block & Boothby, LLP. All rights reserved.
  • 2. Who We Are and What We Do  Levine, Blaszak, Block & Boothby, LLP (LB3) is dedicated to representing enterprise customers in communications and information technology matters, including disputes with providers.  US News and World Report ranks LB3 as one of only ten Tier 1 telecom law firms in the nation. The other nine all work with/for major carriers.  Detailed descriptions of the firm, its practice and its lawyers can be found at www.lb3law.com.© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 2
  • 3. LB3’s Telecom Disputes Practice  Since 1993 LB3 has represented enterprises and employees/agents in scores of disputes with carriers. We also help small carriers at odds with the large telcos.  Most of the time, we are able to negotiate workouts or settlements without the need for formal proceedings.  But we have been involved in many mediations, arbitrations, regulatory complaint proceedings, and state and federal lawsuits.  The most prominent public example of our dispute work is the FET litigation, which led to $10 billion in tax refunds to individuals and businesses.© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 3
  • 4. Telecom Disputes are Different  Tariffs are (mostly) history, but this remains a regulated industry; that has a huge impact on disputes and their resolution  Telecom is mission critical – service problems can halt key operations  Switching vendors is difficult and time-consuming  The regulatory overlay is complicated by divided jurisdiction and regimes – state/federal, regulated/unregulated, domestic/international© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 4
  • 5. So What Are We Fighting About?  Most disputes in 2012 grow out of • Shortfall and Early Termination Charges • Billing issues – wrong rates, bills for services never ordered/installed, charges billed years after they were incurred, charges for discontinued services, large rate increases when a contract expires, bills for fraudulent calls • Service/technical problems – failure to install or migrate services in a timely manner, SLA issues, services that “meet spec” but can’t be used for their intended purpose  Other areas of contention involve poor account support, contract “gotchas”, and merging acquired contracts© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 5
  • 6. Causes of Disputes  Poorly drafted / negotiated agreements  The customer’s failure to do due diligence (e.g., to know its traffic and network requirements)  The customer’s failure to plan for seismic business changes and/or transitions  Incorporation of one-sided documents that the carriers can (and do) change without the customer’s consent© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 6
  • 7. “Gotcha” Clauses  Lengthy minimum terms with hefty early termination charges attached to each individual circuit  Multiple, overlapping, ratcheting commitments  One-sided dispute resolution clauses – the carrier gets to be judge and jury  Long time to bill; short time to dispute a bill  Attachments trump negotiated contracts; carrier order forms trump attachments  Automatic renewal clauses  Complex procedures for terminating/disconnecting circuits  Weird, low limits on a carrier’s liability© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 7
  • 8. Carrier Leverage  Denial, suspension, or restriction of service  The filed tariff doctrine was a trump card, and still is for some intrastate services  Statute of Limitations – 2 years under the Communications Act, longer in most states. But the parties may shorten it by agreement – and the carriers make sure you agree  A bad contract – e.g., semi-hidden commitments  Reciprocal business relationships  Difficulty in switching to another carrier© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 8
  • 9. Customer Leverage  (Most) carriers hate to alienate customers  Carrier practices must be “just and reasonable” under the Communications Act. But this is not a silver bullet  New business or future business  A good contract – especially one with a big cushion  Willingness to move some/all traffic  Pressure from regulators (if appropriate)© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 9
  • 10. Avoiding Disputes  Say it in writing, and keep notes  Save reports and emails  Pay undisputed amounts  Escalate strategically  Prepare for the worst (minimize the impact of suspension with a second-carrier relationship. If you are leaving, leave)  Be willing to give and take – if you’re facing substantial liability to the carrier, something is much better than nothing© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 10
  • 11. Contract Clauses that Can HelpPrevent or Ameliorate Disputes  Dispute procedures (including escalation)  Performance pending outcome of disputes  Reasonable billing and payment provisions  Governance/stewardship  Transition/migration  Limitations on AUP and related provisions governing suspension/termination of services.© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 11
  • 12. Dealing with a Dispute  Early stages – Write it down. Document everything  The role and limitations of your account team  Escalation – start on the business side  When to bring in counsel – the Goldilocks rule • If the customer brings in counsel, the carrier has to reciprocate (carrier account teams often work hard to avoid their counsel) • Bringing in the lawyers too early can harden positions, hindering settlement  But if the account team is useless or hostile or crazy, getting carrier counsel involved can help© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 12
  • 13. Resolving Disputes – Work Outs  Shortfall and other penalties usually go away  Carrier gets new revenue via a term extension and new business  Contributing services are broadened.  Customer leverage tends to be low, so rates and terms are usually not “at market.” But you’d be surprised …  Some carriers are more amenable to “work- outs” than others© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 13
  • 14. When Negotiations Fail  Mediation  Arbitration – compelled by many carrier contracts on unfavorable terms, but often makes sense  The regulators: FCC/State PUCs • Informal complaints • Formal complaints • Regulators as mediators  Litigation • State or Federal Court • Referrals to the FCC© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 14
  • 15. Carrier Hot Buttons  AT&T • Likes circuit-specific terms and tying up customers 12 ways  Verizon • Wants to own reports and control CPNI • Cooperation with third-party vendors  Second-tier carriers • Used to dealing with smaller customers and don’t have sophisticated large deal capability, so • Lots more “sole discretion” language • Lots of hair-trigger termination/suspension rights • Low limitations of liability/carve-outs© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 15
  • 16. Conclusion  It’s not all in your head – telecom disputes really are weird and different  It’s a hard but not impossible world  Questions?© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 16
  • 17. Telecom Negotiation Conference Join CCMI and the LB3/TC2 team for 2 full days of telecom contract negotiation training 20th Annual Telecom Negotiation Conference May 3 – 4 | Washington, D.C. See the complete agenda at http://www.TelecomNegotiationConf.com© 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved. 17