Prevent and Resolve Telecom Disputes

Prevent [and Resolve]
Telecom Disputes

Hank Levine Justin Castillo
hlevine@lb3law.com jcastillo@lb3law.com

Organized by

March 7, 2012
© 2012 Levine, Blaszak, Block & Boothby, LLP. All rights reserved.

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

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.


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


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

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


“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

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


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)


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

Contract Clauses that Can Help
Prevent 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.

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

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

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

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


Conclusion

 It’s not all in your head – telecom disputes
really are weird and different
 It’s a hard but not impossible world
 Questions?


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


Prevent and Resolve Telecom Disputes

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