This is our closing entry on sustainable telecommunications agreements, highlighting basic points associated with “Legal Terms and Conditions,” referencing prior entries for more detailed explanation. In the near future, we will supplement these six (6) entries with several dealing with Wireless services, including M2M services.
Dispute Resolution. Customers’ standard practices on dispute resolution procedures (arbitration or adjudication (with or without mediation)) should apply to disputes under telecom agreements. Carriers’ standard approach for resolving disputes, procedure and venues, such as adjudication in courts located in New York City, are often non-starters. We previously highlighted the pros and cons for arbitrating disputes arising under these agreements. The AAA commercial arbitration rules were recently updated, effective October 1, 2013. Some carriers prefer the arbitration procedures established for consumers (to avoid class action litigation).
Termination Rights. Limited termination rights are artifacts of the pre-Internet era when private lines (connecting discrete points) were the only “data” service, and e-commerce was conducted solely at inbound call centers. The carriers’ position that terminations be limited to the “affected service” is a non-starter, as customers increasingly rely on any-to-any services such as MPLS and VPLS.
Service issues at major locations impact enterprise-wide communications and operations and should be addressed from the perspective of adverse customer impact. As previously noted, without sufficient time to migrate to a replacement carrier/services, a termination right can easily become “a cure worse than the disease.”
In addition, chronic billing issues deprive customers of an essential element of the agreement: agreed upon pricing (savings) for the entire agreement, not just a particular service. Thus, the agreement should be reviewed carefully to ensure that chronic billing issues are not excluded from the termination provision.
Limitations on Damages. The standard exclusion of consequential, special and incidental damages should apply to each party. Customers should secure the same cap on damages as the carriers, however that number is calculated. The preferred approach for termination of the entire agreement or partial discontinuances for cause should provide for damages equal to the difference between the replacement service and the discontinued service. In addition, the agreed upon commitment level should be reduced in proportion to the lost revenue attributable to any partial termination.
Indemnities. Our basic position is that indemnities should be limited (for both customer and carriers). A 2012 entry outlined our reservations over carriers demanding a series of new indemnities. The indemnities that customers should demand are those associated with data security breaches arising under data center and cloud computing services offered by the carriers, particularly those breaches that trigger reporting and notification obligations, fines, or penalties under either state laws or industry-specific data security requirements.
Precedence Clauses and URL Provisions. Telecommunications services agreements can include a number of attachments and schedules, as well as multiple on-line documents (“service guides”), the provisions of which are incorporated into the services agreements. The standard “precedence clause” does not adequately address the ability of carriers to “add” new provisions to their online terms and conditions and, in turn, the agreement. Thus, a more comprehensive approach is warranted in drafting the precedence clause to insulate the agreement from these changes.