[This is the fourth in a series of posts by Bob Butler on the Fine Art of Telecom Transactions. In the first installment, he cautioned about the needs to plan early and to understand the structure ad interrelationships of the deal documents. In this and the other installments in this series, he identifies more factors to watch out for in the drafting process.]
Tip No. 7 – Beware the AUP
Historically, Internet service providers have established draconian acceptable use policies (AUPs) designed to hold their customers liable for virtually any bad act perpetrated by anyone over the purchased services. In most instances such AUPs will expose you to substantial potential liability and the threat of service cut-off without notice or recourse. What’s worse, vendors are increasingly seeking to apply AUPs to non-Internet services as well. While in theory there’s nothing wrong with the concept of an “acceptable use” policy, it’s important that such policies reasonably reflect appropriate assignment of responsibility for problems that may be encountered. It’s equally important that you be given some adequate opportunity to correct problems that are within your control before the vendor pulls the plug on you.
Possible approaches include, as a minimum: negotiating limits to your third party liability exposure; shifting the responsibility for network security breaches back to the vendor; and securing meaningful advance notice and cure rights before your service can be suspended or terminated.
Tip No. 8 – Key Carrier Boilerplate May Not Be Effective
Many telecom agreement templates contain clauses that at first glance appear to offer significant benefits to customers such as competitive rate reviews, business downturn relief and new technology migration. These are often little more than sizzle: if you read those clauses carefully, you find that they rarely promise more than an essentially worthless willingness to talk about possible contract changes should any of those unpleasant eventualities come to pass. Especially in the case of longer term deals – those of three years or more – it’s important to make sure that’s there’s meat in these provisions, and not just sizzle. If the vendor chooses to dangle possible future opportunities in front of you as a possible inducement to do the deal, you can and should ensure that the vendor will in fact afford you real opportunities. You can do this by negotiating a variety of provisions, including, e.g., a reduction in committed spend, additional termination rights, or the availability of an arbitrated dispute resolution if you’re not satisfied with your vendor’s response to your invocation of rights under such clauses.
