Drafting and Negotiating Telecom Services Agreements Structuring Key Contract Provisions, Anticipating Legal Pitfalls, and Mitigating Risks

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TUESDAY, FEBRUARY 18, 2014

Presenting a live 90-minute webinar with interactive Q&A

C. Douglas Jarrett, Partner, Keller and Heckman LLP, Washington, D.C.

Walt Sapronov, Principal, Sapronov & Associates, P.C., Atlanta

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Drafting and Negotiating Telecom Services Agreements

Structuring Key Contract Provisions,

Anticipating Legal Pitfalls and Mitigating Risks

C. Douglas Jarrett Partner

Keller and Heckman LLP jarrett@heckmanlaw.com

Walt Sapronov Principal

Sapronov & Associates, P.C. wsapronov@wstelecomlaw.com

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The presentation and materials are for tutorial purposes only and are not to be construed as legal advice.

Overview • Service Offerings in Enterprise-Based Telecom

Procurements • Wireline/Landline • Wireless (Mobile) • Data Centers • Procurement Basics / Role of Consultants • “Business” Terms and Conditions • Privacy and Security • "Legal" Terms and Conditions • Questions

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Wireline Services • Providers

o AT&T,* Verizon* o Century Link,* Level 3, Sprint o Telefonica, BT, NTT, Orange, Tata o XO, twTelecom, Cable Operators* o Regional Carriers* o Small ILECs

• Geographic Scope of Agreements

o Domestic, International and “Rest of World”

• Contract Term

o 3-Years, w/ two 1-year renewal options for customer o Transition Period

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• Managed Services* o Managed Router/Network

Management o Firewall & Intrusion Detection o Collocation/Data Center o Audio conferencing o Cloud computing o Content Delivery Networks

• CPE (Rarely included)

• Core Services o Voice

• TDM to IP Transition o High speed Internet Access o MPLS/ VPLS o Private Line

• TDM and IP o Special Access

• TDM to IP Transition

• Service v. Dark Fiber

Overview of Wireline Services

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Wireline Procurement Cycle • Keyed to standard term of agreement • Incentives to Customers

o Better pricing , technology /services, back –up carrier, change in geographic requirements

o Better business partner o Avoidance of end-of-term /contract expiration price increase

• Disincentives to Customers o Soft and hard costs of procurements(s)

• Limited staff resources • Transition challenges; minimizing period of dual service

• Dynamics o Timing o Credible threat of loss of business for incumbent carriers o Potential for new business for all bidders

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Service Offerings • Service Offerings in Enterprise-Based Telecom

Procurements • Data Centers

• License v. Lease v. Sublease (Why does it matter?) • Term and Termination (When can you walk?) • Services, Occupancy, Improvements (What’s included?) • Utilities; Power supply (Is power loss a force majeure?) • Building Access: Risers, ducts, wiring, common areas, • Use restrictions on the space: (How strict? Do they matter?) • Assignment; Building sale; Landlord bankruptcy • Dealing with Risk: Casualty, indemnification; insurance • Pricing, adjustments and inflation indices: Deal protections • Foreign locations (Dealing with foreign property laws)

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Domestic Carriers Multinational Carriers

• AT&T • Verizon Wireless • Sprint • T-Mobile • MVNOs

o Voice , data and text o M2M

• Vodafone • Softbank • MVNOs

o Voice, data and text o M2M

Wireless (Mobile) Services Providers

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Wireless (Mobile) Services

• Voice, text, data (migration to 4G--LTE) and M2M • Smart phones, iPads and tablets • Same services and devices as offered to consumers

(except M2M) o Almost always postpaid o Subsidized smartphones, iPads and tablets o Same limits on unlocked devices

• Non-US Wireless--distinctions o Subsidized devices, exception rather than rule o Roaming rates less exorbitant o More dynamic involvement of MVNOs

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Wireless (Mobile) Services

• Major differences from consumer purchases o Pricing – More Options o Plans w/ more discounts/Aggregate credits o Pooling

• Device Refresh Cycle (No Penalty Upgrades) better than consumers

• Corporate liable v. individually liable options • As compared to wireline services

o Wireless carriers do not focus on upselling non-core services, may partner with MDM companies

• Procurement Cycle

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Wireless (Mobile) Services • Geographic Scope

o Domestic with international roaming—very expensive from US carriers---T-Mobile is changing U.S. – based roaming

o Multi-nationals typically have multiple agreements w/ carriers in critical regions

• Term o 2-years, sometimes a single one-year renewal option o Line terms

• M2M Offerings o Wireless mobile often part of an end-to-end service o Devices often carrier-specific

• Certified but not subsidized o Standard wireless term does not work for embedded devices o MVNOs have a much bigger presence in this segment

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• Competitive Bids:

o (RFI/RRP); Extensions; Benchmarks o Proposed Terms and Conditions – Response: yes, no, explain

• Wireline/Landline:

o Purchase / Revenue Commitments (See below) o Term/Credits /Waivers/ Signing bonus

• Wireless:

o Corporate/Employee Lines (CRU/IRU) o Rate & Data Plans, Early Termination Fees (“ETFs”), Waiver pools o Mobile phones / Tablets / Apps

Procurement Basics

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• General: o Plain English o Simple Questions vs. Form Contract Attachment o Response Requirements - Easy Comparison o Price Protection o Bid Comparison (See Role of Consultants below) o Non-exclusive, Primary & Secondary Carrier Selection o Confidentiality / Existing Agreements o Bidders conference / Best and final o Treatment of Response in Contract Negotiations

Procurement Basics

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• RFP Preparation; Develop demand sets o Voice /data traffic; Internal Study; "Spend analysis

• Knowledge of service provider objectives o and account team motivations

• Knowledge of market pricing o Not publicly available

• Competitive market checks o Periodic / Annual pricing reviews - Benchmarks

• Optimization/ Billing audits /TEM services o Security controls (see below)

Role of Consultants

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Business Terms and Conditions

• Service Level Agreements (Wireline v. Wireless) o Service Quality and Provisioning o Metrics are relevant and credits for individual problems work o Chronic issues typically not addressed

• Billing Accuracy

o A challenge for many carriers o Most common source of disputes—a question of how bad o Tiered dispute resolution v. Carrier having final word

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Business Terms and Conditions • Minimum Revenue Commitment

o Business Downturn Clause

• Competitive Pricing Review o Not just a commitment to meet

• Technology Migration • Transition Period/Transition Obligations

o Upon expiration or any earlier termination service continues to be provided at current rates for a period of ____ days/months

• Account Team Support o Responsibilities o Right to request replacement

• Compliance with Customer’s on-site safety and security rules

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• Data Security o Data breach notification laws

o Carrier’s network breach notification obligation

• Cybersecurity o Commerce Dept. / NIST published standards o Tort liability

• Mobile employee issues

o Corporate control of employee mobility ("BYOD“) o Employer liability (Principle-agent)

Privacy and Security

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• Privacy policies o Personally Identifiable Information (PII) o Federal Trade Commission / State A.G. Enforcement o Carrier policies typically incorporated by reference

• Customer Proprietary Network Information (CPNI)

o Statutory Restriction (47 USC 222) • On carrier Use of customer’s network information/personal information • Other than for network management / support • Without subscriber consent

o Used by affiliates to sell customer additional services o Sale to 3rd parties

Privacy and Security

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• Risk Allocation: o Liability - Indemnification

• Common Law/ FCC / FTC / State Enforcement • Foreign privacy laws (e.g. EU Privacy Directives)

o Security of customer’s transmitted data • Carrier v. Customer responsibility • Customer encryption obligations?

• Prompt Notification

o (esp. in Cloud environment)

• Regulatory Compliance:

o Attestation and Certifications: SAS 70 (now SSAE 16) o Industry specific standards: PCI, GLB, HIPPA

Privacy and Security

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Legal Terms and Conditions • Carrier v. Customer Agreements • Disclaimer of consequential, incidental damages • Damages limitations and limited termination rights

o Schedule/Service/Location-Specific v. Entire Agreement o Early termination liability (in lieu customer damages) o Intentional acts

• Indemnities o Mutual

• Intellectual property (challenge as to wireless handsets) • Personal injury and property damage

o Carriers will provide insurance certificates o Customer to Carrier (Varies Widely)

• 3rd party claims as to customer’s content • Violations of carrier’s AUP (Internet Access Service) • E 9 1 1 related claims associated with VoIP

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• Legal Terms and Conditions – and Related Considerations o Scope of Force Majeure Provision

• Business Continuity / Treatment of Cyberattacks o Dispute resolution options

• Litigation v. Arbitration; • Payment disputes /Disconnection rights • Wireless consumer arbitration

o Online documents • Drafting conflicts/Priority clauses

o Choice of law; venue o Application of non-US law

Legal Terms and Conditions

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THANK YOU!

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C. Douglas Jarrett Keller and Heckman LLP 1001 G Street NW Suite 500 West Washington, DC 20001 202-434-4180 Jarrett@khlaw.com

Walt Sapronov Sapronov & Associates, P.C. 400 Northridge Road Suite 515 Atlanta, GA 30350 770-399-9100 wsapronov@wstelecomlaw.com