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Hank Levine
Henry D. ("Hank") Levine is a partner in the firm of Levine, Blaszak, Block & Boothby, LLP, where he specializes...
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Hank Levine | May 30, 2012 |

 
   

AT&T Bites the Hands that Feed It...Again

AT&T Bites the Hands that Feed It...Again AT&T is demanding ever-more unfriendly contract terms so that it can act with impunity even as customers are blocked from using the most cost-effective technologies.

AT&T is demanding ever-more unfriendly contract terms so that it can act with impunity even as customers are blocked from using the most cost-effective technologies.

Some of you may have read that on a recent call discussing its latest financials, AT&T's CFO proudly reported that business service revenues experienced their "best growth rate in 4 years, down only 0.3% compared to a decline of 4.4% in the year-ago quarter. And total business revenues were down less than 1%." Despite the continued shrinkage in revenues, "wireline business margins improve[d] year-over-year for the fifth consecutive quarter."

Breathtaking spin aside, part of the story behind these results is that business customers are fleeing AT&T when they can because of escalating prices (implemented through hidden/uncontrolled surcharges, and designed to preserve margin even as customers depart) and the ever-more unfriendly contract terms that AT&T is demanding so that it can act with impunity even as customers are blocked from using the most cost-effective technologies.

One example of this that I have written about elsewhere is AT&T's efforts to persuade the FCC to let it abandon the public switched network even as it inserts terms in its ILEC agreements that are expressly designed to prevent customers from migrating from the PSTN to SIP trunking except on prices and terms dictated by AT&T.

If that weren't enough, recently AT&T has twice demonstrated why it's high on the list of premier vendors with whom enterprise customers would rather not do business.

First, as of May 1, AT&T increased the Property Tax Allotment surcharge it adds to most bills from 3.17% to 4.05%. As TechCaliber Consulting's (TC2's) David Rohde recently pointed out, the PTA has doubled in the last 3-1/2 years. That has nothing to do with AT&T's property taxes (which certainly haven't doubled) and everything to do with the desire to get more money from customers--including those who negotiated for fixed rates.

Second, on April 17, AT&T filed with the FCC an application to discontinue all Frame Relay and ATM services. The company would not accept new customers for the services after May 31, 2012; would allow existing customers to take these services only on a month-to-month basis (presumably at the much higher rates that characterize month-to-month services) after their current contracts expire; and would discontinue them entirely on April 30, 2016.

In fairness to AT&T, FR and ATM are ripe for retirement, and four years is adequate notice. But the month-to-month pricing is a spiteful kick in the pants to loyal, long-term customers. Equally significant, AT&T's announcement stands in stark contrast to what it demands of customers executing multi-year agreements. They have always had to commit to spend millions of dollars a year in return for discounts, but in recent years they have also been forced to agree to spend those millions on specific services/circuits that the customer can discontinue only upon the payment of huge financial penalties. You can pull a circuit any time, but if you do you'll owe AT&T more than you would have owed had you kept it in place for the term of the agreement. AT&T's willingness to demand terms that it won't accept when the shoe is on the other foot speaks volumes about its arrogance.

So what's a customer to do? In the case of the PTA, you include the cost when you evaluate service bids, and if it makes AT&T more expensive you negotiate reductions--in the base prices if not the PTA itself. In the case of FR and ATM you leave before you have to or the pricing escalates. Think of it as a chance to rebid without an incumbent advantage, and take your business elsewhere if AT&T doesn't give you the best offer on the replacement service--in all likelihood MPLS.



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