Justin Castillo
Justin G. Castillo is a partner in the law firm of Levine, Blaszak, Block & Boothby, LLP ("LB3"), where he...
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Justin Castillo | December 06, 2012 |


Verizon's New Online Master Terms Highlight Risks of Online Service Agreements

Verizon's New Online Master Terms Highlight Risks of Online Service Agreements Enterprise customers beware: What's in your contract may not determine what happens with your actual service.

Enterprise customers beware: What's in your contract may not determine what happens with your actual service.

Service guides and other Internet-based agreements that "supplement" a customer's contract are among the most challenging aspects of network services agreements. They allow carriers to change existing provisions unilaterally and impose potentially costly (and risky) terms and conditions with little or no notice, thereby giving carriers enormous power to change a deal. And service guides are moving targets: A customer can override problematic provisions a, b, and c, but what happens if the carrier adds d, e, and f to the guide after signing the master services agreement (MSA)?

Staying focused on the risks of these online terms is hard for customers. Multiple service guides can apply to a single telecom agreement, and most of them stay the same from month to month. But significant changes do happen, and they create serious new risks for enterprises, such as when Verizon sought in May of 2012 to expand its ability to exploit its customers' confidential information.

For customers that remain unconvinced, Verizon's recent revisions to its online master terms illustrate almost every problem inherent in online terms. This article describes some of these changes, explains why they create risk, and suggests ways customers can mitigate the damage.

Why We Hate Service Guides
Service guides are not inherently evil. Customers and carriers alike need them for important aspects of a contract. Without service guides, for example, every facet of a deal--from the service descriptions to the base pricing--would have to be spelled out, leading to 1000-page network services agreements.

The problems arise when carriers give in to temptation and inject terms and conditions that really belong in the master agreement. At that point the service guides become tools for increasing carrier leverage. We have struggled over the years at our semi-annual telecom negotiation conference to devise the right metaphor to highlight the perils. We have called them "sleeper cells"--hidden provisions that lie dormant until activated by a particular situation. Alternatively, we have cast them as Trojan Horses, spiriting in dangerous terms via innocuous-looking URLs. However you want to think of them, service guides can be trouble.

Some carriers are especially eager to employ Internet-based service guides as the primary source of terms and conditions. They do this in response to (misguided) customer requests for brief and "simplified" contracts. Using service guides lets carriers replace dozens of pages of terms and conditions with a "simple" 5-page contract. As long as the customer remains ignorant of the 40+ pages of terms lurking behind the URL casually referenced in the agreement, illusions about the simplicity and brevity of the contract can remain intact.

Service guides are increasingly designed to discourage all but the most dogged customer from actually reading them. Specific provisions are hard to find. URLs are sometimes broken or lead to sites of Byzantine complexity, as in the case of AT&T, which maintains TWO service guide sites. Getting actionable notice of changes is difficult (most customers get little or no notice when service guide terms change beyond an email or a billing insert), and carriers normally don't show changes in redline, as they did in the "good old days" of tariffs.

The result is that dealing with service guide provisions becomes a game of contract whack-a-mole--customers have to spend scarce time and resources assuring themselves that the deal they signed remains the actual deal.

A final problem is that many customers do not take service guides seriously. For some, there is the "out of sight, out of mind" syndrome: Enterprises think that their contract consists of the document that they signed, and somehow cannot believe that terms incorporated by reference carry the same weight. Other customers believe that "a deal is a deal," discounting the possibility that their deal really could change without their knowledge and consent.

Verizon's New Online Master Terms
All of which brings us to Verizon's new terms.

First, some background. In late 2010, Verizon substantially reworked its master terms and conditions with the goal of simplifying and rationalizing its default online terms. As part of this process, Verizon took 46 distinct provisions and revised and reorganized them, effective November 30, 2010, into 26 sections organized into four main categories: Scope, Rates, Services and Legal Terms

Now, two years later, Verizon has again made substantial changes to its online terms. While it would be an exaggeration to say that Verizon threw everything out and started over, the changes do illustrate the inherent threat that online service guides pose to customers.

Service Guides are Difficult to Read and Track
One of the most frustrating aspects of online terms for customers is that they are difficult to read and track. In its latest re-write, Verizon actually made its online terms harder to use by jettisoning the table of contents.

Second, in a contractual game of "52 pickup," Verizon shuffled provisions around. Service Suspension, for example, moved from 4.4 in the old terms to 12 in the revised terms.

Third, Verizon boosted the number of discrete sections from 26 in the previous version to 47 in the new one. Finally, while Verizon provided a summary of the changes, it did not provide an actual redline (perhaps because the end product would be so daunting to look at).

Next page: How providers take advantage of service guides


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