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How Carriers Try to Increase Your Spend in Tough Times: Page 4 of 4

Get tough on rate reviews, especially for services that can’t be moved and customers with little cushion

When things were flush there were 4 or 5 first tier carriers, and it wasn't uncommon to see Moore’s Law and robust competition drive annual price reductions of 10-15% almost across the board. Nowadays, with AT&T and Verizon trying to act like a duopoly and Sprint weakened, 5-8% is more common. Drill down a level and commodity voice rates can be even stickier, although double digit reductions are still the norm for newer, more rapidly growing services like MPLS.

And the carriers like it that way, so they are actively promoting the notion that prices are "firming," and trying to make that so. The principal victims of this are the companies who have already committed 90% of their traffic for the next two years (or accepted circuit terms that accomplished the same thing even as some exec was blovating that he’d gotten a "no commitment deal"). If you have a 50% commitment and few circuit terms, you can demand market rates as the price of not moving your cushion to a carrier that will give you those rates now.

The carriers are also stingy on rate reductions when the subject is traffic/networks that can't be moved easily--for real (complex data nets) or for cultural reasons ("800" traffic to call centers). There are ways to beat this, but they require skill and perseverance. You can have two MPLS providers, for example, and award new sites to the one that offers better pricing and terms, but you or a third party acting for you are going to have to do the Network-to-Network Interface.

Hollow out the account team or SLAs

When times get tough, the vendor's account team that was dedicated in the "good times" is stripped down, and customers are forced to work the phones for support issues, orders, trouble tickets, billing issues. Big savings for the vendors: much more hassle for the customer (every problem has to be re-explained from the beginning on every call). Even if you can keep a real person with an actual name as a point of contact at the vendor, that person may be assigned multiple clients, so response times suffer, it takes forever to resolve billing issues, etc.

Hollowing out the SLAs is like hollowing out the account team. If the carrier can put in enough exclusions, limitations, etc., it can trim service to the bone (wringing out cost) without incurring the risk of having to pay credits.

Slow Things Down

There are many examples of this, but two are worth highlighting. First, when it comes to billing issues, response times are l e n g t h e n i n g. That makes it increasingly difficult to track billing issues, since you have an ever-growing list with no resolution. If you insist on opening a ticket, that adds another two or three weeks.

Second, incumbent carriers will delay final contract negotiations on a new deal (whether a renewal or competitively procured). This delays rate reductions and, if the customer is anxious to sign to book savings, can be used to extract additional concessions. Anything the customer asks for, however reasonable, has to be "escalated," and escalation takes weeks. As long as the customer is drawn in and has nowhere else to go without starting over, this is costless to the carrier. And a few months of delay per contract multiplied by hundred of deals can represent hundreds of millions of additional revenue per year.

Conclusion

Nothing strengthens a defense like a look at the offense’s playbook. Understanding what the carriers are trying to get (more revenue) and how they are trying to get it does not guarantee that you will foil their strategies, but it’s a good start.