prevent and resolve telecom disputes

© 2012 Levine, Blaszak, Block & Boothby, LLP. All rights reserved.

[email protected]

Hank Levine [email protected]

Justin Castillo

Prevent [and Resolve]

Telecom Disputes

March 7, 2012

Organized by

Who We Are and What We Do

Levine, Blaszak, Block & Boothby, LLP (LB3) is

dedicated to representing enterprise customers in

communications and information technology

matters, including disputes with providers.

US News and World Report ranks LB3 as one of

only ten Tier 1 telecom law firms in the nation.

The other nine all work with/for major carriers.

Detailed descriptions of the firm, its practice and

its lawyers can be found at www.lb3law.com.

2 © 2012 Levine, Blaszak, Block & Boothby, LLP. All Rights Reserved.

http://www.lb3law.com/

LB3’s Telecom Disputes Practice

Since 1993 LB3 has represented enterprises and

employees/agents in scores of disputes with carriers. We

also help small carriers at odds with the large telcos.

Most of the time, we are able to negotiate workouts or

settlements without the need for formal proceedings.

But we have been involved in many mediations, arbitrations,

regulatory complaint proceedings, and state and federal

lawsuits.

The most prominent public example of our dispute work is the

FET litigation, which led to $10 billion in tax refunds to

individuals and businesses.


Telecom Disputes are Different

Tariffs are (mostly) history, but this remains a

regulated industry; that has a huge impact on

disputes and their resolution

Telecom is mission critical – service problems can

halt key operations

Switching vendors is difficult and time-consuming

The regulatory overlay is complicated by divided

jurisdiction and regimes – state/federal,

regulated/unregulated, domestic/international


So What Are We Fighting About?

Most disputes in 2012 grow out of • Shortfall and Early Termination Charges

• Billing issues – wrong rates, bills for services never

ordered/installed, charges billed years after they were

incurred, charges for discontinued services, large rate

increases when a contract expires, bills for fraudulent calls

• Service/technical problems – failure to install or migrate

services in a timely manner, SLA issues, services that “meet

spec” but can’t be used for their intended purpose

Other areas of contention involve poor account support, contract “gotchas”, and merging acquired contracts


Causes of Disputes

Poorly drafted / negotiated agreements

The customer’s failure to do due diligence (e.g., to know its traffic and network requirements)

The customer’s failure to plan for seismic business changes and/or transitions

Incorporation of one-sided documents that the carriers can (and do) change without the customer’s consent


“Gotcha” Clauses

Lengthy minimum terms with hefty early termination charges

attached to each individual circuit

Multiple, overlapping, ratcheting commitments

One-sided dispute resolution clauses – the carrier gets to be

judge and jury

Long time to bill; short time to dispute a bill

Attachments trump negotiated contracts; carrier order forms

trump attachments

Automatic renewal clauses

Complex procedures for terminating/disconnecting circuits

Weird, low limits on a carrier’s liability


Carrier Leverage

Denial, suspension, or restriction of service

The filed tariff doctrine was a trump card, and still is for some intrastate services

Statute of Limitations – 2 years under the Communications Act, longer in most states. But the parties may shorten it by agreement – and the carriers make sure you agree

A bad contract – e.g., semi-hidden commitments

Reciprocal business relationships

Difficulty in switching to another carrier


Customer Leverage

(Most) carriers hate to alienate customers

Carrier practices must be “just and reasonable” under the Communications Act. But this is not a silver bullet

New business or future business

A good contract – especially one with a big cushion

Willingness to move some/all traffic

Pressure from regulators (if appropriate)


Avoiding Disputes

Say it in writing, and keep notes

Save reports and emails

Pay undisputed amounts

Escalate strategically

Prepare for the worst (minimize the impact of suspension with a second-carrier relationship. If you are leaving, leave)

Be willing to give and take – if you’re facing substantial liability to the carrier, something is much better than nothing


Contract Clauses that Can Help

Prevent or Ameliorate Disputes

Dispute procedures (including escalation)

Performance pending outcome of disputes

Reasonable billing and payment provisions

Governance/stewardship

Transition/migration

Limitations on AUP and related provisions

governing suspension/termination of

services.


Dealing with a Dispute

Early stages – Write it down. Document everything

The role and limitations of your account team

Escalation – start on the business side

When to bring in counsel – the Goldilocks rule

• If the customer brings in counsel, the carrier has to

reciprocate (carrier account teams often work hard to avoid

their counsel)

• Bringing in the lawyers too early can harden positions,

hindering settlement

But if the account team is useless or hostile or crazy,

getting carrier counsel involved can help


Resolving Disputes – Work Outs

Shortfall and other penalties usually go away

Carrier gets new revenue via a term extension and new business

Contributing services are broadened.

Customer leverage tends to be low, so rates and terms are usually not “at market.” But you’d be surprised …

Some carriers are more amenable to “work-outs” than others


When Negotiations Fail

Mediation

Arbitration – compelled by many carrier contracts on unfavorable terms, but often makes sense

The regulators: FCC/State PUCs

• Informal complaints

• Formal complaints

• Regulators as mediators

Litigation

• State or Federal Court

• Referrals to the FCC


Carrier Hot Buttons

AT&T

• Likes circuit-specific terms and tying up customers 12 ways

Verizon

• Wants to own reports and control CPNI

• Cooperation with third-party vendors

Second-tier carriers

• Used to dealing with smaller customers and don’t have

sophisticated large deal capability, so

• Lots more “sole discretion” language

• Lots of hair-trigger termination/suspension rights

• Low limitations of liability/carve-outs


Conclusion

It’s not all in your head – telecom disputes

really are weird and different

It’s a hard but not impossible world

Questions?


Telecom Negotiation Conference

Join CCMI and the LB3/TC2 team for 2 full days of

telecom contract negotiation training

20th Annual Telecom Negotiation Conference

May 3 – 4 | Washington, D.C.

See the complete agenda at

http://www.TelecomNegotiationConf.com


http://www.telecomnegotiationconf.com/

prevent and resolve telecom disputes

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