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POV

Network Billing: Caveat Emptor?

Gina Carrano-sq
by Gina Carrano

Isn’t it great when you renegotiate and amend your network and telecom agreements to reflect new discounts and lower rates? What’s not so great is when your carrier puts the onus on you the customer to validate that the new contract terms are being honored. Worse yet is when you discover that the amendments your carrier agreed to have not been implemented.

This attitude of “caveat emptor” is increasingly common among certain carriers. Moreover, customers savvy enough to actually conduct due diligence and document that discounts are not being applied are struggling to recoup their lost savings.

Traditionally, clients who demonstrated that a vendor was “contract non-compliant” would recover the total value of the discounted contract rates that had been missed. Today, carriers frequently use contractual clauses to categorize their non-compliance as “disputes,” which limits their refund liability to six to 12 months. For example, let’s say you sign a contract amendment for improved pricing effective January of 2013, and that the monthly savings from that amendment are $10,000 per month.  You conduct an audit in December of 2014 and find that the new contractual rates were never implemented. You file a dispute with the carrier in December, and they implement the rates from the effective agreement.  But because of the dispute clause buried in your contract, they only credit you back six months from December of 2014 – a total of $60,000. If the contract amendment had been implemented correctly from the start, you would have saved a total of $240,000 over the 24 months. But because you delayed in calling foul, you’ve lost $180,000 of that savings, despite the fact that the carrier was negligent.

Another traditional practice that has fallen by the wayside is the “first bill review,” which was typically conducted following any major changes to a customer’s agreement to ensure that the changes were implemented correctly.  If errors were found then the carrier would work to resolve them.  Except in rare cases this no longer occurs. So, again, the customer either has to trust that the carrier implemented the changes correctly, or to validate the billing themselves.  And the problem here is that most customers don’t have the staff or the expertise to detect the errors and omissions.

In this environment, it’s incumbent on you as a customer to get vendors to agree that billing errors caused by their lack of implementing a contract or contract amendment is excepted from the limitations of any dispute clause.  This would typically require an amendment to the Master Agreement; if that language doesn’t exist in the contract, it should be added.

In addition, vendors should be encouraged to proactively step up and agree to provide written documentation asserting that all amendments and addenda have been correctly implemented.

The question of how to “encourage” a vendor to be “proactive” can of course be tricky.  Much depends on the overall health of the relationship, the importance of the customer to the vendor (and the vendor’s markets) and executive-level relationships between the two firms. A first step should be to appeal to the account team to do the right thing and take ownership of implementing terms that have been agreed to.  An additional step can be to ask the vendor to recoup lost savings as a tribute to the “partnership” between the two firms.  Disputed savings from a past contract can also be used as negotiation leverage for a new agreement.

The optimal solution, however, is to get the vendor to honor the original contract terms back to the original effective date of the contract.

About the author

Gina Carrano has more than 25 years as a telecommunications industry professional during which time she has amassed a wealth of knowledge and experience in the areas of audit and dispute resolution, contract negotiation and administration, sales management and network design.