The Waterfront Partnership

Common Telco Commercial Contracts

Negotiating telecom-specific commercial agreements can be a daunting task, especially when you need to bear in mind what the commercial, operational and regulatory implications are.

We have included some examples of the most common telecommunication services agreement below.

Interconnect Agreement

Interconnect agreements are also known as wholesale carrier services agreement or termination services agreements. To put it simply, it governs the buying and selling of capacities to route calls through either party's telecommunication system for onward transmissions. The parties may either connect their telecommunication switches via Voice over Internet Protocol (VOIP) in which case the connection occurs at the WorldHub or via Circuits (TDM) where the connection occurs at the designated party's Point of Interconnect (POI). As the nature of the service involves the termination of minutes from one carrier to another, it is not unusual for the parties not to give any warranties or service level of any nature.

The main source of dispute in interconnect agreements are usually billing disputes caused by a failure to comply with notification procedures, rate changes, time zones and payment terms.

Bearing that in mind, some of the key issues to look out for when reviewing an interconnect agreement are set out as follows:

1. Services

• Is the agreement a buy, sell or a reciprocal agreement?
• Is the interconnection via VoIP or TDM?
• Are you required to provide a forecast of traffic to be routed through the other party's system?
• Where is the Point of Interconnect?

2. Payment Terms

• Determine how the rates are billed - is it in terms of full minutes and in one second increments?
• Ensure that you are not required to provide a deposit or a security.
• If the agreement is for reciprocal services, check whether there is a provision for a "cap" or a "set off" in respect of the amount owed.

3. Payment Dispute

• As billing disputes are the most common source of disputes, ensure that you have in place a comprehensive and workable payment dispute process.
• Ensure that you also have a comprehensive rates notification procedure as this will affect the billing for routing the calls.

4. Regulatory requirements

• Ensure that you comply with any regulatory requirements by your telecommunications regulator (e.g. Ofcom) to operate as a carrier (most EU jurisdictions merely require a notification to the relevant local telecoms regulator).

Call Origination Agreement

Call origination agreements (also sometimes simply known as origination services agreements or telecommunication services agreement) govern the terms in respect of the collection of calls initiated by one party on an exchange and the subsequent passing over of those calls to another exchange for onward transmission or termination.

As this service is usually back to back with retail telecommunication services (e.g. calling cards), the party in receipt of the service is advised to press for service level agreements, helpdesk support and maintenance services. It is also useful to bear in mind that the call origination service provider may at times be dependent on the incumbent service provider to provide you with the service and as such would be reluctant to commit to a set of service level or warranties.

Mobile Virtual Network Operator (MVNO) Agreement

An MVNO agreement is a reseller agreement for mobile services to virtual network operators. These virtual network operators do not have their own infrastructure nor are they allocated radio spectrum frequency to provide the service.

A mobile virtual network operator (MNO) has every reason to resell its services to a mobile virtual network operator (MVNO):

• an MVNO with specialised market knowledge and skills may be better placed to target certain market segments which the MNO is either incapable of or does not normally target (e.g. Blyk which targets the youth market); or

• an MNO may not be prepared to take the risk of exploiting a new market segment and an MVNO may serve to reduce or limit such risks.

If you are reviewing an MVNO, ensure that you keep your eyes peeled for the following issues:

1. Minimum volume commitments

• Are there any minimum volume commitments?
• If there are, what are they and whether these are realistic and achievable?
• Also look out for any clawbacks, charges, costs or repayments to the MNOs which are tied in to the minimum volume commitments

2. Regulatory obligations

• Ensure that you comply with any regulatory obligations binding on you as an MVNO. This can be as simple as notifying the regulator of your provision of MVNO services and dealing with annual requests for data.

3. Guarantees

• Are you required to provide a parent company or bank guarantee to secure the deal?

4. Cancellation charges

• Bear in mind any charges which are imposed on you should your customers terminate the agreement prior to the completion of the minimum term.

5. Back to back terms 

• Ensure that your customer terms and conditions are back to back with the MNO's requirements such as minimum terms, discounts, warranties, additional charges and etc.

6. Termination

• Determine what happens to your clients upon termination of the MVNO. Will your customers be automatically migrated to the MNO's customer base as customers? Or will you retain your customers?

7. Limitation of Liability

• Most importantly, know what your limitation of liability is.