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DRAFTING A CUSTOM TARIFF OR AGREEMENT WITH A CARRIER

A tariff is the contract between the telephone company (i.e., the carrier) and the customer companies. Although it is debatable whether there will even be tariffs in the future (as of the time of this writing, the FCC is trying to get carriers to retract tariffs), they are still important. Companies need to have some kind of contractual agreement with their carriers, whether in the form of a contract, a tariff or both.

It is important to remember that a tariff commands the weight of the law and preempts contractual law. That means the carrier can change a company’s contract if a ruling at the state or federal level changes the rules for the tariff. An AT&T Tariff 12, for example, could change in 24 hours if the FCC rules against the terms in it as part of a broader issue, which is all the more reason to stay in the loop with regard to matters of policy.

Tariffs are similar to very detailed contracts. However, a tariff is actually a law. The carrier cannot lawfully deviate from its tariff, and the customer is bound to pay the tariff charge.

Although this seems reasonable on the surface, there can be some unexpected side effects. For example, the customer and the carrier agree on a specific price for telephone service to the customer’s plants and the carrier promises to file that tariff with the appropriate regulatory bodies. The customer’s bills change to reflect the agreement, and the customer operates for several years believing that it is paying the right amount. Suddenly, someone discovers that the revised tariff was never filed. The customer is now liable for all of the payments that should have been made under whatever tariff was the true lawful tariff. This is binding even if the provider company has gone out of business.

Customers should be especially careful in their understanding of the tariff because it is the rule book through which services will be purveyed.

INFLUENCING A REGULATORY BODY

Regulatory bodies include the FCC, state public utility commissions, Congress, and courts. The most active are the state commissions and FCC. A wide variety of influences will apply to each commission, and they will each respond to those influences in a general manner. However, there are a number of factors that a commissioner may be taking into account that go beyond the narrow confines of any particular case.

The commissioner is influenced by many different parties that may include the general public, the governor, the legislature, the utilities, the interveners, the staff, the other commissioners, the press, or the courts. Commissioners are also limited — no commissioner can be an expert in everything their commission does all of the time. As one commissioner put it, it is like being the coach of the football team, the basketball team, the track team, the baseball team, the swimming team, the choir, and the debate team all at once. It can be done, but only with the help of many other people, and those people would have to be experts in their areas. Thus, it is helpful to know who helps the commissioners and what their interests and positions are.

In most commissions, the commissioners are assisted by aides who work directly for them. The aides help summarize the positions of the parties, privately assist the commissioners in understanding the issues, and may meet with people when the commissioner is unable to.

The amount of influence of the staff and the aides varies from state to state. In some states, the staff is extremely influential on the decisions of the commission; in others, the staff may be out of favor and other parties may have more influence.

Negotiating a Price with the Commissioner

A business trying to negotiate a price with the commissioner should show a return to the carrier over the price of the contract and a contribution to universal service. Commissioners will not approve a solution based only on reduced cost for fear that the business will pass the costs along to its customers. An organization should concentrate on networking solutions that not only grow the business, but also create growth, jobs, and national competitiveness. These are ideals that commissioners can endorse and approve. An organization should make its money through building business, not cost cutting.

Negotiating with the Carrier

Once a company has made initial contact with a carrier through a request for information (RFI) or request for proposal (RFP), the carrier goes back to headquarters and establishes what it can provide for the company and at what price. The business should do a little “homework” to determine what network elements are available and what prices are generally being imposed for them.

The interests of the business and the carrier are not necessarily the same; however, this is not necessarily a bad thing. The carriers want to maximize their long-term profits and market share and the company seeks advanced services at rates as low as possible. If the carrier builds a custom network for a company, it may resell the same network to other companies, which creates new revenue opportunities. The company for whom the network was originally built has access to new, enabling technology first.

The company should make sure that at each stage of their cost studies, the carriers employ only long-run incremental cost principles, not just numbers from an arbitrary tariff. The company should start with the carrier’s cost and negotiate from there. It is exceedingly difficult to get the carriers to release these costs, however. A basic nondisclosure agreement often sets the carrier’s mind at ease.

The company should require the carrier to desegregate (i.e., unbundle) their services into the smallest possible network components. The company may not need all of the services that the carrier wants to bundle together. The carrier’s progress should be monitored, and even after the services are approved by the commission, the company should ensure that someone is constantly checking the carrier’s performance under the contract. The agreement between the company and the LEC may be in the form of a contract, a tariff or both.

Converting “Feature Packages” Business Requirements to a Custom Tariff

All of the conditions are right for the new network when the company finds a willing trading partner, an accommodating utility commission, and an environment ripe for change. A detailed business analysis should be performed at this stage. All of the business processes should be condensed into a digestible white paper for executive management that can be used to justify the money required for the new network and measures the results of the innovations using traditional return-on-investment methodology.

For example, the team creating the white paper comes up with several business processes (e.g., imaging, multimedia, network management, and native LAN connectivity) that would make the operations departments a runaway success. Each of these processes should be described in the paper and numbered as Feature Package 1, Feature Package 2, Feature Package 3, and so on. This exercise will:

  Articulate the business need to management.
  Become the basis for the request for information that will be sent to the carriers.
  Articulate the business need to the carrier.
  Allow the carrier to craft a custom response based on business, not technology, objectives.
  Show a utility commissioner why the business needs a certain technology and correlate it to something that equates to growth, jobs, and cost rather than just technology.

This features package can be crafted into the company’s ideal network. It is possible to create a network that does not just spur revenue, but creates competition and new technology that everyone benefits from.


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