The Long Distance Carriers' Service Guides: The Rules Have Changed
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By Bonnie Gerhardt Lo, Janine Goodman, and Jim Blaszak

On August 1, 2001, interstate long distance carriers cancelled their tariffs for interstate and international service, and replaced them with service guides and publications posted on their web sites. The carriers' service guides and publications (which we will refer to collectively as "service guides") will be at the core of current and future contractual relationships between business users and carriers.

This article explores the service guides of AT&T, Sprint and WorldCom. It identifies some provisions that are substantively different than the corresponding tariff sections; highlights other provisions that are new, i.e., were not in the original tariffs at all or only applied to particular services; and provides examples of tariff provisions that were not favorable to customers and that continue to apply to customers through the service guides. In some cases, the changes almost certainly could materially and adversely affect customers across-the-board. Other changes may not be universally detrimental, but should be considered carefully by customers with their particular circumstances in mind. In short, this article is about customer pitfalls in the carriers' new service guides and, in some cases, suggests steps customers should consider to avoid those pitfalls.

Detariffing
The FCC ordered all carriers, except incumbent local exchange carriers, to cancel their tariffs for interstate long distance telecommunications service offerings (voice and data) effective August 1, 2001. The order came after a struggle of over fifteen years. Long distance carriers fought detariffing. They preferred doing business under tariffs because, among things, tariffs permitted them to unilaterally change the terms, conditions and rates applicable to telecommunications services deals. Mandatory detariffing of these services prevents the carriers from changing deals through tariff revisions. If customers allow it, however, carriers will use service guides, to retain the same flexibility to change the terms of deals.

AT&T's Service Guide
Navigating AT&T's Service Guide is not intuitive. The first page of the Service Guide can be found at www.serviceguide.att.com. Click "Business," which will put you on a page that headlines, "Welcome to the AT&T Business Service Guide." Then click "AT&T Business Offers." This site provides links to service descriptions, rates, terms and conditions applicable to AT&T's business services.

To access the Service Guide applicable to Virtual Telecommunications Network Services (VTNS) customers (i.e., AT&T's larger customers) from this web page, click "Virtual Telecommunications Network Service," then go from there. A word of caution about the "Terms and Conditions" link: the first level of access through the "Terms and Conditions" link will be to those General Terms and Conditions of the Business Service Guide, not all of which may be applicable. The next level of access, found by clicking "Offer Terms and Conditions," will contain specific terms and conditions applicable only to VTNS.

Now let's focus on some specific provisions in AT&T's Service Guide:
Payment Arrangements. Customers must pay their bills within 30 days of the bill date. Very few customers are able to routinely pay carrier invoices within this time period. As written, the Service Guide does not permit customers to withhold amounts in good faith dispute. Moreover, be prepared to pay late payment charges if you agree, wittingly or unwittingly, to this payment schedule. Another payment provision of consequence to some customers, is one that mandates that "All rates and charges will be quoted in United States dollars, billed in United States dollars and are to be paid in United States dollars." If customers want billing and payment in a currency other than U.S. dollars, e.g., for foreign affiliates, there should be contractual agreement on this issue.

Unauthorized Use. The Service Guide makes customers responsible for all manner of behavior by "Users." Customers are accustomed to being contractually responsible for those whom they allow to share their deals with long distance carriers, but AT&T seems to have gone farther in the Service Guide. The Service Guide glossary defines "User" as "Any one who uses or accesses any service purchased by the Customer." (This definition is extremely broad. It could include, for example, anyone who uses a toll free number for which the customer is the subscriber, and even those who may gain unauthorized access to the customer's service.) The term User pops up in numerous places in the Service Guide. For example, AT&T may "immediately" suspend or terminate a customer's service if AT&T "suspects" that "Users" are using the service fraudulently or are abusing or misusing the service. If customers are not willing to accept responsibility for the actions of broadly defined "Users", they must confront this problem in their contracts.

Sharing Arrangements. The Service Guide also impacts those customers that want to share service with entities that are not part of the customers' corporate families. The Service Guide states that "Any locations that are not the same legal entity as Customer, or that are not wholly owned or controlled by Customer, must comply with all terms and conditions in this Service Guide and the AT&T standard contract ...." This provision requires customers to assure that "Users" comply with an AT&T standard contract that may be different than customers' service agreements with AT&T and that they may have never seen.

Account Support. Carrier account support, including that of AT&T, has suffered in recent years. The Service Guide gives customers no reason to expect improvement. It states that installation is subject to the availability of personnel, network capacity, site readiness, etc. The same provision also states that when the network demarcation point is extended within a building through the use of wire available through the local exchange carrier (LEC), the work will be done at the rates in the LECs' tariffs. The Service Guide fails to address what will happen if the wire is not available through the LEC. Will the extension work be undertaken at all? And if so, at what rate? Again, if this subject matters, use your contract to document AT&T's responsibilities.

VTNS. Some Service Guide provisions will interest VTNS customers in particular because such provisions may change "the deal." The Service Guide specifies a "Billing Support Plan" for VTNS," a VTNS Maintenance Support," and a "VTNS Provisioning Support," but the description of each is "sketchy" at best. If VTNS customers want a different level of support, they should negotiate contract provisions for this support and assure that the contract trumps the Service Guide.

Partial Termination. The Service Guide allows a customer to partially terminate without liability its use of VTNS if the affected service elements chronically fail to meet performance specifications, but eliminated the broader right that customers had under former section 7.2.17.C of Tariff 12 to "discontinue affected portions of VTNS without liability if AT&T does not comply with one or more of the material terms and conditions under which VTNS is furnished." This is a material change.

Finally, VTNS customers should be clear about which provisions of the general business services Service Guide apply to VTNS. We suggest that no provision of the Service Guide should apply to VTNS if it would change the respective rights and obligations of the customer or AT&T.

Sprint's Schedules
Sprint refers to its published service guides as "Schedules." Customers can find the Schedules at www.sprintbiz.com. Click on Product Index in the left-hand column, and then click on Schedules, again in the left-hand column. With few exceptions, Sprint appears to have published on-line the terms and conditions formerlly included in its tariffs.

Sprint's Schedule No. 12 outlines general terms and conditions applicable to Custom Network Service Arrangements ("CNSAs") (i.e., Sprint's agreements with medium to large business customers), and on its face, this Schedule seems easy to navigate. But beware: the terms of Sprint's service-specific Schedules (Nos. 1, 2, 5, 6, 7, 8, 10 and 11) also apply to the provision of switched and dedicated network services. In short, there's more than meets the eye, and Customers entering into a Sprint contract or renegotiating a Sprint deal will want to review Sprint's Schedules carefully.

Here are a few examples of potential problems:
Exclusivity Requirements. Embedded in Sprint's Schedules are certain terms and conditions that can limit a customer's flexibility enormously. For example, if the contract states that Sprint is the customer's Exclusive Telecommunications Services Provider, it means, according to Schedule 12, that the customer must award Sprint all (or the share agreed by the parties) of its voice and data interexchange telecommunications services during each billing month, with no exceptions for redundancy or poor service quality. That issue is fairly easy to spot. More innocuous terms, however, can be equally if not more disastrous for a customer: If a contract designates Sprint as the customer's Preferred Telecommunications Services Provider, it means that the customer must award Sprint 98% of its voice and data interexchange telecommunications services (unless otherwise agreed) during each billing month without exception. Most importantly, Schedule 12 states that the customer loses all discounts if it fails to comply with any of these exclusivity requirements - a penalty which far exceeds the crime.

Payment Arrangements. Like the payment terms in AT&T's Service Guide, the payment provisions in Sprint's Schedule 12 are problematic. Interest of 1_% per month begins to accrue on undisputed charges that are unpaid more than 30 days after the invoice date. In addition, failure to pay on time results in loss of discounts. Sprint can modify these payment terms unilaterally based on the customer's credit rating or credit history.

Termination Rights. The termination provisions in Schedule 12 also are troubling. First, the early termination penalty is 100% of the remaining commitment, even though termination of the contract reduces Sprint's costs far below that amount. In addition, when a customer terminates a contract early, its annual commitment is transformed into a monthly commitment. This means that a customer who terminates in month 9 of the last year will continue to have to pay an early termination penalty (for the unmet monthly commitments) even if it satisfied its commitment for that year. The same termination charge applies if the customer "ceases to use a material amount of Network Services at any time during the term." This penalty makes it virtually impossible for the customer to begin transitioning to another carrier prior to the expiration of the term. In addition to the termination penalty, the customer must repay all concessions and credits issues and charges waived.

Hidden Costs. Business customers will also want to address objectionable provisions, including hidden costs, in Sprint's service-specific Schedules. As noted above, these Schedules apply to services provided under a Schedule 12 CNSA. For instance, Sprint Schedule No. 11 currently includes a Carrier Property Tax of 1.04% (applicable to all "federally scheduled charges") and a Federal Regulatory Recovery Fee of .22% (applicable to all interstate and international charges). The Federal Regulatory Recovery Fee is an example of a provision that did not appear in Sprint's former Tariff No. 12.

WorldCom's Service Guide
WorldCom probably presents the most user-friendly of the service guides. From the first page of the WorldCom Service Guide, which can be found at www.worldcom.com/publications/service_guide/, you can click on information on how the Service Guide is organized; review summaries of special customer arrangements (SCAs) entered into between WorldCom and its customers; or begin reviewing the service descriptions, terms and conditions associated with WorldCom's available service offerings. There are hyperlinks throughout the Service Guide that access pricing, service levels, definitions, terms and conditions as applicable to a particular service. At this time, the Service Guide addresses mostly the standard telecommunications products (e.g., voice, private line, frame, audioconferencing services) and indicates that terms and conditions regarding other types of product offerings will soon be available.

User-friendly, however, should not be confused with customer-friendly. The WorldCom Service Guide raises the same types of issues discussed above with respect to the AT&T Service Guide and Sprint Schedules. Here are just a few highlights:

Unauthorized Use. Like AT&T's definition of "User," WorldCom's definition of "Authorized User" is overbroad. It includes anybody who is "placed in a position by Customer, either through acts or omissions, to send or receive communications." This definition may include individuals who are not, in fact, authorized by the customer at all. It could include hackers, for example. Customers should care because the customer is liable for all use of "Authorized Users." It does not matter that the customer used all security measures known to man (or woman) or that WorldCom was aware that something was a bit "off" and didn't check into it. The customer pays. Period.

Termination Rights. WorldCom may terminate service on 7 days' notice if a customer fails to timely pay an invoice or commits some other breach of its agreement. The breach need not be particularly noteworthy. Also, if a customer thinks that payment of a termination charge for early termination of the contract means you can walk away free and clear, think again. A customer's termination for convenience, even with payment of a termination charge, is considered a material breach by the customer, and WorldCom may sue for additional damages.

Limitation of Liability. WorldCom's liability for claims brought by the customer is limited to $1,000, except where the claim arises from WorldCom's intentional misconduct. It doesn't matter how many dollars the contract is worth or how much real damage was done. Plus, WorldCom is not liable for the actions of anyone else who is involved in providing services to the customer. This broad exclusion appears to include WorldCom's affiliates and subcontractors. The customer's liability to WorldCom? Unlimited.

Hidden Costs. As noted with respect to the Sprint Schedules, WorldCom tacks on numerous other costs to its services. These include the Carrier Access Charge of $2.61 per multi-line business line presubscribed to WorldCom which accesses service via switched access, a universal service fund charge based on 7.5% of gross revenues, and a new 0.24% Federal Annual Regulatory Fee to recover amounts paid "to the federal government for regulatory costs and for telecommunications services for the hearing-impaired."

Conclusion
The foregoing are only a few examples of the many provisions in the carriers' service guides that contain terms and conditions adverse to customers. Customers should understand that these and other not so favorable terms and conditions are part of their deal with the carrier, even if not specifically referenced in the signed contract. Bottom line: If customers want to ensure that the deal they thought they cut with their carrier is the same deal they will live with month to month and year to year, they must carefully review the applicable service guide, understand how the service guide works vis-à-vis their contracts and be assertive in fixing the inconsistencies, ambiguities and other miscellaneous problems.

In this case, as in many, knowledge is power, and ignorance is not so very bliss.

901.01; Service Guides BCR Article

Bonnie Gerhard Lo, Janine Goodman and Jim Blaszak are attorneys at the law firm of Levine, Blaszak, Block & Boothby, LLP, which specializes in the representation of large telecom users on regulatory matters and in the negotiation of custom network service and technology agreements. The firm's clients include one half of the Fortune 100 and 10 of the Fortune 20. We are pleased to provide the information in this article as a service to the general public. While we hope that you find the article informative, please note that it is provided for informational purposes only, and is intended neither to provide nor to substitute for legal advice. Because each legal situation requires individualized attention, it is important that you not act (or refrain from acting) based upon this information without first obtaining professional legal counsel. LBBB disclaims all liability for actions taken or not taken based on any or all of the contents of this article