Procurement 5 June 2017

What every small business owner needs to know about telecoms contracts

worst broadband providers
Ofcom has ruled you can opt out of telecoms contracts if prices rise

Telecoms are essential for every business, but it’s easy to get bamboozled by the jargon. Here, head of telecoms consultancy Equinox, Dave Millett, gives some key points to consider when negotiating business telecoms contracts.

Last year, Ofcom research showed that 34 per cent of small UK business owners believed they don’t have the confidence to identify telecoms products and services that could benefit their organisation. Contracts often include complicated charging structures, meaning you may sign something you later come to regret.

Whether you are in-contact already or just about to negotiate a new one, here are some key considerations.

Proof of contract dates

Just because a supplier’s system says your contract ends on a certain date does not necessarily mean it does. Data entry errors are possible, or there could be deliberate attempts to mislead consumers.

The onus is always on the supplier to prove the contract end dates. Reasonable proof is a copy of the original signed document, e-contract, or even a recorded phone call.

Contract renewal or cancellation

The regulator Ofcom has rules protecting consumers and businesses with ten employees or fewer.  Ofcom protection bans automatic rollover of contracts, and gives the customer the ability to cancel contracts because of price rises or failure to deliver promised broadband speeds.

Unfortunately, some suppliers try to work around these protections.  Automatic rollovers are an example.  Contracts may say “tick this box to keep tariffs after the contract end date”. They don’t make it clear that by ticking, you are agreeing to an automatic renewal. Ticking the box can mean waiving away your rights!

Ofcom has ruled that you can opt out of a contract if the prices rise – as long as you give notice within 30 days of notification of the rise.

However, suppliers may publish revised prices on their websites only or may tuck them away in the small print on invoices. If you miss the notification, you miss the opportunity to cancel your contract. Beware.

Notice period and penalties

Notice periods can vary greatly, they can be anything from thirty days to six months, with three years being the longest we’ve seen.

Check the penalties for early contract cancellation.  If the company gave free installation in return for a three-year contract, and you cancel much sooner, it is reasonable for you to be asked to pay for the installation.

However, we’ve seen an example where initially a penalty was stated as £42,000. It took two years of arguing before the supplier agreed to £5,000. Small businesses are protected by Ofcom rules on the calculation of penalties, so make sure you know your rights and avoid overpaying.

Other tricks to look out for

  • False inducements, such as: “We promise your business will save money with us”, however the savings aren’t delivered
  • If you change or add a service your contract is restarted automatically
  • Adding new services that have individual contracts so that end dates are different. As you’ll never be out of contract on all your services at the same time cancellation is almost impossible
  • Give a different timescale to each element within the contract. For example, phone calls for twenty-four months and line rental for five years

How can you reduce risk and protect your business?

Make sure your supplier is signed up to the telecoms ombudsman. When there are disputes, the Ombudsman offers free binding arbitration to consumers and small businesses. You must give the communications company a reasonable opportunity to resolve your complaint. If you have serious concerns talk to a lawyer.

Send an email which spells out your understanding of the contract. Ask the supplier to confirm in writing that in a conflict between their terms and conditions and the email, the email takes precedence, and only on that basis are you accepting contract. Within this email you could include:-

  • Contract duration and notice period
  • That prices are fixed for the duration – Any change gives you freedom to cancel without penalty whenever it is spotted
  • Only the charges specified in the contract may be levied – This stops hidden costs and any changes in terms and conditions
  • Repeat any claims made by the supplier, inclusing claims about how much money you will save, and state that they are a condition of the contract and if they fail to meet these then the contract is null and void
  • The contract will not rollover at the end of the term without your explicit prior consent

Always compare your bill to the contract prices

We frequently find significant differences between the two. The longer the contract, the more closely you should comb through the small print and check the documents against one another.

Be aware of what your rights are, and the details of the telecoms contracts you are signing.  After you have signed, make sure you scrutinise your bills routinely, challenge your supplier if you spot any inconsistencies, any unexpected changes or other failures or mistakes.

Dave Millett has over 35 years’ experience in the telecoms Industry. He has worked in European director roles for several global companies and now runs consultancy firm Equinox.

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