Broadband Procurement & The Challenge to Stay Competitive
With the proliferation of SDWAN, enterprise clients have increasingly implemented broadband services in their WANs. If you’re geographically diverse, you likely found it necessary to engage with multiple broadband suppliers for an optimal mix of competitive services. It’s likely that you either wound up with multiple agreements with several broadband suppliers, or you contracted with an aggregator. No matter which decision you made, maintaining market competitive rates for your broadband services presents unique challenges relative to other telecommunications services.
Most enterprise clients are familiar with the traditional telecom contracting model in which a commitment is made, volume or revenue based, in return for a set of customer rates, terms, and conditions for a set term. Since broadband services are typically contracted on a site-specific basis with an individual term of 12, 24, or 36 months, services may not be coterminous. This can make it challenging to “refresh” rates through a mid-term renegotiation or competitive sourcing event. Fortunately, broadband pricing continues to compress, with increasing availability of fiber and more bandwidth being made available at lower costs. The challenge is in how to continue to take advantage of those changes when you are managing a large number of sites with multiple providers, or using an aggregator, when the providers are offering more throughput/speed with higher ‘minimum available’ options instead of compressing the price on existing bandwidth offerings. The familiar strategies employed to renegotiate coterminous WAN services at one time every 18-24 months no longer apply.
If you selected an aggregator of services, such as AT&T, Comcast, or Granite, or directly sourced internet services from multiple providers, you must make certain that optimization of services is ongoing. There must be a continuous effort to refresh pricing, or reinstall services as plans are improved or grandfathered, grooming the network to take advantage of potential savings. An overall revenue commitment, rather than a site/circuit volume commitment, allows for maximum flexibility and must incorporate coterminous terms. In situations where managed services are also purchased it’s critical to have a benchmark, or market rate review clause, that allows you to open the agreement to bring rates to market during the course of the term as well as a penalty (often a reduction in commitment) if you can’t reach an agreement on appropriate reductions.
With the appropriate stewardship to ensure that the provider(s) shoulder the burden of ongoing optimization, and market rate review language in your provider agreement(s), you will position your enterprise to continue to reap the benefits of broadband in the SDWAN environment at competitive rates. With continued competitive pressure of fiber builds and acquisitions such as the recently announced Verizon – Frontier deal, these clauses, as well as short and coterminous service terms are achievable.