Legal Articles - May 2001 - Outsourcing Mobile Telecoms Services
An Overview of the Legal Issues Introduction
Anyone looking at the mobile telecoms world at the moment would be forgiven for thinking that the only subject worth talking about is broadband 3G - and the gamble that the telcos have taken in bidding for the licences. Indeed, the financial pressures on the mobile providers add complications to the already challenging task facing corporates seeking to outsource their requirements for mobile telephony.
Initially, mobile telecoms contracts focussed more on cost than service. However, there is a growing awareness amongst major corporate users that the contracts also need to address some key issues:
- how do you measure service quality and deal with service failures?
- how can you guarantee international roaming will be provided where you need it?
- how do you address technology changes?
This article looks at these issues, in the context of an uncertain market but a growing demand for reliable mobile and remote working.
Who are you dealing with?
A fundamental question for a user is to consider which of the three principal kinds of player it is dealing with, because each has different characteristics.
|
Type of Sevice Provider
|
Description
|
Comments
|
| Licence holder |
The 4 2G and 5 3G network operators |
Have ownership and control over the means of delivering the service - logically should have maximum flexibility on service levels risk |
| MVNO (Mobile Virtual Network Operator) |
An emerging tier of the market. A company which either contracts with or enters into a joint venture with a licence holder and which contracts in its own right with customers |
In theory, ought to be able to use its bulk buying status to negotiate discounts and also some concessions on risk. Seen as being a valuable way of allowing financially stretched Licence Holders to gain market share.In practice, the Licence Holders seem to be showing marked reluctance to commit other than on price, but this is seen as being unsustainable
from a commercial viewpoint |
| Reseller |
Generally acts as an agent for a number of Licence Holders and facilitates the entering into of a contract between customer and the Licence Holder |
Generally competes on price, rather than service |
Measuring service quality
It is a convenient myth that service quality cannot be measured in respect of mobile telecoms services. It is true to say that measuring service quality between any two mobile phones is far less meaningful than an end-to-end measurement on a fixed network, but that is not the end of the story:
- The Licence Holders are obliged to report to OFTEL on a regular basis on coverage and service quality issues. If you are a significant enough client, you may also be able to influence the timing and content of testing. This should be addressed in the contract.
- There are a number of other operational issues which the Licence Holders and MVNOs will monitor at a network level, and you should seek access to this information
- There are specific measurements a customer can take itself, to give indications as to the contention ratio in various cells
- Apart from the comms services themselves, the contract should of course contain service levels relating to the responsiveness service centres and all the other parameters in a usual telecoms services contract.
Service credits and remedies
Both Licence Holders and MVNOs are loath to link payment to service quality, even though this is commonplace in fixed line and other telecoms services agreements. The position of MVNOs reflects the attitude which the Licence Holders take. There is no legal - or real technical - impediment to offering service credits and other remedies and our view is that this will inevitably become a market differentiator between service
providers.
International roaming
A typical Licence Holder will have well over 100 roaming agreements with telcos in other countries, as well as interconnect agreements with fixed line and other operators. The terms of these agreements vary, but generally deal only with financial and technical matters rather than service quality. It is therefore unlikely that a Licence Holder (or MVNO, which will be taking advantage of its Licence Holder's roaming agreements) will
be able to provide a guaranteed service level for roaming services. Not all roaming partners will be able to offer the full basket of services - for example, SMS and other value added services.
2.5G & 3G challenges
The points above consider mainly the position as it stands now with GSM services. GSM is still principally used for basic circuit switched voice calls and for fax, SMS and low bandwidth data services. The packet switched services currently being overlaid on the GSM networks and the future 3G services raise new challenges for those preparing service contracts as there is still uncertainty over basic issues such as timing, pricing
and the range and quality of services. Users are consequently unlikely to want to be tied into long term mobile services contracts. Where these contracts are entered into, they typically should address:
- At least an indicative timetable for roll-out, with a right to terminate should this not take place. It can be useful to compare a particular MVNO or Licence Holder's progress on this with the market and to retain the flexibility to change providers.
- Indicative pricing, again with a right to market test.
Risk allocation
As mobile services become both more sophisticated in their service offerings and more critical to business users, we believe that pressure will grow on mobile operators to take a more flexible approach to risk sharing. As a matter of policy, Licence Holders seek to avoid accepting liability for business losses, much as fixed line operators did. However, just as customers of value added network service providers have been
increasingly successful in obtaining rights to damages for lost profits, it is inevitable that mobile operators will be forced to follow suit.
This article is a summary of the law only. Specific advice should be sought in specific circumstances. If you wish to discuss the new law in more detail please contact Rory Graham Email: [email protected] Tel: + 44 (0)20 7919 1385 Fax: + 44 (0)20 7919 1999 |