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Telecoms contracts – What every start-up and small business needs to know

June 12, 2017

signing telecoms contract agreement

To some extent we are all caught in a telecoms trap. Whether you are in services, retail, or manufacturing your start-up or small business must have some form of telecoms.

This gives some suppliers an opportunity to bamboozle customers with jargon and complicated long-term contracts. It can even get to the point where when you have a query and consider moving supplier you are promptly told, “sorry you are still under contract.”

But are you really always bound by such a contract, and do you have any options to get out of a telecoms contract you aren’t happy with?

We asked Dave Millett of independent telecoms brokerage, Equinox,  to give you the inside-track on business telecoms contracts; We regularly get asked, “Can you get me out of this contract”. Generally our answer is, “It depends”.

If you are not sure whether you are in contract or not, or you’d like some tips to help protect yourself before signing any new deals – here are some key questions and lessons.

1. Do you know when your contract ends?

There is an onus on the supplier to prove the contract end dates. Just because the system has a date it does not mean it is correct. There could have data entry errors, or they could be deliberately misleading you.

One of our clients was told their contract had renewed two days before they enquired about it. Maybe this was a coincidence, but the supplier didn’t offer any proof of that being the renewal date.

Reasonable proof would be a call recording or a copy of the original signed document or e-contract.

If suppliers refuse to provide this proof then they probably have something to hide.

For example, one major supplier insisted for six months that the customer was in a contract but would offer no proof. They then claimed it was done over the phone but couldn’t provide a copy.

Eventually a letter to the Chairman’s office resolved the matter and the customer was released from the contract.

LESSON: Make your life easier by ensuring you have a copy of the signed contract (either paper or e-version). Signing up verbally on the phone can cause extra hassles.

2. Have you checked the final version of the contract?

Some situations are almost unbelievable. Here is an example;

The customer signed paperwork on the basis of a one year deal. But the salesperson phoned a couple of days later saying the paperwork had got lost. He asked to bring it back in and would they sign it there and then.

On the version of the paperwork the salesperson brought with him – it said 5 years. Some months later the customer went to change suppliers and was told they were locked in a 5-year deal.

Even though the customer had kept a copy of the original contract, the supplier wouldn’t accept it. We eventually got involved. The supplier backed down and gave the customer £750 compensation and allowed them to leave without penalty.

LESSON: Do not sign until you have double checked everything. Don’t take anything on trust.

3. Have you unintentionally signed up for an automatic rollover?

There are a number of rules laid down by Ofcom to protect consumers and businesses with 10 or fewer employees. At Equinox we think it should be higher – how many 11 person businesses employ a qualified contracts person or company lawyer?

The protection for businesses with 10 or fewer employees bans automatic rollover of contracts and provides the customer the ability to cancel contracts because of prices rises and/or failures to offer promised broadband speeds.

But some suppliers will try to find their way round these protections for small businesses.

On automatic rollovers we have seen contracts saying ‘tick this box to keep tariffs after contract end date’. There is no mention that by ticking this box you are agreeing to an automatic renewal.

But that’s exactly what you are doing – you are renewing for that same term again. Effectively they are getting you to waive your rights by ticking the box.

LESSON: Don’t make unnecessary commitments. Diarise a date a couple of months before your contract is up for renewal and check if renewing will be the best deal

4. How will you be notified of changes to T & Cs?

Changing the Terms and Conditions – but only stating this on the website. In the small print of many contracts suppliers state that they can change the T&Cs without needing to notify you, they simply need to update the information on their website. This means you may miss your opportunity to cancel

Others obscure price rises by only publishing it on their website or hiding it in the small print on invoices.

Ofcom has ruled that you can opt out of a contract if the price rises – as long as you give notice within 30 days of being told. As before if you miss the notification you miss the chance to cancel and are stuck with the higher prices.

LESSON: If you won’t get direct notification diarise a regular check so you don’t get caught out

5. Are you aware of your notice period?

Always check your notice period. These can vary considerably. They’re most likely to be from 30 days to six months. However, we have seen a three year notice period.

LESSON: Review the notice period to check it’s appropriate for your business. Negotiate if necessary.

6. What about penalties?

Look at the penalties you may have to pay if you cancel early. If the telecoms provider has given you a free installation in return for a three-year contract and you cancel after one year then it is perfectly reasonable for them to ask you pay for the installation.

Again, small businesses are protected by Ofcom rules on the calculation of penalties but many suppliers try to ignore these and rely on their customers’ ignorance.

Finally, some suppliers promise to pay any penalties you may incur by switching to them – but then fail to follow through.

If you are offered this incentive, do make sure you get the agreement in writing e.g. that there is no cap to the penalties and that they will be paid within 14 days of you being charged. State clearly that any failure to do so will make your contract with them null and void.

LESSON: Make sure penalties are reasonable and that you believe you can bear the costs if you need to cancel.

7. Have you kept a look out for these old tricks?

The small print in the contract may include the following:

  • Automatically restarting your contract if you change or add something
  • Adding new services that have their own contract so end dates never align, meaning cancellation is almost impossible as you’ll never be out of contract on all your services at the same time. Mobiles are a favourite for this tactic
  • Having different terms for each element of the contract. For example, having calls for two years and in small print the lines are for five years

A final trick is selling you the wrong product – which is inappropriate and possibly adds expense.

There was a charity which had an old phone system with a couple of ISDN circuits. They were persuaded to move to SIP even though the phone system would not support it. Not to worry said the supplier we have a smartbox that will sort that out – sign here.

What they didn’t say was that the smart box was on a never-never lease and they left those costs out of the comparison. So, the charity actually spent almost £2,000 more a year than they needed to.

The supplier tried to ignore everything until we helped the charity write to their legal department who promptly agreed to cancel the deal and pay off all the outstanding lease payments.

LESSON: You need to be hyper-vigilant. 1) Try to keep one end date for all services. 2) Buy the suitable products for you existing systems.

8. Ways to protect yourself

There are ways you can protect yourself before you sign up to any telecoms contract. You should;

  • Check if the supplier is signed up to the Telecoms Ombudsman as that offers free binding arbitration to consumers and small businesses if there is a dispute.

Obviously if you have real doubts then consult a lawyer it could save you money in the long run.

  • Send an email to your supplier listing your understanding of contract. Ask them to confirm that in a conflict between their T&Cs and the email – the email takes precedence and only on that basis are you accepting contract. Within the email you could include:
  • Contract duration and notice period
  • That prices are fixed for duration – any changes 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 such as call set up fees and likewise any changes in Terms and Conditions
  • Repeat any claims made (e.g. you will save money) 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

9. Always check your invoices in detail

How many people have ever compared their bill to the prices in the contract? We frequently find large differences.

The longer you are asked to commit for the contract the more closely to should read the small print.

We have found what can be termed false inducements to purchase – for example, ‘we promise to save you money’ but when you get your invoices there is no saving.

If you’ve been given this kind of promise you need to check very carefully, and be prepared to fight if you believe the inducement was false.

10. Should your business use a residential contract?

Using a residential contract maybe a good decision for start-ups and small businesses: at least in the short term.

Ofcom’s research suggests up to one in three SME users have residential contracts for landline phones and broadband.

The problem is that some of these contracts don’t have specified service care levels or they have levels that may cause business problems if you lose service. Let me give you an example.

A pub had bought residential products. When their internet went down at 4.30pm on a Friday they could not get it fixed.

Consequently they could not take debit or credit card payments over the weekend and lost £5,000 in takings as a result.

We moved them to a business broadband with a router that takes a SIM card as backup. So should they have an issue they can simply put the SIM from their mobile in the router and be up and running whilst the broadband line is fixed

To avoid this kind of issue it’s worth looking at the additional costs and service levels your supplier provides on business contracts. Our publican reduced his stress levels considerably once he switched!

And finally

Always raise issues if you think your supplier has made a mistake or is doing something wrong. Using a supplier signed up to the Ombudsman Service means you can access their dispute resolution if this proves necessary.

It is fair to say that many of these points could apply to a range of services, not just telecoms. Unfortunately many in the telecoms industry rely on people not spotting things, and then being unwilling to challenge their supplier.

When they are challenged the supplier will often attempt to draw out the process for as long as possible. So, be aware of what you are signing up to, what your rights are, keep an eye on your bills and be ready to challenge your supplier if you spot any changes, inconsistencies, or failures.

About the author

This guide has been written exclusively for ByteStart by Dave Millett who has over 35 years’ experience in the Telecoms Industry. He now runs Equinox, a leading independent brokerage and consultancy firm. He works with many companies, charities and other organisations and has helped them achieve savings of up to 80% on telecoms costs.

Dave Millett is a regular contributor to ByteStart, and other guides he’s written to help small businesses, include;

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