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The Challenges and Rewards of Mobile Contract Negotiation

Published June 13, 2018

Written by: Eric Witt
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Eric Witt

Eric brings 20 years’ experience in the telecommunications and consulting industries to his client engagements for Tangoe. Prior to joining Tangoe, Eric served in a number of business development capacities at MCI, overseeing the pricing and contract negotiations for MCI’s large commercial and global investment account segments representing more than $1B in revenues. His extensive experience in contracts and negotiations has enabled Eric to successfully manage complex carrier engagements on behalf of Tangoe’s clients in the local, long distance, and wireless segments with all the major telecom providers, both domestically and globally.

Eric earned a B.S. in engineering from the U.S. Naval Academy, a Master’s in Public and Private Management from Yale University, a Master’s in Strategic Studies from the U.S. Army War College and a Doctorate in Law and Policy from Northeastern University.

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Mobile phones have a long history from concept in the mid-20th Century  think comic strip detective Dick Tracy and the 2-way wrist radio in the 1950s through the fictional spy Maxwell Smart’s “shoe phone” in the 1960s, to the first clunky prototype cell phones in the 1970s.

The widespread availability and use of mobile phones truly began in the 1980sThese analog cellular devices gave way to technological advances in digital communications in the 1990s, offering smaller, faster devices that provided not only voice service, but texting and data

Truly internet capable devices began to appear in the early 2000s with the rollout of 3G services. Then, with the introduction of the first iPhone in 2007, we’ve never looked back.

Data Source: Tangoe

As mobile phones became more capable and in greater use, the demand for data has risen. This has only accelerated as we have changed the way we use our mobile devices and the content available has increased. Using 1GB of data on an early smartphone – like a Blackberry – was virtually unheard of a decade ago. Today, the average user consumes about 3GB of data each month and that figure continues to grow.   

Evolving Equipment Options

One of the biggest changes in the market has been the unbundling of equipment from the rate plans themselves. Historically, plans and equipment have been closely intertwined. In exchange for subsidized equipment pricing, carriers have required long-term commitments. 

More recently, attitudes towards having all equipment subsidized by the carrier have shifted. With consumers willing to pay higher prices to get the devices they want  either upfront or spreading those equipment payments out over time  we’ve seen actual plan prices drop. Even if bundled into the plan initially, the expectation now is that the user should see lower plan pricing after the plan term commitment expires.

Another big change in the market has been in the evolution of mobile plan pricing for the services that the carriers provide. In the early days of smartphones, corporate agreements generally included plans involving pools of minutes, charges for text messaging bundles and an unlimited allowance of databecause data consumption was so low. As data services grew in use and importance, and voice services declined, the structure reversed. Newer plans began to offer unlimited voice and text, but a pooled allowance for data. Most recently, with T-Mobile’s “un-carrier” offering of unlimited everything, competing mobile providers have responded with a return to alternative unlimited offerings as well.

Data Source: Tangoe

Three Pillars of Mobile Negotiations

Mobile phones are an increasingly vital part of business as well as our lives and, despite the ever-growing data usage requirements we see from mobility, the average cost per unit has continued to decline. How do you ensure that your costs follow this same trend? When it comes to mobile negotiations, to get the best contract, there are three key areas of focus:

  1. PlansLegacy vendor plans are often inefficient and costly. Updating your plan structures to the latest available is important. Those newer plans should include unlimited calling minutes and unlimited texting. Options for data include pooled plans or unlimited plans. Pooled data plans offer flexibility to optimize services to meet the current and future needs. Unlimited data plans are easy and convenient, but can be costly, and should only be used where they make sense.
  2. EquipmentWith carriers increasingly looking to get out of the subsidy game and separating equipment cost from carrier services, enterprises should be aware of how that will impact their expenses and how to approach equipment purchases. Certainly, getting desired phones and accessories at the right price is one point of negotiation. However, the focus away from the subsidy model  and its resulting direct pay for mobile devices upfront  can result in significant one-time costs in a large-scale rollout. On the other hand, this disaggregation presents the enterprise with more alternatives, including managed mobility providers, as a source for not only equipment, but much of their other mobile logistic needs. By separating equipment costs from plan cost it is also easier to allocate equipment costs to the end user in a BYOD (Bring Your Own Device) type scenario, allowing them to choose and pay for the device they want and need, while the enterprise pays for the now lower priced, mobile plan. 
  3. International TravelFor companies with any sort of international footprint or travel requirement, another key negotiating area is on international rates. Understanding the per minute rates for calling to international locations is important, but the real sticker shock has most often come from international travel without subscribing to an international plan or feature package. The pay-as-you-go option can lead to exceptionally high bills at the end of the month. Today, companies need to examine the latest international options such as the “Day Pass” or “Travel Pass” that allow subscribers to essentially use their domestic plans while travelling internationally for a low daily rate. These plans work very well for periodic travelers. For heavy international travelers, assigning international plans and features can result in improved cost structures.

Negotiating Tips and Best Practices 

Today, organizations employ sophisticated Telecom Expense Management (TEM) programs that not only procure, track, repair and retire mobile devices but also negotiate the best rates and packages from carriers. Many enterprises realize they can increase efficiency and lower costs by partnering with an expert managed services providers (MSPs) for advice in contract negotiations with carriers. Here are some of the best practices MSPs employ to obtain the biggest reward:

  1. Direct negotiation or RFP? Once in the door, primary providers can become complacent with their positions. With the market remaining competitive, the threat of a mobile migration is something that can be leveraged in an RFP if you are not getting satisfactory pricing from your current provider. Most companies that put their mobile services out to RFP don’t end up switching vendors, but shifts do happen and the threat of a loss of business can help move the incumbent to market rates.
  2. Terms and conditionsEnsure that all relevant offers are included in the contract itself and avoid any primary provider or exclusive provider language. If you also buy fixed line services from the same provider, they may suggest leveraging your mobile spend to help drive a higher commitment than achievable with the fixed line services alone. There can be some benefit to that but you want to be careful so as not to end up turning your “soft” mobile commitment into a hard dollar commitment with the typical penalties you can see on fixed line deals.
  3. Buy-up optionsMobility needs change and what you negotiate today may not be exactly what you need six or twelve months down the road. Keep your potential future needs in mind as you negotiate your vendor contract ensuring that the plans, pricing and equipment options available to you down the road will allow you to meet those future needs.
  4. CoverageNothing causes dissatisfaction with a deal more than poor coverage. If you are considering switching mobile providers, make sure you validate coverage capability with quantifiable data and get the ability to improve coverage added for locations where service isn’t so good.

When it comes to mobile devices negotiations, it is a total cost of ownership equation. It is not just about the plans and how low you can negotiate the individual plan costs, nor is it about the equipment, how you buy it and whether or not there are early termination fees. And it is also not about any credits that you can get for new business or being a loyal customer. The bottom line: you need to look at the overall picture to determine, in the aggregate, how each of these areas impacts your situation.




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