If a combined commitment is suggested as a potential benefit for you, understand that you are increasing your risk profile. Most carriers will include the wireless spend when calculating and setting commitment levels for a new combined arrangement. That means you might still be committed to 60-70 percent of your spend—but at a higher commitment level. Migrating to a combined model does not gain you additional “cushion” for flexibility. Therefore the only reason to make the transition is to leverage total spend for better pricing.
Despite what some carrier account teams might say, so far there is little cross-elasticity in pricing between the fixed and mobile silos at AT&T or Verizon. We’ve seen some slight movement from AT&T, where some duel margin consideration has been given. But in general, this is has been the exception. Tangoe has recently had the opportunity to test this with a $50M contract. The fixed and mobile businesses were operating separately. Tangoe does recommend accepting a combined commitment in the event that you are facing a shortfall on a fixed services commitment. Beyond that, we encourage our clients to wait for the providers to offer some incentives to lock in the mobile business under a “hard dollar” commitment.
Things to consider:
- Combined fixed and mobile commitments can increase liability risk
- Penalties are hard revenue dollars for shortfalls vs. standard mobile loss of discount point
- Generally, providers still expect 60-70 percent of total spend
- There is no cross-elasticity in pricing for wireline and wireless services
- Operating as separate businesses
- Potential loss of negotiation leverage with current provider
- Possible solution to shortfall situation on wireline services
Tangoe's Strategic Consulting services combine decades of collective consulting and billing analysis expertise with an extensive technology-driven knowledgebase of contract rates and terms to negotiate world class telecom contracts and terms and conditions that deliver market floor rates. Contact us to learn how Tangoe can assist you in best managing your existing and pending carrier contracts.