How to: Q&A: Get more bang for your telecom bucks

Telecom spending represents a big chunk of most IT budgets, but industry competition and negotiating finesse can reduce costs. Hank Levine, a Washington, D.C., attorney with Levine, Blaszak, Block & Boothby, has helped large companies squeeze carriers for years. Levine spoke recently with Network World Senior Editor Denise Pappalardo. Here is an edited version of the interview:

How has the landscape for negotiating telecom contracts changed in the past few years?

The landscape has changed in several key respects. First, the rapid price decreases we saw in the late 1990s (10%, 15% or 20% per year) have trailed off. We are still seeing price decreases, but the decreases are more like 5%.

Second, there has been an upheaval in the industry from MCI/WorldCom's bankruptcy to the entry of the [regional Bell operating companies] in the long-distance market.

The third change is next-generation technology's impact on the market. Much in the same way that frame relay shook up the data world in the mid 1990s, IP VPNs and [voice over IP] are starting to do the same. All this is happening at the same time we are seeing growing use of mobile service, various forms of remote access and the death of the calling-card market.

How do less-aggressive price decreases affect users at the negotiating table?

One thing people have to do is temper expectations. There are ways to keep getting 10% to 15% price decreases, but they don't include walking into your carrier and simply asking. You can still do very well, but it takes a lot more effort.

How can users lower their annual contract rates by 10% to 15% if the average is 5%?

They have to be willing to move some traffic to a second-tier carrier, and they have to be willing to change. There is always a better bid from a user's non-incumbent carrier. If you don't show that you are willing to go through the pain of changing service providers, then the ability to get those dollars from your incumbent is compromised.

Is the fact that MCI is still in bankruptcy, although close to emerging, something users should consider?

Yes. The last five years have proven that diversity of carriers is important. We tell MCI customers: Stick with MCI, but you can't give them 90% of your business. Cut that percentage in half.

We say that, with a little less urgency but for similar reasons, to Sprint and AT&T customers and certainly to Qwest customers.

How seriously should users consider the fact that most RBOCs will soon be able to offer national long-distance voice and data services?

There is good news and bad news about the RBOCs. The bad news is that the RBOCs are not ready to support large, nationwide networks. The good news is they are a lot more ready than they were 12 months ago and in another 12 to 18 months they will be ready for prime time.