Automatic Contract Renewal Terms – go find your contract or you could get screwed

by Jeff Wiener on November 24, 2009

screwedIt happens all too often to the unsuspecting customer. The automatic contract renewal clause. The clause itself has some merit, it’s the auto renewal term that could cause problems.

Every contract needs a term, and generally the longer the term the better the deal. The clause exists in all sorts of contracts of course, but, in this case I am speaking of the clause as it relates to telecom contracts.

The dilemma is as follows: Let’s use a standard contract for PRI. If a customer signed a 5 year PRI contract in 2004 which is coming due today November 2009 they signed the contract at 2004 going rates. In 2004 the going rate for a full PRI would have been $890 / month. At that time a competitive rate. Fast forward 5 years later, and with the constant downward pressure on rates the 2004 rate, in 2009 is expensive. The current PRI rate on a 5 year contract could be as low as $610 / month.

Fair enough. In 2004 the customer got a fair contract for a fair value. That’s not the problem.

You see, when the customer signed the contract they might have been very aware of the following clause (I pulled this clause from a Bell Canada contract. All the carriers have this clause in their contracts, Bell happens to be an easy culprit). This could be in your Rogers, Telus, AT&T, Verizon … contract.

Renewal Term(s): Unless the Customer or Bell gives a notice to the other as described in Section 3(e), each Service Schedule will automatically be renewed at the end of the Initial Service Term on the same terms and conditions for the consecutive renewal period(s) set out in that Service Schedule. If there is no renewal period set out in a Service Schedule, then that Service Schedule will expire and the Services provided under it will be terminated at the end of the Initial Service Term.

2004 was a long time ago. The customer signing an agreement with this clause might have been very aware of what they were signing. The problem is, when the 2009 renewal date revolves, unless the customer remembered they might have been unwillingly renewed into what is now a very uncompetitive rate.

Do you think the carriers send a notice out to their clients advising them of these renewals ?

ABSOLUTELY NOT. You’re on your own.

I’m speaking from experience here – very few customers know their renewal date. Chances are the person that signed the agreement in the first place is no longer in charge of contracts, or the IT person has no idea they even have a contract … you get the point. Once the agreement has been signed it’s neatly filed into a folder never to be found again.

Very few customers are aware of their current PRI contract terms, or for that matter, even know where their contract is. And the carriers will hold you to these contracts.

Now that you have read this post, go find your carrier contract. Make note of your renewal terms and dates because chances are the rates your signed your contract at are no longer competitive in the current market.

More: Since publishing this post I received an email from a customer suggesting the post was excellent but questioned what PRI itself was. You can read more about PRI here … but, an additional take away is to make sure you know the expiry of your auto renew contracts.

Written by: Jeff Wiener. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Identi.ca, or Friendfeed

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{ 5 comments… read them below or add one }

Neil April 9, 2012 at 10:22 am

I ran in to same issue with Bell and their answer was contract has auto renewal and nothing we can do about pricing till contract ends. They also do not allow you to pre notify and you must cancel contract one month prior to expiry. I put reminder for all Bell contracts for our multiple sites and guess what I am in process of moving them one by one. If you don’t respect customer and not give them service they deserve than I rather go with someone who does. I understand it might be same with other providers as well but well for me it was Bell.

Christina October 11, 2012 at 5:18 pm

Hi everyone.

I actually work for Bell as a Channel Partner and yes Bell does have a renewal clause but we only renew on a 1 year term not another 3 or 5 year term that TELUS does. Also in Western Canada if you did auto renew you can talk to your rep at Bell and look at a new 3 year term usually at a new rate and that can be looked at anytime during your contract. I hope this has helped.

Jeff Wiener October 13, 2012 at 9:26 am

Thanks for commenting Christina. You should check with the Bell business office with regards to Bell’s auto renewal policies though. Bell renews for the same term as the previous contract term.

Jeff

DJ October 16, 2012 at 5:17 pm

Christina is mis-informed and she works for Bell. I know for a fact that Bell has an auto renewal of 3 years as they did it to me. They do inform you of the renewal time 2-3 months before as well as the month of. You must review your invoices carefully to see it. It is easy enough to miss. You do have to cancel 1 month before the renewal date. An FYI as well, if you pay the amount owed after receiving this invoice with the statement that says your renewal just took place and do not dispute the charges or the contract renewal for 2 months then they accept your payment as an agreement. A little sneaky in my opinion but these are their rules and they do comply with the CRTC. So be careful everyone with auto renewal program. Enter the date as a reminder in your ohone, computer, everywhere and give yourself time to re-investigate and react. Good luck everyone!

Michelle Beighley September 19, 2013 at 12:15 pm

Please sign this petition to encourage AT&T to stop imposing huge, unwarranted cancellation fees that fall under automatic contract renewals: http://www.change.org/petitions/at-t-stop-charging-for-service-not-rendered-under-deceptive-automatic-contract-renewals-6

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