News

Bundled telecommunication deals - small business beware!

Published: 10 Mar, 2010

SOURCE: http://www.accc.gov.au/content/index.phtml/itemId/918059/fromItemId/815214/fromAll/

Under a ‘bundled services deal' business model, a telecommunications company enters into a contract with a small business to provide telecommunications services and call credits to cover payments for what some customers think is ‘free' equipment. It may not be immediately obvious that when agreeing to these deals, you are in fact signing two separate contracts - the first is for the phone calls with a telecommunications service provider, and the second is a lease of equipment from a finance company.

While the dual contract arrangement might meet the needs of many businesses, and be a legitimate packaged deal, the ACCC is concerned by the number of complaints it has received about these products from small businesses. Many small firms say they have been misled, and have found themselves without a telephone service, but locked into expensive equipment leases once the service provider goes out of business.

The best course of action is to avoid entering a contract that will result in you incurring ongoing costs for unusable products. To help with that, the ACCC recommends you ask the following questions, suggested by the Telecommunications Industry Ombudsman, prior to signing anything:

* who are the parties involved in the deal?
* are commissions paid as part of the deal, and to whom?
* how many contracts does the deal involve? Is it just one contract with one company or are they separate contracts?
* exactly what services are being offered by the phone company? If "credits" are being offered to offset the lease payments, how much are the credits and are there any limitations on when they are paid?
* is there a lease? If so, what are the monthly lease payments, and how long is the lease for?
* what happens if the telecommunications contract ends? Is the business still bound by the lease?
* what is the total cost of the deal over the term of the contracts?
* does it actually work out to be cheaper than the small business's existing telecommunications arrangements?

You may also wish to report your situation to the ACCC infocentre on 1300 302 502, or the ACCC Small business helpline on 1300 302 021.

 

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