...white paper, Best Practices in Satellite Capacity Contracts, which shares first hand experience into the often complex contracts for satellite capacity. Best Practices in Satellite Capacity Contracts is based on interviews with executives of teleport operators that purchase satellite capacity, and satellite operators that sell it. The report spells out the basics of satellite capacity contracts including those hot areas that need particular attention. According to the report, there are four key areas to watch:
- Length of the lease. Satellite contracts contain multiple provisions – from SLAs and interference to preemption and protection – that can be out of alignment with a teleport operator's customer contract in ways both obvious and subtle. The result is unrecognized risk for the teleport operator
- Resale rights. While it’s understandable that satellite operators want protection from competition from their own customers, prohibitions against resale for non-video applications can be challenging for teleport operators who purchase wholesale capacity
- Unlimited liabilities. Satellite capacity contracts frequently require teleport operators to sign for unlimited liability in the event of trouble on the satellite. These uncapped liabilities can be the single largest concern other than the basic commercial terms
- Lessons from Experience. Experienced buyers seek specifics in the contract on orbital location, protection and redundancy, and technical specifications. Inexperienced buyers put more trust in the vendor and accept higher-risk capacity deals in exchange for lower pricing
According to WTA Executive Director Robert Bell, “Satellite capacity is the biggest running cost of the teleport business model. In a report released last year we discovered that teleport operators spent an average of 47% of revenue on satellite capacity and capacity spending ranged from a low of 14 percent of revenues to a high of 79 percent. Contracts are, not surprisingly, a hot topic. By interviewing both teleport operators and satellite operators, we were able to identify a number of areas that can become significant pitfalls in establishing a mutually beneficial, long-term relationship.”
Best Practices in Satellite Capacity Contracts is available free to WTA members from the World Teleport Association website. Non-members may purchase a copy of the report from the site.