Telco reseller agreements – legal issues

There are over 800 carriage service providers (CSPs) in Australia. CSPs that do not also have a carrier licence buy network services from carriers. Each network service offered by carriers has its own set of flow down terms that must be passed down into the CSPs end user standard form of service agreement (SFA). In this article, we consider the key legal issues when entering into a reseller agreement with network service providers and the impact on the SFA.

Regulatory context

CSP resellers of telecommunications services are considered carriage service providers under section 87(5) of the Telecommunications Act 1997 (Cth) and are therefore bound by the same legal obligations as all other carriage service providers. For example, CSP’s are obligated to keep certain customer data under the Telecommunications (Interception and Access) Act 1979 (Cth) (TIA Act), which requires CSPs to retain a particular set of telecommunications data for at least 2 years.

The retained data must be encrypted and protected from unauthorised interference and access. Some subscriber information (a category of data in the data set) must be retained for the life of the account and for a further 2 years after the account is closed.

When negotiating a reseller agreement with a network service provider, it is important that the CSP undertakes an analysis of the data security protocols used by the network service provider to determine whether it is robust. The CSP should also seek an indemnity from the network service provider against any fines or penalties imposed by regulators arising from the network service provider not maintaining the data as required under the TIA Act, or disclosing it in breach of the Privacy Act 1988 (Cth).

Critical Information Summary (CIS)

Under C628:2019 Telecommunications Consumer Protections Code (TCP Code), CSPs must ensure that any information provided or made available to consumers, including the SFA is clear, accurate, free of material omissions, relevant, current, readily available, and, in cases where information is provided, timely.

Therefore, a CSP must check all the service schedules for the services it will resell to customers provided by the network service provider, and the CIS, which is a separate document no longer than 2 A4 pages to be place on the CSPs website to allow customers to compare offers that includes the following information:

• a description of the telecommunications service to be provided under the offer, including inclusions;
• the minimum monthly charge payable under the offer (where calculable);
• the maximum monthly charge payable under the Offer (where calculable);
• the maximum charge payable for early termination of the offer;
• the minimum term applicable in respect of the telecommunications product set out in the offer;
• early termination fees;
• details of bundling services;
• where applicable, the exclusions and any important conditions, limitations, restrictions or qualifications for that offer, such as mobile data auto top-ups; and
• a link to the area on the carriage service provider’s website where the consumer can obtain call and data usage information or instructions.

Liability

When negotiating a reseller agreement with a network service provider, a CSP should keep one eye on terms that will flow down into the SFA. The most obvious one is liability.

If the CSP takes on more liability and or obligations to the customer than the network service provider takes on to the CSP, the CSP will have no upstream recourse against the network service provider and be liable to perform those obligations that it may not be able to do which could result in a breach of the SFA by the CSP and customer complaint. For example, where the reseller agreement offers certain network service levels, the CSP must ensure that it does not offer higher levels to the customer. Likewise, a CSP must ensure that any broadband speed promises exceptions and maintenance periods in the reseller agreement are reflected in the SFA.

Indemnities

Network service providers will often require indemnities given by CSP against claims made by the CSPs end users. Such indemnities need to be limited to the network services provided by the CSP and be to the extent that the claim does not arise from the acts or omissions of the network service provider, otherwise the CSP will incur liability for losses not caused by the CSP.

Termination

CSPs need to be mindful of the network service provider’s rights to withdraw or cancel a service. Any such change to a network service should be subject to a notice period sufficiently long enough for the CSP to alter its marketing material and be reflected in the SFA, otherwise the CSP will be taken to have repudiated the SFA with the end user and it will attract unwanted and negative publicity if the service to the end user under the SFA is terminated on short notice.

Links and further references

Legislation

Telecommunications Act 1997 (Cth)

Telecommunications (Interception and Access) Act 1979 (Cth)

C628:2019 Telecommunications Consumer Protections Code

Privacy Act 1988 (Cth)

Further information about reseller agreements

If you need advice on negotiating or reviewing a reseller agreement with a network service provider, please feel free to contact me for a confidential and obligation free discussion.

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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