Wireless SLAs: Hype Or Boon?

Whether Sprint's pioneering service level agreement is hype or substance, it is changing the wireless landscape.

September 23, 2004

4 Min Read
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Last month, Sprint became the first U.S. wireless carrier to provide service level agreements (SLAs) for its wireless service. The SLA gives service credits to enterprise customers if service falls below specified levels.

But is Sprint's SLA a boon for enterprises or is it more hype than reality? And will other carriers follow suit?

Industry analysts are divided on those issues and Sprint's competitors are playing it close to the vest. But analysts are agree that, whatever the merits of Sprint's SLA, it will shake up the wireless industry and will help enterprises get better, more centralized wireless service.

A Good Thing Or Marketing Hype?

Sprint's SLA gives the customer a 10 percent service credit if, on a national basis, two percent or more of the customer's calls are blocked or dropped or if network availability dips under 99.9 percent.Most analysts claim that the Sprint move is a positive development and that it will force other carriers to follow suit. But the carriers themselves are sanguine.

Cingular and Nextel, for example, declined to comment for this story and T-Mobile did not respond to a request for information. A Verizon Wireless spokesman said that the quality of that operator's network makes an SLA unnecessary and would add a layer of paperwork to its relationship with customers.

However, analysts claimed that similar SLAs are, indeed, in the pipeline, although they would not provide details. They add that carriers are including elements of SLAs in contracts but that these haven't been made public.

"What will happen is quite simple: Enterprise customers are going to make this a core requirement, and at that point you will see [all the carriers] step up," says Michael Voellinger, the director of wireless services for Telwares, a telecom consultancy.

However, there also is strong sentiment that Sprint's SLA is not strong enough to be useful and that its primary value is in setting the wheels of change in motion."It's one part hype and one part a dose of reality," says Bob Egan, president of Mobile Competency, another telecom consultancy. "There is more and more competition in a maturing market, and carriers have to figure out points of differentiation."

Analysts also note that the Sprint SLA only covers voice -- not data -- and that it is the customer's responsibility to alert Sprint if it is in violation.

SLAs As A Negotiating Tool

Still, the advent of SLAs provides at least two strong advantages that they didn't have before, the analysts said. First, it gives all enterprises, no matter which carrier they use, a strong negotiating tool, Egan noted. He said that companies that are currently negotiating with wireless carriers should insist on service guarantees whether or not the actual term "service level agreement" is used.

In particular, those guarantees should be more location-specific than those in the Sprint SLA, Egan said. That means having the service guarantee focus on the region in which the enterprise is concentrated and not on nationwide service levels, as is the case with Sprint's SLA.An SLA based on nationwide service is far removed from the enterprise's actual usage, Egan said. An employee in Detroit or Sacramento, for instance, can get terrible service but, if the service the carrier is providing is good on a national level, the SLA won't be violated.

"I think that's where the disconnect lies right now," says Voellinger.

Second, SLAs can be a potent tool for leveraging down costs and simplifying management of wireless services, according to Lisa Pierce vice president of the telecom and networks research group for Forrester Research.

Currently, she noted, wireless service for most large organizations is managed locally, regionally or by individual users, which is an expensive and inefficient way to do business. But SLAs will encourage more uniformity and centralization, which will cut service providers' expenses.

Pierce also said that the SLAs will become even more important when they cover data services as well as voice. Middleware and security issues are far more vital in the data world, so SLAs will enhance the carriers' ability to standardize the software that each employee uses."In this case, it's a positive incentive instead of a negative one," she said.

A Good First Step

Though they were quick to point out the limitations of Sprint's SLA, the analysts stopped far short of calling it unmitigated hype. Though he thinks the carriers can and will improve, Egan lauds Sprint's SLA.

"You have to give them kudos for actually bellying up to the bar," he said.

Added Forrester's Pierce: "I expect by the end of this year to see announcements around data service [SLAs] publicly available for corporate customers. What Sprint has done is particularly meaningful because it puts a stake in the ground. A number of providers have touted their comparative service availability for a long time by citing studies, but have never held them up to the limelight of public display before."0

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