Telco SLA - parameters and penalties

Communication links provided by Telco providers are critical to most businesses. And as any network admin will tell you, these links tend to have outages, ranging from small interruptions up to massive breakdowns that can last for days.

When such interruptions occur, businesses suffer, but unless the provider has serious contractual obligations, there is little effort on their side to improve service or correct issues.

That is why businesses need a good Service Level Agreement (SLA). Usually, the preparation of the SLA is dreaded by most, since it is full of numbers and parameters on which the client must decide what is acceptable, and whose values may be difficult to measure.

SLA Parameters
A good SLA is not necessarily loaded with a lot of numbers. You need to work with 2-3 parameters which are important to you. Here are the most frequent SLA parameters, with their acceptable values:

  • Availability - more then 99% for internet, more then 99.5% for corporate data links
  • Packet Loss - less then 0.4% for internet, less then 0.2% for corporate data links
  • Jitter - less then 15ms for internet, less then 5ms for corporate data links
SLA Penalties
And you need penalties which will hurt the provider. Penalties are the big stick in the SLA.
Here are the penalties that you want:
  • small breach of SLA - 25% to 33% of monthly fee
  • large breach of SLA - 50% to 100% of monthly fee


Be aware that no provider will create an SLA that will eat much of it's profits. The commited provider can be identified by the type of Service Level Agreement (SLA) that it's prepared to sign without special negotiations.

Here are three different levels of SLA's - not so much by the metrics and parameters, but quite different in terms of penalties

Talkback and comments are most welcome


Related posts

9 Things to watch out for in an SLA
The SLA Lesson: software bug blues
5 SLA Nonsense Examples - Always Read the Fine Print

4 comments:

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rht66 said...

I see this as a no brainer for a company that has enough clout to demand or ask for an SLA, but where does that leave the thousands of small businesses and millions of home customers?

I may have misunderstood how these SLA agreements work, but I am kind of figuring that a business has to sign a similar contract with, say AT&T, Sprint, or whom ever just as an individual does. e.g. A two year contract or a one year contract, so that either a co. would be penalized if they decided they didn't like the SLA agreement with said co., just as the individual signs one for a free phone. And even then the price of a cell phone seems to be one of the best kept secrets in consumer goods.

Basically the consumer is getting screwed no matter what they do. Because when you can buy a throwaway phone for less than what the cell companies want you to either buy or if you're lucky get for free, but only if you sign a two year contract. So the way I see it, unless you are part of a friends and family plan, you just might be spending a little less on your cell phone bill, instead of everyone just picking out their own prepay phone and paid their own bill.

I certainly think that it has come to the point, unless you want all the extra bells and whistles that come with the phones sold by few cell carriers that are out there, than you are better off with a prepaid phone.

Maybe the solution for small businesses is to go coop, and for consumer they could either add every relative and friend up so they too would have the clout to get an SLA agreement with these telecom companies. I wonder if local governments are smart enough to have such agreements? Probably not.

Bozidar Spirovski said...

To rht66:
SLA agreement has little to do with supposed 'free stuff'. SLA agreement is all about the quality of a service, not about the loyalty or perks of a service. So let's clarify again:
SLA agreement stipulates which levels of service quality must be met by the provider. SLA agreement higher then the standard one offered by the provider is charged extra. On the other hand, an SLA agreement does not stipulate a better router, phone or anything else for the customer, unless such equipment is needed to achieve some parameter of the SLA.
And SLA has nothing to do with loyalty plans, instead, SLA agreement should have a clause of contract cancellation without penalties if the SLA is not met for some period (2-3 months)

The real question for a consumer is not really the SLA, it's the price that you want to pay VS the price the operator wishes to charge you. And yes, you don't have much choice there, that's the reality of things.

As a general rule of thumb, i would not sign any loyalty plan of more then 12 months, regardless of extra perks.

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