Break Your Internet Circuit Chains

Does Your Company Pay for Internet Circuit Connections?

This article has two parts.? The first part is a brief note on what these devices are and a description of what can happen when you tell a company that offers them to terminate your circuit.? That is because that will give you immediate information you may be able to turn to your own financial advantage.?

The second part will also allow you to gain some financial advantage and is broken down further into what these circuits are, what they are intended for, what they actually do and the wild costs that they can cause to any company, small or gigantic.

We will also discuss the obscene profits gained by this particular part of our economy and how they can impinge on growth, slow technical development and hurt business.

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Part 1

‘What the heck is a Business Internet Circuit?’

“A business internet circuit is a dedicated, high-speed connection that provides reliable internet access for businesses. It's like a private highway for data, ensuring consistent performance and security. SD-WAN (Software-Defined Wide Area Network) is a technology that manages and optimizes these circuits, making them more efficient and flexible.”

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‘All I want to do is cancel this service and go with a new carrier?? Why is the Finance Department in rebellion and the legal department calling me?’

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“Terminating an SD-WAN contract early can lead to significant financial pitfalls:

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Early Termination Fees: Contracts often include hefty fees for breaking the agreement before its end date.

Residual Contract Value (RCV): You might be liable for the remaining value of the contract, especially if the provider can't easily resell unused capacity.

Equipment Buy-Out Costs: If you own the SD-WAN equipment, you may need to buy it from the provider to fully terminate the contract.

Lost Investment: You may lose money invested in configuring and implementing the SD-WAN solution.

Increased Costs for New Provider: Switching to a new provider might involve additional setup fees and potentially higher monthly costs.

Service Disruptions: Transitioning to a new provider can cause temporary disruptions to your network, impacting productivity and potentially incurring additional costs.

To mitigate these risks, carefully review the contract terms before signing, negotiate favorable termination clauses, and consider potential exit strategies when selecting an SD-WAN provider.”

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Part 2

At one of my present clients they on average $545.75 a month for each of these internet circuits.

In total they pay out close to $900,000 a year.

The average speed for all connections over this sprawling example is 63.5 Mbps.

Circuit speeds, measured in Mbps (megabits per second), determine the maximum rate at which data can be transferred over an internet connection. Higher Mbps values mean faster data transfer speeds. ?

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Common circuit speeds are:

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100 Mbps: Suitable for small businesses with basic internet needs like email, web browsing, and light file transfers. ?

1 Gbps (1000 Mbps): Ideal for medium-sized businesses with growing bandwidth demands, including video conferencing, cloud-based applications, and large file transfers.

10 Gbps (10,000 Mbps): Suitable for large enterprises with extensive network requirements, such as data centers, high-definition video streaming, and real-time collaboration tools. ?

The circuit speed is dependent on the business's specific needs, including number of users, types of applications used, and expected data traffic.

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By the way – just because you have higher speeds does not mean you will get better performance.? If your system is heavily bogged down with cybersecurity, network security, desktop security, transaction security, et cetera – that will take a toll on performance of the applications you are using.

If your system uses legacy software (old stuff) in combination with newer software like Cloud apps, Cloud computing and Cloud data there will be an impact on speed and performance that won’t have anything to do with the circuits at all.

It is important to have the highest connection rates (speed) available for your business but, the point here is, if your business has not optimized the software, and even the data, being transferred and operating through the circuits you may not see any improvement as speeds go higher.? In some cases there may be a decline in performance as timeouts in the software or on the network which were tolerated within the operating parameters of the ‘slower’ circuits may become an issue.

Often circuits are organized and operated by a completely different group within Information Technology than the programming and operations staff.

At the example client I am discussing, this miscommunication and total lack of understanding of the operational performance of the applications and programs lead to a delay of a year before the problem was even discussed by company employees and mid-level executives.

To make matters worse in this case, it might have been possible to start these conversations earlier but because the responsible parties involved in working with the circuits were not asked for a complete system review before upgrading the circuits they did it immediately without concern for system impact.

Let’s get back to what might be termed the ‘Villain’ in this story and leave the internecine warfare to others in the Human Resources Department.

For a review – here is the average monthly cost for our example internet connection at 64.5 Mbps is $545.75 for an annual cost of $8385.00.

A home internet connection of 100 Mbps can be had for $65.00 a month.? That yearly cost would be $780.00.

That is a 91.7% premium for the ‘corporate’ connection as opposed to the home connection.

There is essentially no difference between the two.

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You could probably stop reading now and track down the person paying these charges but, unless you are running your own business or have a few employees, this sort of thing can be buried in billing and finance and pushed off to a worker whose connection to these things might not be altogether obvious.

That would be an internal issue to overcome.

Let’s say, for the purpose of this article, that you found the person and you have decided you want to swap out these overcharged and underforming devices for newer equipment.

Well – you will find they are under contract.? Similar to contracts that used to be the vogue for Exercise Gym contracts over the past couple of decades.? They can have ‘Early Disconnect’ ‘disincentives’ (financial punishments) attached to them.? Often they are equal to or in excess of the cost it would be to just let the contract run out.? There’s a disincentive for you, isn’t it?

Let’s say you get over that one and you have several others you’d like to divest yourself of and replace with another service.? If you don’t have a ‘bulk’ contract that will be pretty tricky and require vigilance over all of the terms and conditions of each one of the circuits.

We have already seen that we can potentially achieve cost savings over 90%.? Who wouldn’t want to do that?

For starters, most business owners and operators are unaware of this bizarre national and international business operation.? It has formed and been in place for such a long time, more than 40 years, it has grown like a fungus in dark space without much attention being given to it.

Of course, if you are not aware of something there is little chance you will begin to inquire about it.? This is one of those cases.

For mid and large sized businesses that do not have accounts payable locations at each office this situation can not only start quietly but get out of hand over the course of a few years and never be seen distinctly.? It will regularly be lumped in with other charges for the ‘Normal Cost of Doing Business’.

None of these charges are normal.? Even when marginally legitimate these charges are excessive for what is provided and, as we have discussed, do not actually provide the speed of computing that is assumed.? It is a shame that the sales forces that offer these connections often pose these devices as things that will make your business faster when all that will actually happen is that raw data might be transferred data but there is no guarantee the software will perform any better and more often than not, it will perform worse.

What is a company detects that their systems are slowing?

In our example business they did just that.? They immediately jumped on upgrading the speed of the circuits.? Some of them were very slow – and they were at sites where one or two people worked from the office rarely.? As a result of not studying the entire network again, nor even bothering to examine their business practices, they opted to spend money to upgrade all of the circuits.

For the smaller offices that received the superboost in speed they see no real difference because most of the time no one is at the location.? The security system is monitor by another company (with their own adequately sized circuit).? As for the larger offices, though they are get a boost in ‘speed’ it is inadequate.

After all this we still haven’t arrived at where the ‘heist’ takes place.? I use that term loosely and in jest, of course.

As you begin to find the bills from the companies providing your circuit connections to you there may be a few things you take note of.

For example –

1.?????? All of the bills may be coming to the main office but it will be nearly impossible to figure out where the circuits are located – let alone their speed.? If you continue digging you may find that you have some circuits you no longer use, or you may find you have more than one (or two if you are using ‘redundancy’) that isn’t doing anything.? It might not even be plugged in but the contract keeps running.

2.?????? You may be on autopay and never see the bills, therefore, never see a need to question them

3.?????? You may be on autorenew, which is common, and you will never see a reason to question them or review them either financially or physically because is all in the ‘Cost of Business’.

4.?????? All of the bills, from many different vendors, or two or three main competitors, have one thing in common – your salesman.? The person who helped you get the contract signed.

Let’s take a look at number 4.

Why would the same person be associated with all of the vendors you are using?

That is because the vendors, that is the telecommunications company, contract with companies known as aggregators and the more popularly known ‘Partners’ and ‘Channel Partners’.

They are a secondary salesforce that the telecommunications companies to use so they don’t have to pay a salesforce directly.

How do the sales companies get paid?

They are given a payment for when the circuit is first signed.? The company gets paid more for the higher priced circuits and other services, of course.

They also receive a percentage of the bills that are paid to the telecommunications vendor as well.

Often called a service payment it is often categorized as a ‘Kick Back’ in common parlance by those who peer into this dark corner of the telecommunications industry.

Sometimes it is referred to as ‘A Little Off the Top’.

“A kickback is an illegal payment made to someone in a position of power or influence as a reward for their help with something. It's often a percentage of the total income from a transaction, paid secretly and illegally. Kickbacks are considered a form of bribery and are illegal in most countries.”

The reason ‘kickback’ is kicked around by those who pay is because the relationship and pay scale taken by the intermediary, the sales person(s), is kept secret.

That’s what I have for you now.

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If you would like to learn how to save a great deal of money feel free to reach out to me.

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