LEGAL & REGULATORY MATTERS
HOW TO NEGOTIATE AGREEMENTS WITH THE OTTS BY ANDRÉS FÍGOLI
T
oday, Over-The-Top (OTT) companies such as Amazon, Google, Meta and Microsoft have a clear dominance in most submarine cable routes around the world, whether through their own infrastructure, consortiums or even long-term agreements such as fibre or capacity Indefeasible Rights of Use (IRU) agreements. With recent announcements of new long OTT cable systems in almost every ocean, the gap between OTTs and the telcos is widening every quarter. The situation is familiar to those who were in the industry more than 20 years ago when state-owned telecom operators had national monopolies, but with one major difference, we are now facing the power of economies of scale that drive directly to global dominance in the wholesale market without regard to borders. While an incumbent telecom operator used to land in a country of a certain region that would serve as a beachhead for future investments in mobile operations, towers, urban/rural fibre network deployment, now the OTT scope has expanded to other countries far beyond the usual regional footprint to distant places across oceans to establish new data centres to secure their ultimate online products and services (e.g., online advertising, e-commerce). If we apply this to the legal and regulatory aspects of the submarine cable industry, each OTT approaches customers, suppliers and local governments to negotiate its agreements in its own style but with similar results, conquering markets and gradually
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leaving less and less room for other telecom operators and new entrants to participate. And this should serve as a warning for the possible consequences it may have, as we clearly saw with the monopolies or dominant market participations of incumbent operators some years ago. In this conservative article, we will analyse some of these behaviours and how they may have a greater impact than in the past decade if antitrust and telecom regulators do not act in time. Of course, we will try to identify some patterns, while not generalizing because they will not necessarily apply to all the parties involved.
AGREEMENTS WITH CUSTOMERS
Typically, the dominant incumbent telecom operators used to impose their
own IRU template agreements on their capacity suppliers, giving the former an extraordinary advantage from the outset of the contract negotiations. Certainly, most of the provisions were in their favour, such as indemnification clauses or even liability caps, without them having to justify or defend these provisions in any way during the negotiations. At the same time, they would impose tougher terms on their own customers, leaving a gap between the two types of agreements. This allowed them to reduce their risk exposure and limit their liability for example when dealing with frequent fibre cuts. In some situations, this strategy would allow them to obtain additional credits subject to aggressive Service Level Agreements (SLAs) with their capac-