What Is a Service-Level Agreement?

Organizations that rely on broadband connectivity for business operations need to understand how an ISP’s service will perform each day. A service-level agreement (SLA) details the service’s performance parameters. Because the SLA guarantees a stated level of service quality, it’s a key tool in determining if a business internet service is right for your network requirements. Reviewing SLAs before signing up for service will help you analyze and compare the expected service quality across providers and select the best services for your business. Here’s everything your company should know about SLAs.

Overview of SLAs

What Is an SLA?

An SLA is a formal contract between a business and an internet service provider (ISP) that outlines expected performance standards and guarantees for the internet service. Emerging in the late 1980s and early ’90s as businesses increasingly relied on outsourced IT and telecommunications, SLAs became essential for ensuring service quality and accountability in managed services and internet connectivity.

SLAs set critical benchmarks for service reliability, specifying what will happen if performance levels fall below agreed-upon standards, which often includes penalties or remedies such as service credits. The agreements are designed to define specific performance metrics — such as uptime, response times, and issue resolution — while providing a framework to address any failures. SLAs establish clear expectations between service providers and customers, offering a contractual means to measure and enforce service reliability, which is vital for minimizing risks in critical business operations.

What Do SLAs Cover?

An SLA outlines the expected service performance, responsibilities, and remedies if service levels are not met. It covers aspects such as service availability, response times for resolving issues, and compensation for downtime. The three core components of an SLA include uptime, packet delivery, and latency. Those metrics ensure that businesses receive reliable and efficient internet service.

What Is Uptime?

Uptime is the percentage of time that a business customer has broadband service availability over a given period — typically a month. It reflects the internet service’s reliability and is a key metric in evaluating performance.

Business-grade services backed by SLAs, such as fiber internet or fixed wireless internet, aim for 99.99 percent uptime or better. That level of reliability translates to an average downtime of approximately four minutes or less per month. In contrast, a service with 99.99 percent uptime, while seemingly reliable, can result in about 44 minutes of downtime per month. That seemingly slight difference can significantly impact businesses that depend on constant connectivity.

It’s important to understand how your internet provider defines uptime. Many ISPs measure uptime from their core network to the customer’s location (demarcation point or DMARC), but some limit guarantees to the core network only. That distinction is crucial because a core network-only uptime excludes the last leg of the connection to your office, which is often where problems can arise.

Be aware that many ISPs resell services delivered over another carrier’s infrastructure, which is known as Type II circuits. The circuits are often subject to a separate SLA from the provider’s own network. Before signing your agreement, clarify which network and SLA terms apply to the service you’re being offered.

What Is Packet Delivery?

Packet delivery refers to the percentage of data packets successfully received compared to the total packets sent over a network. The metric is discussed alongside packet loss, which measures the percentage of data packets that fail to reach their destination. High packet delivery rates are crucial for maintaining consistent and reliable network performance, particularly for time-sensitive applications such as video conferencing and VoIP.

For business internet, the standard packet delivery rate is typically 99.5 percent or higher. A significant drop in packet delivery can lead to noticeable issues such as increased latency, degraded call quality, and buffering in real-time services. When packet loss occurs, data must be retransmitted, further increasing latency and impacting overall network performance. Maintaining a high packet delivery rate is a critical component of business internet SLAs, ensuring that data flows smoothly and efficiently across the network.

What Is Latency?

Latency refers to the time a data packet travels across a network, typically measured in milliseconds (ms). SLAs may specify latency for the core network alone or include the customer access network as well. Latency can be defined as one way (from source to destination) or round trip (to the destination and back). Pay attention to those definitions when comparing SLAs, because they can significantly impact your network’s overall performance.

Latency is especially critical for businesses running real-time applications such as video conferencing, VoIP, or surveillance systems, where delays can disrupt communication and performance. A one-way latency of 100 ms or less is generally acceptable for those applications, while more sensitive tasks, such as online gaming, benefit from a latency of 50 ms or less.

For most business services, a one-way latency of 25 ms or less is ideal, offering smooth performance for cloud-based applications. Differences in latency under 20 ms are often imperceptible to users, so prioritizing SLAs that guarantee low latency is essential for ensuring reliable and responsive service in critical business functions.

What Is MMTR?

Some carriers include MTTR (mean time to respond or mean time to repair, with “mean” referring to average) in their SLAs to set expectations for how quickly they will address service issues. “Mean time to respond” refers to the average maximum time for the carrier to acknowledge and address an outage or severe degradation. The response could involve running diagnostics, scheduling technician visits, or providing status updates. The metric doesn’t cover the time it takes to fully resolve the issue.

A typical mean time to respond is about four hours, usually measured during business hours and excluding holidays. It’s an average across all customers, however, which means an individual business is not guaranteed a four-hour response.

“Mean time to repair” refers to the average maximum time to fix an issue and restore full service, often calculated monthly. The metric may be limited to business hours or exclude holidays. Many SLAs don’t explicitly include an MTTR, but that omission is not always a cause for concern. MTTR impacts uptime, and carriers typically are incentivized to resolve outages or severe service degradation within the agreed uptime metrics, even without a formal MTTR clause. A slow repair time can negatively affect service availability, so carriers aim to resolve issues quickly to maintain uptime guarantees.

Types of Internet Covered by SLAs

Different types of business internet services come with varying SLA guarantees based on the technology and infrastructure used. Understanding the distinctions helps businesses choose the right service for their needs.

Here’s how SLAs typically relate to different types of business internet.

• Fiber internet: Known for its high reliability, fiber services often come with SLAs that guarantee 99.99 percent uptime, low latency, and minimal packet loss, making it ideal for businesses relying on cloud applications and real-time services.
• Fixed wireless internet: Although fixed wireless offers high-speed connections, SLAs may include slightly lower uptime guarantees (around 99.9 percent) but often still provide strong latency and packet delivery metrics. It’s a good option for locations where fiber isn’t available.
• DSL or cable internet: Business-grade versions of DSL and cable internet may offer SLAs, but due to the shared nature of the network, they generally come with lower uptime (99.9 percent or less) and performance guarantees.
• Satellite internet: Due to environmental factors and the nature of satellite transmission, SLAs for satellite internet usually have higher latency and lower uptime compared to fiber or fixed wireless. The service typically is used in remote areas with limited alternatives.

How to Negotiate an SLA

Many internet service providers offer standard SLA terms, but there is often room for customization — especially for larger businesses or those with critical connectivity demands. Key areas to negotiate include uptime guarantees, latency thresholds, and response/repair times (MTTR). Your business may also push for tighter guarantees in exchange for higher service fees or seek compensation clauses in the form of service credits for any breaches in agreed performance levels.

It’s also important to negotiate how performance is monitored and reported and what constitutes a breach of the SLA. Clarifying the scope of coverage — whether it includes only the core network or the customer access network — is essential to avoid gaps in service responsibility. Your business should also ensure that SLAs account for after-hours and holiday support if needed.

SLA Remedies When an Agreement Is Breached

Service credits are the most common form of compensation for missed SLA metrics, but they can be tricky to evaluate and compare across providers. Some SLAs claim 100 percent uptime, for instance, but it’s widely understood that no service can achieve that. Upon closer inspection, the fine print often reveals that remedies aren’t triggered until uptime drops to 99.95 percent, which is effectively similar to the 99.99 percent uptime guarantees offered by other providers. That discrepancy means businesses may not receive compensation unless service falls below that threshold.

For chronic issues, many SLAs allow businesses to terminate the contract and fees without penalties if performance consistently fails to meet the agreed terms. It’s important for your business to thoroughly review the details surrounding service credits to understand how the provider defines missed metrics and whether the remedies are adequate for their operational needs. Scrutinize the SLA’s compensation structure to ensure it reflects a realistic and reliable performance level for your business.

Frequently Asked Questions About SLAs

What is a good SLA percentage?

A good SLA percentage for business internet services typically guarantees 99.99 percent uptime or higher. That level of reliability translates to minimal downtime, which is essential for businesses that rely on consistent internet connectivity for operations, especially those running real-time applications such as VoIP, video conferencing, or cloud-based services.

What is the difference between SLA and MOU?

An SLA is a formal, legally binding contract between a service provider and a customer that outlines specific performance standards, responsibilities, and remedies if those standards are not met. An MOU (memorandum of understanding) is a nonbinding agreement between parties that outlines general terms and mutual expectations but does not legally enforce compliance.

What are the disadvantages of an SLA?

The main disadvantages of an SLA are its potential complexity and the difficulty in enforcing certain terms. SLAs can be highly technical, making it challenging for businesses to fully understand or negotiate the fine print, especially when it comes to metrics such as uptime, latency, and service credits.

What happens if SLAs are not met?

If SLAs are not met, your business is entitled to remedies outlined in the contract, most often in the form of service credits or discounts on future bills. The credits compensate for service interruptions or degraded performance, such as missed uptime, latency, or response time targets.