Frontier to Follow FairPoints Footsteps?

By Cara Sievers

Since FairPoint Communications Inc. acquired the Verizon landline business in Maine, New Hampshire and Vermont in March 2008, a few channel partners have expressed disappointment with the way the transition of the indirect channel occurred.

Loretta Roby, founder and president of Caleidoscope Communications, one of only seven Platinum Verizon agents nationally, brought a lawsuit against FairPoint in December 2008, alleging FairPoint has misled her company to believe it would not only be the cornerstone of its agent program, but would receive a better contract with better payouts. This, in turn, lead to Caleidoscope sharing proprietary information about its customers. The complaint alleges that FairPoint engaged in deceptive and unfair trade practices to reach Caleidoscope’s customer base, before and after FairPoint terminated Caleidoscope’s agent agreement, along with all other indirect agent agreements.

Jeff Nevins, a spokesman for FairPoint, said the termination of these agent agreements was pursuant to the terms of the agreement. “In the last week of August 2008, FairPoint provided all sales agents with the required 90 days notice that we would be terminating agent agreements on Nov. 25, 2008, in accordance with the termination provisions and requirements in the sales agent contracts,” he said.

“FairPoint did a significant amount of research and found that we could manage this channel more cost-effectively and with better sales results with our own direct sales teams. … Business customers in Maine, New Hampshire and Vermont are extremely important to FairPoint and northern New England is our largest market,” said Nevins. “We believe that no one can serve our customers and be in a position to increase sales better than our own employees.”

That may be true, but where does that leave agents? “The danger to the agents is that they could wind up like Caleidoscope, which is in litigation with a residual base being held hostage, and FairPoint salespeople telling customers that they have cut out the middle man and that we are no longer in business,” said Roby, who feels her business has been severely impacted by this unexpected contract cancellation.

However, Doug Turpin, CEO of Venture Group Enterprises, a master agent that, according to Turpin, accounted for roughly half of the Verizon ILEC channel last year, said he felt FairPoint honored its agreement and therefore, he was satisfied with the way FairPoint handled things. Although Venture Group’s agreement was indeed terminated, he said FairPoint worked with his company to negotiate terms of the payout of past orders in a mutually agreeable fashion.

“We are satisfied with how they took care of the outstanding obligations in their agreement with us and we hope they decide to launch an agent program in the future,” said Turpin, unable to reveal further details of the agreement due to NDA. “And the Frontier transaction is perhaps a year away, so we will be affected when that transpires in ways unknown at this time; but for now, it’s business as usual.”

Agents and industry pundits now wonder if Frontier Communications Corp. will handle its Verizon acquisition the same way and end up putting the kibosh on its channel program. The Frontier deal will affect even more partners since Frontier will acquire Verizon’s access lines in 14 states, making it the largest rural communications provider in the United States.

Pete Hayes, executive vice president of sales, marketing, business development for Frontier, has an optimistic outlook for the post-transaction channel. “As currently planned, [Verizon agents] would be incorporated in the Frontier process,” said Hayes, referring to Frontier’s agent program that includes door-to-door sales, telemarketing, master agents and referral agents. “We look forward to meeting the agents who work with Verizon once the transaction closes in the next nine to 12 months.”

Hayes said Frontier’s current agents will benefit from more opportunity in light of the Verizon deal, allowing them to provide greater solutions and support for Frontier customers. Hayes also mentioned that Frontier has plans to increase its number of agents in the future, but currently has no specific goals on that front.

Only time will tell just how Frontier’s acquisition will affect Verizon agents in those territories, and whether the agents will be satisfied by the outcome. According to Debbie Lewis, director of media relations for Verizon, neither the FairPoint nor Frontier transactions should have a large effect on the channel. “We see these moves as having a minimal impact on our indirect channel program, and we will work with our agents and value-added resellers as appropriate to ensure a smooth transition for our indirect sales partners and our customers,” she said.

Lewis explained that agents selling Verizon Business services would not be impacted and could continue selling those services, including those associated with LEC services – FairPoint, Frontier or otherwise. “For the small number of former Verizon agents who primarily sold local exchange services to small business customers in the FairPoint territory, they work directly with FairPoint to deliver those services to customers,” Lewis said, explaining that the situation would work similarly for agents in the Frontier territories once the transaction closes.

Caleidoscope’s Roby cautions agents in the Frontier states learn from her experience. “I think the dangers to the independent agents with the Frontier acquisition are that the assigned contracts would not have significant safeguards in them to require Frontier to honor them; and the agents need to get specific commitments that Frontier won’t mess with their contracts for the duration, which is something that Verizon refused to do,” she explained. “So, in order to protect themselves from having what happened to my company happen to them, I feel strongly that the independent agents should lobby the public service boards to require protection of their contracts as a prerequisite to the public service board approval for the deal. … The public service boards in [the affected] states should take a long hard look at what has happened in Maine, Vermont, New Hampshire and Hawaii before they sign on.”