By Khali Henderson

Wireless resale has been a vexing proposition from the get-go. Few competitive telecom providers have found themselves on the upside of the wholesale agreement if they could meet the required volumes in the first place. And for the big brands that were expected to deliver subscribers in droves, the MVNO model has turned sour again and again (witness ESPN and Disney). That may be about to change with a new wholesale offer from Verizon Partner Solutions.

VPS, the wholesale arm of Verizon Communications, has entered into a deal to resale the Verizon Wireless network. In turn, it is able to offer its landline resellers the seemingly elusive ability to sell mobility solutions. The big a-ha for VPS resellers is they don’t have to meet the same volume commitments as they would by going direct to the mobile operator.

“I would say the name of the game is having critical mass – whether that’s handsets or overall customers in order to make the margins companies would like to make. What we help to do is aggregate the critical mass so they can be successful whereas if they would go after this on their own, it would be more difficult for them to accomplish,” said Mike Millegan, who became VPS president in October 2007.

The catch? All sales of the new Verizon Wholesale Mobility Solutions suite through VPS must bundle Verizon’s wireline services.

The former is not much of a downside for VPS resellers, which reportedly have been clamoring for a wireless product for a number of years. As evidence, the company announced its first contract with Lightyear Network Solutions LLC along with the product release in mid-July. Agreements with other existing VPS resellers also were in progress, said Quintin Lew, VPS’ senior vice president of product marketing.

“We have companies like Lightyear that look at this as a value-add and not just a wireless mobility play,” said Lew, noting it offers them a bundle and the ability to realize margin across multiple products (although he declined to reveal what those margins might be). “That’s the advantage we bring here. We are not just pushing a resale of Verizon Wireless or a resale of mobility services; it’s more of an integrated portfolio that we are positioning to the small/medium business segment.”

Sherm Henderson, Lightyear president and CEO, said bundling is what the business customer is looking for anyway. “They want the bundle and we want the bundle,” he said.

That focus on bundling products for business customers is among the likely reasons Verizon Wireless has come to the table. Verizon Wireless already offers a wholesale agreement to competitive service providers serving both consumers and businesses. While the company was not forthcoming about the reasons for the deal, a spokesperson did confirm that “VPS is a complementary distribution channel.”

“The Verizon Wholesale Mobility Solutions product offered by VPS opens another door for Verizon Wireless’ reseller channel, while at the same time enabling VPS to deepen and further solidify its business relationships with its wholesale wireline network clients,” said Nancy Stark McFadden, a spokesperson for Verizon Wireless. “It works for VPS, customers and Verizon Wireless.”

Millegan added, “Verizon Wireless has been extremely supportive in helping us create this package. What we are able to offer is a network of customers, particularly our CLEC customers who are ready for this product.”

VPS also takes away the headache of managing these smaller resellers for Verizon Wireless. This also is good news for VPS resellers, which can continue to deal with VPS for ordering and provisioning.

“A big part of what we do is to ensure the service aspect of this plan is in tip-top shape,” said Millegan. To enable its resellers to sell wireless, VPS is offering a Web-based ordering platform for both service and equipment; “white label” wireless handsets, accessories and wireless modem cards; over-the-air service activation; direct shipment of gear to the reseller or its end-user; end-user billing information and call detail; and technical and equipment support.

“We’ve stress tested the process and we are very confident that we can support the volumes of orders today,” said Lew. “We have learned from other experiences with DSL rollouts, Wholesale Advantage [local] rollouts and DirecTV rollouts. We’ve made some mistakes along the way, but we have the expertise to make it work this time through.”

Significantly, VPS has built a new ordering GUI that’s not unlike ordering from a major online retailer. “The proof is in the pudding, but we have created new systems and interfaces that are not your typical telco legacy back-office systems,” Lew said.

What might be more significant to resellers is that VPS will manage their handset inventories. These can be drop shipped to the reseller or sent directly to the client. Branding is available at significant volumes to be decided on an individual case basis, Millegan said, adding most resellers, however, will start with unbranded devices or with a Flash logo on the screen.

Lightyear Extends Wireless to Agents

The inventory piece is huge for a company like Lightyear. “It enables us to put our money elsewhere,” said Steve Ray, vice president of carrier management for Lightyear. That means more cash for sales and marketing efforts, driving demand through the company’s indirect channel.

Lightyear is moving quickly to take advantage of its new deal with VPS; a soft launch of the Lightyear Wireless service was set for the Channel Partners Conference & Expo, Aug. 18-20 in Boston. A general launch will take place at the Lightyear agent event, Sept. 24-25 in Louisville, Ky., where the reseller is based. In addition, the company plans a road show where it will be training and recruiting agents to sell its mobility services.

Lightyear’s new wireless contract fills a gap the reseller has bemoaned for years. “For six years we have been on the hunt,” said Ray. He noted Lightyear has tried to offer wireless in the past as early as 1996 and as recently as 2002, each time as an agent. Lightyear also investigated becoming a direct Verizon Wireless reseller, but predictably volume commitments were among the obstacles.

Lightyear’s channel partners also have been asking the company for wireless products almost as long. Many agents have experienced challenges working as direct agents for wireless carriers and have been asking Lightyear to make it easier for them to add mobility. What’s more they are looking for a compensation plan that’s comparable to what agents are used to earning on wireline services as opposed to the typical activation commission or activation commission plus single-digit MRC percentage.

Lightyear agent Stu Johnson, director of sales with [National Energy Services Company Inc. (NESC), Egg Harbor, N.J., said his company was dragged kicking and screaming into the wireless business because of customer demand. NESC provides utility management services, including energy and telecom, to multilocation and multinational companies. About 18 months ago it signed a direct agency deal with Sprint and found it to be a full-time job to manage the plans and the phones. Making matters more complex, he claimed Sprint isn’t set up to process business-to-business accounts, particularly multilocation deals. He said, for example, he can’t order phones with numbers matching the user’s location and his Sprint agent support team is only incented to work on activations in their local areas, so he and his out-of-area customers have no support.

In contrast, he said Lightyear is an agent-based company. “They understand agents like me. They understand the support that I need. They understand my business model,” Johnson said, noting he has sold Lightyear’s services for two years. “I’m not saying it’s going to be perfect because wireless is a tough game, but when I call with a situation — whether it’s pre-sale order issue or a post-sale customer service issue — they understand my model.”

Lightyear agent Pete Langas, president of IPiphany, Rolling Meadows, Ill., also feels pressure to offer its business customers wireless service. “We like to work with our clients for whatever their communications needs are; the gap for us has always been the wireless side of things,” he said. “We’ve been in business seven years and we’ve been looking for it almost from the get-go.”

IPiphany offers managed voice and data services to SMBs. “Because we handle so much of their other communications, they’d like to consolidate the number of vendors they have to deal with. At times it’s also a service issue particularly among the smaller clients or the clients who are spread across multiple locations.”

As an MSP, IPiphany plans to build on the Lightyear Wireless services with additional services like calling plan optimization and expense/asset management.

Langas is particularly excited about a commissioning model that is in line with wireline services, noting that the typical compensation plan doesn’t make selling wireless as a direct agent worth the hassle.

Both Lightyear agents said they also are excited about the prospect of selling the Verizon Wireless network, but that excitement might need to be quelled. Lightyear and other resellers are not allowed to market using the mobile operator’s brand. The only way customers will find out the name of the underlying carrier is if they ask.