Q&A With PAETECs Channel Chief John Leach

By Khali Henderson

John Leach, president of the South region, for PAETEC Communications (PAET) will take over as the leader of the company’s nationwide channel program Jan. 1. His predecessor, Chris Bantoft, was part of layoffs the CLEC made in early December. Leach has a long history working with the agent channel, going back to the early ’90s running programs at BTI Communications and Telco Communications Group. Before joining PAETEC in 2007, he was CEO of Covista, which sold some assets to PAETEC in 2004. Prior to being named South region president, Leach oversaw the authorized agent sales channel in the company’s South, South Central and Mid-Atlantic regions. PHONE+ spoke to Leach in early December. What follows is an edited transcript of the full interview.

How will the layoffs impact indirect channel support in 2009?

Obviously with everything that’s gone on in the economy, everyone is looking at rightsizing their company. Everyone from Obama on down is looking at a difficult year in 2009. One of the smaller changes was in the indirect support. We will continue to provide indirect channel support that we have in the past.

We will roll out a product portfolio early in the ’09 year. It will include former McLeod, so we have a unified product set and commission structure across the country.

We are looking at ways to allow agents through an agent portal to do more things on their own, which will hopefully better the support they have gotten from PAETEC and they won’t see degradation as we go forward in 2009.

Will there be fewer people in the indirect channel support team?

No, it’s remaining constant.

After several recent channel leadership changes, how are you going to maintain stability in the program?

Chris [Bantoft] has been looked at as the leader of the group. Jeff [Howe] stepped in still working with Chris in a supportive role. Chris has been the leader and the driver of the channel — both internal and external — for a number of years now. That’s been pretty stable. The landscape beneath Chris has changed over the years as we have grown in size through mergers and acquisitions and organically. I’ve worked very closely with him over the last few years and leading a number of the initiatives. We feel it’s a pretty seamless transition from him to me in that the landscape that reported up through Chris now will be reporting to me. I’ve kept close ties with all those people. Even though Jeff was in and contributed in the short time he was here, Chris was the leader of the group. Now, it will be a transition to me. So, we think it’s been fairly stable.

How is the economic climate impacting competitive carriers like PAETEC?

It’s impacting businesses in general and it’s going to impact our existing base, but we also think it’s going to present an exciting opportunity for PAETEC. We have been through the downturns before and the competitive providers that offer more competitive services and are more flexible really have a good opportunity to take business [away from the incumbent providers]. …We think there is an opportunity for us to compete on deals we wouldn’t have got a shot at to begin with.

We also have some really flexible opportunities to help business in these difficult times where capex spending and dollars are a concern. We have an equipment-for-services program, which allows equipment to be subsidized by part of the telecom spend. It’s a unique product that will give businesses an opportunity to offset some of their concerns by using PAETEC to get an innovative service as well as helping them with their capital dollar issues as they go into the new year. We think it will offer a unique alternative and make PAETEC an even better choice.

How will the economic crisis impact the way you use the indirect channel?

Well, we are always looking to do more with the indirect channel. … [W]e are not going to look at using it in a different way. We are going to look to get more out of the channel by making ourselves easy to do business with by giving agents more access via an agent portal to create a lot of their own paperwork and products and proposals and by doing that hopefully make them more efficient and allow them to sell more of PAETEC’s services. And, pushing and making sure they understand the equipment for services program and the benefits that will drive for their customers and then continuing to be flexible and providing quality service that we provide. If we do that, the economic impact will lessen to a good degree and get the message out, which we think is that PAETEC offers products and innovative services, we will win more than we lose. If we do that, it will negate a lot of the impact of what’s coming in ’09.

Some carriers are cutting agent contracts. Are you doing anything similar?

No. I think PAETEC has always been very concerned with driving the revenue commitment toward the commission percentage, so people that commit more and build up a bigger base with us get paid more money. The smaller agents that commit to a smaller dollar amount get paid smaller. We think that makes a lot of sense. On a quarterly basis, we review those contracts to make sure those agents are making those commitments. The ones that are providing the larger revenue and building a bigger base are getting paid more and the lesser ones are paid commensurate to what we think they are providing. On a quarterly basis we review and make sure we are paying per the contract. We have no plans to across the board reduce the agent contracts going forward.

Do you plan to continue to recruit agents?

We think there is a whole segment of agents we can do a lot better job with as we transition to more of a data products set. We are always aggressively looking for new agents as well as looking for better ways to support our existing base.

What will you say to recruit agents or to reassure them about the strength of your company?

Our results are public. When you look at the result of the company, you’ll see a company that has a strong financial foundation that has been cash-flow positive for [23] consecutive quarters — a number that none of our peers can subscribe to. I think PAETEC, when anyone looks at it and is concerned about what is going on in the industry and economically, you’ll see a company that is sound and has a great financial structure and is in a position to handle the economic hit we have coming at us. We think we will be stronger at the end of the day than a lot of our competitors because of that.

Do you have any immediate initiatives/goals for the PAETEC channel?

We are very sensitive to the fact that as we have grown very quickly over the last few years we need to continue to make ourselves easier to do business with, not more difficult. We are working very hard behind the scenes via the Web and a number of other things we have brewing to make ourselves easier to do business with.

[W]e are looking at an agent bundle that will help us sell to the lower end of the base — we’ve been middle to up-market primarily — it will be a seamless bundled product … and be competitive.

[We’ll have] more focus on just making ourselves easier to do business with, making it easy to get a price quote, paperwork and providing any kind of support for the agent to help close sales that we think we do better than a majority of our competitors. That’s our focus. It builds on what Chris has done and continues into the new year with an eye toward making ourselves easier to work with.

How might agents best weather the economic crisis?

The agents will want to make sure they are putting their business in a place where it’s going to be well cared for and safe. I think when you look at PAETEC, our structure, our financial structure is one that can sustain what we have coming in ’09 in terms of the economy and that we will be stronger at the end of the day than a majority of our competitors as we get through that. From a concern standpoint about what’s coming, I think we offer a safe haven for the agents based on our financial structure.

Beyond that they are looking at their business as we are looking at ours and making sure it is right-sized to handle the economic instability that exists right now. If we can make ourselves easier to do business with, that will negate the agents’ ability to have to hire people to work with us. Focusing on those two things will serve us and the agent community well in ’09.

Do agents have any reason to be optimistic about 2009?

I know as the economy tightens, the carriers, they may look to the agents for more business because there’s less overhead with regard to salary and benefits to support the channel. They may be getting things pushed to them they otherwise might not have.

We plan for the worst and hope for the best. 2009 will be a difficult year across the country. Everyone is projecting that. We also feel very good about our value proposition and what we think we can provide in ’09. We think PAETEC is positioned to withstand that, but come out stronger on the other end of it.

Is there anything else you’d like to add?

We really thank Chris for his leadership over the last number of years he has led the program. I’m looking forward to stepping into his big shoes and carrying on the leadership that he has provided at PAETEC.