Agents Drum Up Sales for CLECs

Posted: 01/1999

Agents Drum Up Sales for CLECs
By Gail Lawyer

Like competitive long distance companies, regional Bell operating companies (RBOCs) and
competitive wireless service providers, many competitive local exchange carriers (CLECs)
have been relying on outside sales agents to expand sales in their existing markets, as
well as drum up business in cities where they plan to build new networks.

Using agents "gets us a lot more feet on the street," says Jeff Blackey, vice
president of marketing at US LEC Corp., a Charlotte, N.C.-based CLEC that offers service
throughout the southern United States. "Our name is fairly new, so working with
someone that has an established base of customers helps us," he adds.

Earlier this year, US LEC had more than 40 agents selling service in its established
territory. In August the CLEC added even more feet on the street when it struck one of its
largest sales agent agreements with SETEL LLC, the networking division of Nashville-based
Southeastern Telecom Inc.

SETEL has more than 70 sales personnel in Florida, Georgia, North Carolina, South
Carolina and Tennessee. Along with its own networking products, SETEL will offer US LEC’s
local, long distance and enhanced services.

In addition to allowing carriers to have more salespeople, using agents is more
economical than hiring a direct sales staff. "It’s a really inexpensive way to open
up a market," says Brad Bono, eastern region president of PaeTec Communications Inc.,
a CLEC based in Rochester, N.Y. "Sure, you have to pay the agent. But you don’t have
to pay salaries, benefits or for office space."

Another attractive reason to use agents is the relationships they have developed in the
markets they serve. "Most agents are localized, so they know the community and are
known in the community. That makes them successful," says Tony Copeland, executive
vice president and general counsel at BTI Raleigh, N.C.-based Telecommun-ications
Services. BTI has had an agent program for seven years for its long distance service, and
recently has added local service to the product mix.

Many CLECs rely solely on their own direct sales force initially, but then develop an
agency program to attract business their internal staff might not be able to address.
However, at least one new CLEC is jumping immediately into the agency game. PaeTec, which
is not quite a year old, planned on using an agency strategy from Day 1. The reason:
PaeTec didn’t want to repeat the cycle that executives there saw happen in the long
distance industry in the mid-1980s, Bono says.

"Early in long distance, no one was using agents because they were having so much
success with direct sales. They thought, ‘Why should we cut agents in?’" Bono says.
But, he adds, there came a time when the long distance carriers realized that direct sales
weren’t addressing all potential customers. "We’re trying to circumvent that
cycle," Bono says.

Within two months of starting its program, PaeTec had signed up about 100 agents. These
agents now are selling PaeTec’s long distance service and preselling local dial tone in
markets where the company is installing switches, according to Bono. By the end of 1999,
PaeTec will have service in 16 markets along the East and West Coasts. In 2000, the
company will begin offering service throughout the Midwest.

Bono says PaeTec has had great success in lining up agents because they are seeking to
add value to their current offerings. "Agents have a nice book of business, but they
don’t have a local product," he says. PaeTec offers residual commission of 6 percent
to 10 percent, and provides the agents an intensive two-day training course to educate
them in all the facets of local telephone service. Plus, some agents want to have a
combined offering of local, long distance and Internet, so large facilities-based carriers
that provide end-to-end services, such as MCI WorldCom Inc., don’t steal their customers.

"Our main goal is to be a premier telecom company, a single-source vendor for our
customers," says Ginger Gaines, vice president of SETEL. In addition to being an
agent for US LEC, SETEL also sells the local services of NewSouth Communica-tions LLC, a
CLEC based in Greenville, S.C. Gaines says that working with the CLECs so far has been a
positive experience because she and the CLECs’ direct sales forces work closely together
to bring services to the end users.

Like PaeTec, WinStar Commun-ications Inc., Falls Church, Va., used agents from the
early days of its business. At first agents were recruited by the general managers in each
of the company’s different service territories. It wasn’t until 1997 that the company
created a national agent program. Now WinStar has about 350 agents that account for about
20 percent of its sales, says William Judd, WinStar’s national vice president of alternate
channels.

WinStar offers commissions of up to 22 percent, depending on the combination of local,
long distance, data and Internet services an agent sells. The CLEC also has a program that
offers upfront compensation on a quarterly basis. That program is used to attract new
agents or reward successful existing ones, Judd says.

ICG Netcom, Englewood, Colo., only began its agent program in March 1998. But the CLEC
has attracted about 111 agents who account for about 25 percent to 30 percent of all of
the company’s local service sales, according to Bonnie Wallenta, director of corporate
sales for ICG.

"Agents increase our opportunity to touch all portions of the market. No single
[channel] is the ‘be all and end all,’" Wallenta says. ICG’s agents receive upfront
rewards for selling local lines, and then are paid a monthly residual commission of 6
percent to 12 percent as long as the customer stays on the ICG network.

Not all CLECs have agency programs that make double-digit contributions to the bottom
line. But that doesn’t lessen the importance of using agents. e.spire Communications Inc.,
Annapolis Junction, Md., has had an agent program for the last two years that contributes
about 5 percent to its total sales volume each month. But the CLEC relies on its agents to
bring it business in areas where it couldn’t really do so on its own budget. "Agent
programs improve and expand our market coverage. It helps us dramatically, especially in
markets where we can’t afford our own sales force," says Richard Putt, e.spire’s
executive vice president, sales and customer service.

e.spire also uses agents to precede the company’s entry into markets as a
facilities-based carrier. Agents in those cities begin selling resold service before
e.spire builds its network. This in turn helps e.spire gain brand awareness and judge
customer interest in its services. For more than two years now e.spire has been using
agents, and currently has about 130 throughout the Southwest and southeastern United
States.

Gail Lawyer is executive editor of X-change Magazine, PHONE+’s sister publication
covering the competitive local exchange carrier industry.