Agents, You Can Go Home Again

By Tara Seals

The residential market traditionally has been a long-distance target for agents, and while lucrative during the phone wars of the 1980s when the Big Three owned the market, the bottom fell out as per-minute rates fell below three cents per minute. The “resi” sale no longer was worth an agent’s time, unless you could string many of them together for a volume play.

That’s all changing thanks to a proliferation of new services that have consumers logging higher-than-ever average revenue per household. VoIP, cellular and all-youcan- eat local/long-distance bundles are selling like hotcakes … and luring agents back to the home.

The biggest opportunities in the residential space are bundled offerings.”That is certainly the moneymaker, especially for the RBOCs being able to bundle long distance,” says William Stofega, an analyst at IDC.

“As competitive telcos back away from the residential market and competition for individual components decreases, price compression will be increasingly weighted toward competing bundles between cable firms and the Bells,” says Judy Reed Smith, CEO of analyst firm Atlantic-ACM. “Look for bundle wars between these groups to drive greater broadband penetration, and for the cable firms to more aggressively pursue broadband voice services.”

ClearTel, Epicus, Talk America, AT&T Corp., Lightyear Communications Inc., MCI, PowerNet Global Communications and others also offer unlimited local and long distance for around $50 per month.

nii Communications Ltd. has rolled out two brand-new local and long-distance residential offers in Texas and California. Mike Vasquez, agent program head at nii, says there are two flavors: a la carte, and a bundled package that includes call management features, voice mail, unlimited domestic long distance (provisioned on the Qwest Communications International Inc. network) and local (based on UNE-P with SBC Communications Inc.). It also includes call hunting if there’s a message and an 800 number with unlimited inbound calling, all for $49.95. “That’s setting the hook pretty deep in the cheeks,” says Vasquez.

However, a shadow hangs over the all-you-can-eat plans. “The hottest products out there, both in a positive and negative way, are the UNE-P bundled products,” says Rick Stambaugh, president and CEO at master agency Fionda LLC. “But we don’t know if that will last.”

Fionda is an agent for MCI’s The Neighborhood bundled UNE-P local and long-distance product. Recent regulatory changes may mean UNE-P, which allowed competitive local service providers to lease facilities from the Bells at federally mandated, discounted wholesale rates, may be eliminated.

“This is an issue we’re watching carefully, and we’re going to have to navigate around some uncertainties; in my personal opinion, I think the Neighborhood product will continue to exist, as we know it today, in the short term,” says Stambaugh, who predicts a rash of consolidation among CLECs in the wake of the UNE-P decision. “The Neighborhood is an incredible brand and it’s really an asset, and MCI has done a really good job of protecting and conditioning that brand in the marketplace, so if they keep it they’ll compete and do it as cost effectively as they can. If they’re consumed, the brand may endure.”

Vasquez is cautiously optimistic. “SBC and the other folks are saying they’re not going to do anything until after the election,” he says. “But we’re going to seek other paths of diversification, obviously not deviating very far from what we’re doing. We’re hoping [the RBOCs] will be realistic, but even if they [try and price us out] we’ll still be able to maintain a good product.”

With local number portability, some are finding consumers fleeing landlines for cellular-only local and long distance service. Long-distance reseller Pioneer Telephone’s CEO, Pete Bouchard, says the trend is prevalent in Tier 1 cities. “Cellular is built out so well in most cases that it’s toll quality,” he explains. “Agents digging for customers in a Tier 1 market, they’re going to churn them. You take AT&T or the other big carriers, and it’s tough because the quality on a cell phone in those areas is just as good as landline service.”

Stambaugh says Fionda partners with another company to offer all carriers, all plans and all phones. “We have seen a trend towards people going cellular only and that will continue,” he says. “Number portability has not had the impact that everyone thought it would out of the gate, but now they’re getting more people switching. A lot of people wanted to see what kind of teething problems would happen with number portability and which carriers would actually be good at being able to port over the number and which ones would not. So, wireless is definitely having an impact, but the reality is that there’s still a lot of copper in the ground, and there are still a lot of people with telephones in their homes. I don’t think the market’s going to dry up entirely any time soon.” He counsels agents to expect aggressive campaigns to stop attrition.

“You’re going to see loyalty programs where your phone bill gets you points, much like you have with some of the credit card companies, or you get a rebate on the phone bill,” he predicts. Another hot item for consumers is voice over IP. Touted as a cheaper, more feature-rich replacement for traditional local service, VoIP can be an easy add-on to a broadband sale for an agent and may gain more traction depending on UNE-P developments.

“Partners have gone through the learning process with their customers in getting them into the Internet era with access, so this is just another opportunity that will provide them with a lot of revenue,” says Chris Petrovic, vice president of business development and strategy at voiceless Inc.

Vocal’s GloPhone includes voice mail, call forwarding, call waiting, caller ID, voice2email, buddy lists and other enhanced calling features, and is for global peer-to-peer VoIP calling, along with access to PSTN. With an adaptor, GloPhone users can place or receive calls from a landline or a cellular phone.

Petrovic says the VoIP offer gives agents and resellers plenty of advantages. “Our product isn’t limited by geographic boundaries, so that kind of leads into one of the big value propositions for partners is that they likewise aren’t limited by geographic boundaries. Our service is available to anyone with a broadband connection and they can get a U.S. phone number - and soon a Canadian number - so their market suddenly opens up exponentially. Their offline efforts can now be complemented with online efforts that are agnostic to geography.”

As VoIP continues to proliferate, price is no longer the differentiating factor. “People are more attracted to value-added features, and what their VoIP phone service can do for them from a feature perspective,” says Petrovic. “That starts with the fact that it’s portable, you can pick any area code we offer, and calling features are offered for free as part of the plan.” Some are skeptical. Tom Klein, president of North Charleston, S.C.-based master agency PhoneDog.com, says VoIP has yet to be widely accepted, despite the hype.

“Broadband voice over IP has gotten a lot of press, and everyone seems to know about it; but in the residential realm, other than people that are tied to their computers, it’s not getting to the masses yet,” he says. “No one’s ready to make it a single source for voice calls, except for international calling. We’ve noticed a big change in that area.”

Complexity still plagues VoIP, he adds. “When people realize the inflexibility of VoIP, even a limitation on having one phone somewhat close to the computer, it’s a problem,” he says. “And the money savings certainly aren’t as much as they would lead you to believe, certainly when you average residential customers only spending $14-$18 per month on long-distance calls and maybe another $25 or $30 on local, and VoIP is $40, it’s not much of a savings when you think about all the things you have to give up, like toll quality.”

Speaking of the PSTN, TDM-based long distance is no longer a dead-end for agents either. Taking a page from both wireless buckets of minutes and flat-rate bundles, PowerNet Global recently launched Power 3000, a nationwide residential dial-around plan that provides 3,000 anywhere, anytime domestic long-distance minutes for $29.95 per month. PowerNet Global will market the service through its 2,000 nationwide agents and affinity groups.

“We like to keep it simple for our customers and free them from the restrictions of most dial-around plans, while offering a single monthly charge for the budget conscious,” says Larry Moses, executive vice president of sales at PowerNet Global. “Customers appreciate calling as often as they want with the peace of mind that comes with paying the same amount each month.”

Customers of Power 3000 will access the calling plan using 10-10-813 from a registered phone line, and the plan carries no startup fees or per-call connection fees. The service will be available out-of-network via a toll-free number at $39.95. International calls will be charged per minute. One company has found a way to make even traditional standalone long distance a viable service to sell to consumers. Pioneer Telecom specializes in it, and sells via an agent channel.

“For residential customers, we’re looking for customers that call internationally – we have over 30 percent of our residential customers that make calls internationally, while the traditional reseller has no more than 2 percent,” explains Bouchard. “Then we look for folks that call the same locations month in and month out, and we offer Pioneer-to-Pioneer calling where they can call for 2.5 cents per minute state to state. When we lower the rate, those callers will get 1.9 cents per minute. So our customers really take a strong look at making a change before they go to their cell phone or VoIP.”

Although it possesses a well-defined target market, Pioneer still has to make residential lucrative with such low rates. “Your second-tier carriers, your resellers, had pretty much stayed away from residential, predominately because of the churn and the bad debt,” says Bouchard. “We look at it as an opportunity since it’s a very uncompetitive marketplace, and there aren’t a lot of players in it. We figured if we could get the bad debt out of the way, we could offer very strong pricing for residential. So we built a base of customers that pay by credit or debit card on auto pay. We are getting ready to lower interstate rates in the United States to 2.7 cents per minute, no monthly recurring charge. Because we keep our bad debt at sub-one percent, we can afford to bring rates like that.” The reseller is making its mark and growing: It turned up three Nortel DMS 250 switches in July.

Another factor for agents selling long distance is the ability to get volume sales thanks to the Internet. “The Internet for long distance has been a huge change,” says Klein. “Internet sales are increasing on all products, but long distance seems to be a very, very easy way to switch. People don’t need to be calling customer service departments; they certainly seem very comfortable doing long distance over the Internet; with other residential services, like cellular phones and VoIP, they tend to want to speak to an agent directly before making any decisions.”

Local, long distance, cellular, VoIP, broadband…With so many communications options, the consumer is firmly in charge. “It’s the consumer wagging the dog now,” says Stambaugh. “Agents need to realize it’s about the customer, and once they figure that out, they’ll be very successful.”

While many agents have focused on high-margin business customers, consumers also are ripe targets for more lucrative bundles of wireless, local and long-distance. Find out how to use relationship selling and tap into the residential market in the session titled, “Partners Hit Home: Residential/Consumer Opportunities,” at the Fall 2004 Channel Partners Conference & Expo, Aug. 30 – Sept. 1, at the Hilton Chicago. For more information, please visit www.phone plusmag.com/channelpartners/chicago2004.