PARTNER CHANNEL: Agents Rate Carrier Partner Programs

Posted: 9/2003

Agents Rate Carrier Partner Programs
Unprecedented Research Reveals Channel Priorities

By Dr. Judy Reed Smith

Agents represent an increasingly important sales channel for
telecommunications service providers. As companies tighten their belts and seek
creative ways of maximizing their sales budgets, they gravitate toward solutions
that can increase revenue without increasing fixed expenses or capital
expenditures. Ironically, the sluggish economy that created a rich pool of
talented people for internal sales opportunities is driving telecom firms to the
agent channel. Over the past decade, large indirect sales groups have emerged
and evolved. These sales teams typically began with skilled salespeople who
developed and cultivated relationships with other sales pros who sold for them.
They paid these subagents a commission, keeping a slice to cover their work on
contracts, interfaces with carriers, training and administration. Today, many
master agents are evolving into significant companies with more than 300 agents
selling for them, contracts with 20 to 30 vendors and their own software systems
managing and dramatically improving their interfaces with carriers. This
level of sophistication increases the attractiveness of these agents to
providers as it reduces the hassle for carriers and resellers to add these
channel partners to their sales forces.

These channel partners have become so attractive, in fact,
that contracting with them is becoming a matter of competition. Atlantic-ACMs interviews with channel partners for the 2003
Agent Program Carrier Report Card reveals several large channel partners are
not entertaining new suppliers because they are at the limits of their support
capabilities.

It is not surprising, then, that commission structures for
master agents are moving upward especially from suppliers with lesser-known
brands. Nor is it surprising that many of the carriers interviewed for the study
were considering changes in terms of their partner contracts, such as ongoing
payments with evergreen clauses to keep revenue flowing while customers remain
with providers, up-front payments and other incentive programs, such as travel
opportunities and prepaid credit cards.

For its partner program report card, Atlantic-ACM assessed 220
individual provider rankings by master agents (defined for the purposes of the
study as organizations with subagents and direct contracts with one or more
carriers) representing nearly 3,000 subagents and hundreds of millions of
dollars in annual telecom revenue.

Surprisingly, network which often equates with brand edged out issues
such as price and contract terms in priority. However, all three received
overall importance ratings of 8.5 or higher on a 1-to-10 scale (10 = highest
importance). Also weighing in with overall importance scores of 8.0 or higher
were commissions and incentives (nearly as important as the first three with
ranking of 8.41), technical support, financial stability and product
provisioning speed. Behind these areas were network reach, sales support,
marketing support and product portfolio diversity. Even the item with the lowest
relative score portfolio diversity is considered important with an overall
score of 6.47

In terms of execution, the median overall score among
providers on a 10- point scale (1=Very Bad, 5=Average, 10=Superior) was 5.65.
While no provider exceeded seven points, ACC Business, which scored the highest
overall, reached the seven-point threshold with an overall score of 6.86. Other
carriers scoring higher than the median in overall score included AT&T
Corp., SBC Communications Inc., Sprint Corp. and other providers, which is
a pooled score for companies that were evaluated by fewer than 20 percent of
respondents.

Five main areas were studied for the 2003 Agent Program
Carrier Report Card: Contract Terms, Conditions, Commissions and Incentives;
Support (Marketing, Technical, Sales, and Provisioning); Products and Pricing; Network Quality and Reach; and Carrier and Channel Stability.

Contract
Terms, Conditions, Commissions and Incentives.Within
each of the broad categories, votes were cast for 36 different companies,
ratings in key subcategories reveal that providers strengths and weaknesses
vary widely. In the main category of contract terms, for example, a
miscellaneous group made up of other providers topped the field, followed
closely by ACC Business and then SBC. In the subcategory of flexibility in contract negotiations,
however, Covad Communications Group Inc. pushed its way into the top three.
Likewise, Global Crossing Ltd. shot up to a top-three spot for contract renewal
features and MCI made it into the top three for competitiveness of commission
rates. This story of varied strengths and weaknesses of carriers by category is
clear throughout all 24 subcategories of the evaluation.

Additionally, in each category, anecdotal interviews sometimes
revealed deep anger towards one carrier or another and tales of customers or
commissions being stolen away by insensitive carriers. Interestingly, however, even when a disgruntled agent voted,
he or she gave the provider(s) in question high marks in certain areas despite a
negative experience in another. Therefore, many variations show up in the detail
of the survey.

Support (Marketing, Technical, Sales and Provisioning). In
the support category, overall no one carrier distinguished itself significantly
against the others, with Sprint slightly ahead of Covad and ACC Business and the
other providers a hair ahead of all. Atlantic-ACM likens this
miscellaneous category to AVIS in the rental car market: they try harder with better support, because the partners, in
many cases, are their only sales channels. Also, when the other is a small provider, master agents
would not be likely to work with it unless it was exceptional. On the flip side,
master agents may continue to work with big brand vendors through less ideal
conditions because the branded product is an easier sale to close than a lesser-
known companys product.

Looking beyond other providers, ACC Business and Sprint
show strength in product provisioning. Within the support category, Sprint led the pack for
helpfulness of training programs, while Covad pulled ahead slightly in
responsiveness of technical experts and Sprint inched ahead for ease of access
to information.

Products and Pricing. In the
products and pricing area, SBC slightly outscored the rest of the field overall
an outcome that was reflected in large part in subcategory scores. In a
measurement of the ease of closing sales with a providers products, SBC had a
lead over Covad, which was its nearest competitor. In another subcategory
however, SBC dropped to third behind other providers and Global Crossing in competitiveness of pricing.

Network Quality and Reach. It is
interesting ACC Business edged out Sprint and AT&T for the top ranking for
network quality, when we assume ACC Business uses the same network as AT&T.
All three were rated in the excellent category. For reach, the top spots
went to the long-term interexchange players AT&T, MCI and Sprint as
well as ACC.

Carrier Stability. Because of the
financial challenges that have faced telecom companies recently and some
carriers on-and-off commitments to channels, carrier stability was rated. Financial stability, commitment to the alternate channel and
the ability to deal with channel conflict were ranked as important to channel
partners. For financial stability, the two carriers in bankruptcy
MCI and Global Crossing as well as Qwest Communications International Inc.
(with threatened financial issues) and even Covad, now out of chapter 11 and other
providers all weighed in under the median for financial security. As you
would expect, Verizon Communications Inc., SBC, Sprint, AT&T and ACC
Business were rated as relatively secure financially.

There is more to the story than can be covered in this
article, such as who was at the bottom of each category with weaknesses that
need to be addressed. Likewise, there are many tales of the strengths that
providers may turn from good to great. As more companies dive into the agent
channel, channel partners will increase their influence, pulling the best sales
people with the incentives and commissions they enjoy. Contracts will heat up
and service providers will compete hard for the attention of the strongest
players. This critical channel deserves the attention of providers top
management. Atlantic-ACM will continue this research with an annual shared
company study to draw that attention and help providers and agents work together
effectively.

Dr. Judy Reed Smith is CEO for Atlantic-ACM, a strategy
consulting firm serving the telecommunications industry. Information for this
article came from Atlantic-ACMs new study, 2003 Agent Program Carrier
Report Card.