Posted: 04/2002

No Pain, No Gain
Local Service Agents Sweat the Small Stuff

By Josh Long 

A $100,000 SWITCHED LONG-DISTANCE customer base can evaporate in two years, under typical attrition rates. This is a primary reason why master agent Vince Bradley encourages subagents to sell businesses stickier services like local voice and data services.

“A lot of agents still aren’t selling local and I think it’s stupid,” says Bradley, president and CEO of Malibu, Calif.-based master agency World Telecom Group. “If it’s done right it can be a tremendous value-add to the client and to your own customer base.”

Or, it can be a real pain in the butt.

Veteran agents say marketing local services is far more complex than selling 1+. From understanding price differences in tariffs, to researching how business customers want to route incoming calls via the main line, to finding out whether a supplier’s switch is capable of provisioning a T1, there is much more drudge work involved in the local services business than flipping a switch. A lot can go awry during the process, threatening to alienate agents from their business customers.

Still, master agents say their sales reps can earn good coin selling local services through the Bells, Bell and unbundled network element-platform (UNE-P) resellers and facilities-based competitors. Bradley says they can easily double their existing base if they up sell local services into it. “I would say, at minimum, that it could be at least 30 percent of their revenue. If a good agent works full time for three years, they could be making $10,000 per month; local could be at least $3,000 per month,” he says.

Rick Dellar, co-founder of master agency Intelisys Inc., concurs. He says it’s reasonable to expect an average independent sales rep — who’s worked in the field a few years and is earning $60,000 a year, for instance — would book 20 percent to 25 percent of revenue through local services.

As economic conditions force businesses to consider the return on investment in technology, they ask, “Can I live without it?” The answer regarding local telecom services obviously is “no.”

Barbell Lifting

Agents can provision local services directly through the Bells, but the incumbents often are not their first choice. The Bells, which typically retain fewer outside partners in the local markets than resellers and competitive carriers, often offer agents a one-time stipend rather than a recurring payment each month based on current business, say agents.

On the other hand, more agents are turning to the Bells as competitive carriers drown in the perfect economic storm. Agents concede some business customers justifiably worry that mission-critical applications are in jeopardy as the bankruptcy

filings continue to mount. Iowa-based master agency Access Data Now sells local services only on behalf of the Bells, grossing several millions of dollars a year in local business, says president and CEO Leigh White. She says the opportunities to sell local services are endless; the company can’t expand its subagent base fast enough.

“The potential is limitless depending on how much time and effort you put into it,” she says.

Why doesn’t the agency partner with resellers and competitive carriers? White tried that before with two long distance resellers — and got burned. The resellers shut down operations and in one case did not give customers notice, she says. Consequently, agents lost commissions and their credibility.

A master agent who sells local services through Bells as well as through UNE-P resellers voiced an opinion shared by other reps who spoke to PHONE+ off the record: “I don’t even like Verizon,” the agent says. “They have been ripping customers off for decades because they are the monopoly of choice, but when you pick up the phone it works.”

Platform Diving

Of the two more lucrative sources for local service, UNE-P resale may prove a better fit for smaller independent reps than bigger outfits. UNE-P presents a limited revenue opportunity because the sales reps are marketing plain old telephone service as opposed to higher-margin data services, Bradley says. Plus there is the risk of penalties if agents move a customer from the ILEC to the UNE-P provider in the middle of a contract term. Sue Platner, co-founder of consulting firm The Northridge Group, explains the penalties can be as severe as requiring the business to pay the remainder of the contract. On a T1, that could run in the thousands of dollars, negating any savings the customer would realize through a UNE-P provider.

A UNE-P provider’s local-loop charges vary greatly depending on the state and geographic region, Platner says. But the “contract issue is the biggest problem” hurting UNE-P providers, says Brad Hamilton, product manager at Miami-based UNE-P reseller IDS Telcom. If an end user breaks a contract term, IDS Telcom often must pay back the discounts it received over the life of the contract, he says.

Still, UNE-P has its place. Bradley favors selling local voice services through a UNE-P reseller when a business customer has multiple offices; UNE-P is a great solution for retail chains that want one bill and can’t justify higher-margin T1s for their satellite offices, he adds.

New York-based reseller NUI Telecom Inc. resells Bell South and Verizon local services and books a limited amount of local services business through UNE-P resale. “You really have to look into the tariffs and make sure it’s beneficial,” says Tom McCrosson, vice president of alternative channels at Bedminster, N.J.-based NUI Telecom.

In a pure resale model, the Bell gives the reseller a set discount based on the customer’s existing calling plan, McCrosson says. Under UNE-P, the reseller is assessed a charge based on metered usage and line costs. If a business account fits the right profile, NUI Telecom can earn more money off UNE-P than pure resale, and offer the business customer a better deal.

However, McCrosson says a reseller must analyze carefully a customer’s calling pattern and plan with a Bell before determining whether to put a customer on the UNE-P platform. NUI Telecom moves a customer over to the pure resale model before determining whether to provide service through UNE-P, McCrosson says.

False Starts

Bradley says he prefers to book business with facilities-based competitors because he can provide customers integrated services rather than basic telephone service. Master agents say that’s where they can make more money.

Still, individual sales reps have had their fair share of problems with competitive carriers. Among the complaints: horrible customer service, service disconnections, problems making and receiving phone calls, delinquent payments to agents, sudden withdrawals from markets due to financing problems and far too many bankruptcy filings.

Bradley says agents can forge successful relationships with competitive carriers if they have the resources within the agency to track orders throughout the entire process. Smaller agents often don’t have the personnel and back-office systems to monitor the process constantly as competitive carriers move customers from Bell facilities to their own, he says. That is partly why Bradley thinks UNE-P resale is a better fit for smaller organizations.

“I think — in terms of opportunities for agents — if you are a one-man show, UNEs are good,” he says. “If you are a master or bigger operation, then I think CLEC services are better because you can make more money.”

But the bigger cut can come with some risk. Solomon Sandel, director of operations at Brooklyn, N.Y.-based master agency Delson Communications, says he’s had his share of problems with competitive carriers, including Broadview Networks and Allegiance Telecom Inc. For instance, he says, a business customer had problems making and receiving phone calls for a few weeks after the company was linked to Broadview’s facilities. Sandel says he switched the customer back to Verizon, but the customer could not take advantage of a 90-day money-back guarantee because Broadview had been reselling the Bell’s service before moving the customer onto its own switched facilities.

Because of this kind of experience, Sandel says he only will sell local services directly from a Bell or UNE-P model.

Such a problem is “an exception rather than the norm,” according to Dave Thomas, executive vice president of sales and marketing at Broadview. He says 98 percent of the lines provisioned don’t experience a problem; there is a less than 2 percent failure rate.

Still, Sandel recently received this message from his Broadview agent manager: “I know [you] may not have had the attention you duly deserved in the past.”

Thomas says the company is improving its year-old agent program, making its product offers and compensation plan competitive. He says he wants to generate 25 percent of new lines through the agent channel by the end of the year. “Has their been some hurdles in dealing with agents? I would say maybe,” Thomas says.

According to agents, the instances are not rare. Sandel says he had a similar experience with Allegiance Telecom. Sandel claims one of his customers, Source One Trading, waited nearly eight months to get a phone line from Allegiance. To be fair, Sandel was one of the company’s first agents, selling services during the last quarter of 2000 and the beginning of 2001 before the company had a formal channel program.

Allegiance officially rolled out an agent program last fall, when it had the personnel and infrastructure to properly administer a channel program, says Tony Parella, the company’s executive vice president. The company says it had more than 350 agents as of last December.

“You go through some startup growing pains,” says Parella, the company’s first employee. But he says Allegiance is well equipped to accommodate agents. For instance, last fall the company assigned an agent manager to each market. In addition, the company is 100 percent electronically linked to the Bells’ OSS systems, which allows Allegiance executives to track an order’s status from the moment a customer decides to switch over local service to when the line is changed.

Parella says Allegiance is among the few competitive carriers with a sound balance sheet. Having raised $700,000 in equity and $1 billion debt, the company has one of the healthiest equity/debt ratios of any telecom firm in the country, he says.

But Allegiance’s financial story is atypical in an industry that continues to record an unprecedented amount of bankruptcy filings. What’s more, alongside the financial troubles are service problems.

Agents have been on guard for more than a year.

“We didn’t want to ruin the reputation of our company just to go out and market a CLEC’s product,” says Rob Langlois, president of Scarborough, Maine-based master agency Coastal Connections Corp. With a CLEC, “It’s not uncommon to have monthly service outages.”

Steve Smith, CEO of San Diego-based master agency Optidial Communications Inc., says downtime could result when a business customer is switched over from a Bell to a CLEC. For instance, a competitive carrier may be slow to respond to a problem, taking a few days rather than an hour to fix a local service glitch. “It’s very time-intensive with a switchover and as an agent you have back-office support and you have the customer calling six times a day and you can’t get an answer from the CLEC as to what’s going on.”

Facilities-based carriers aren’t the only providers that have goofed, say agents. Optidial’s Smith says last spring the agent signed business with more than 30 customers to provision lines in San Diego through UNE-P reseller Talk America. Then in June, he received a letter that the orders were on hold and could not be processed.

“Obviously that lost us some credibility,” he says.

The agent eventually had to cancel its orders, says Mona Queriones, the top agent at Optidial. The ramifications: Business customers told the agency not to contact them again, she says.

Talk America spokeswoman Ruth Abeshaus responded: “We would never do that. We would never say go ahead and sell an order and sign up a customer that couldn’t be provisioned unless the agent misunderstood the areas in which we can sell under UNE-P.”

Pockets of San Diego fall outside SBC’s Pacific Bell territory, she says. A Talk America sales executive does not recall the case “and would not take an order in a non-RBOC territory we don’t service,” Abeshaus reiterated.

Apparently, the gain is worth the pain. Smith says Optidial began processing orders through Talk America again in 2002.