Wholesale Channel: New PaeTec Partner Targets Resellers

By Tara Seals

Posted: 1/2002

Wholesale Channel

New PaeTec Partner Targets Resellers

By Tara Seals 

Facilities-based integrated communications provider PaeTec
Communications Inc. has positioned its wholesale channel as a complement to its other business segments. With the launch of a bundled solution tailored for resale, PaeTec offers resellers the same advantages as their retail counterparts.

Launched in November during the fall 2001 Association of Communications Enterprises conference (ASCENT), “PaeTec Partner” is a local resale bundle that offers local, long distance and Internet via one facility.

“We’ve been offering that on the retail side for the past three years,” says E.J. Butler, president of PaeTec’s wholesale markets group/network services. “Resellers that traditionally have only been selling long distance can upsell to local.”

The services are provided on a dedicated facility, so resellers can move switched customers, reducing underlying costs and creating customer stickiness, he says.

It also gives resellers a level playing field. “You’ve protected your account from getting cannibalized by retail companies selling against you with a bundle,”

Butler explains.

In the spirit of the times, the bundle comes as a red, white or blue option. Each option has flat-rate service, with price options based upon usage.

PaeTec also offers services a la carte. Options include circuit design and provisioning, onsite technical assistance for the cutover process and customer premise equipment (CPE) provisioning and maintenance.

Butler predicts more emphasis on providing resale solutions in the future. “If you look at access to capital, it’s very tight, so a lot of these entrepreneurs out there can’t get the seed money to install switches and back office, so they’re looking for companies they can partner with,” he explains. “They can go out and get the customers but they need a partner that is network-reliable for the backbone to deliver services. So the resale will drive the wholesale revenue and will continue to be a

key contributor.”

PaeTec boasts 1,000 employees, nine switches, service in 26 metro areas and $180 million in projected revenue for 2001. The vision of the wholesale group since being founded, says Butler, was to represent between 20 percent and 25 percent of that revenue. For 2001, the wholesale side brought in about $45 million.

“We never want to get to the point where we are 50 percent of the revenue, because then we start to look like a different model,” he explains. “Frankly, the way the Street values companies like ours, they put more value on a retail dollar than they do a wholesale dollar.”

Instead, he says, wholesale acts as a complement to the direct and agent sales channels.

“We utilize the network capacity during the off peak hours, and we leverage the back office intelligence that we built for the primary revenue source, which is the retail and agent side of the house,” he says. “We leverage the engineering, IT support and regulatory staffs to create an almost immediately profitable, low-maintenance revenue stream.”

Cost-effectiveness is an advantage for the wholesale division. Because wholesale customers have a higher level of technical expertise than retail consumers, the time spent maintaining accounts is less than it would be on the retail side, says Butler. He adds, the average wholesale account generates more money, meaning less maintenance per dollar for PaeTec.

Local services generate 80 percent of PaeTec’s revenue, but Butler explains, “We are truly an ICP, not just a CLEC.”

The company deployed Lucent Technologies’ switch to provide long distance and local from the same component. PaeTec provides a range of services, including toll free, long distance, DID and DOD services, T1s and PRIs.

“Whereas other CLECs provide local and resell someone else’s long distance,” says Butler, “being facilities-based is a key differentiator for us on the wholesale side because accounts know they can get both.”