What Does It Say About the Reseller Model?

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| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

What Does It Say About the Reseller Model?

TNCI filed BK, owing $10M. There have been a number of resellers over the years in this industry - and there will be more. Reselling is THE business model that everyone jumps on it telecom. What was UNE-P after all? Just a sales and marketing plan with your billing software and you were a CLEC. Even then, some of those guys - like Birch - went BK.

Bandcon, WBS Connect, Global Capacity, Alpha Red - are all examples of transit and transport resellers who exited. For GCG, it was via a BK.

NITEL has been reselling AT&T for a long time off a couple of air-tight wholesale contracts. Maybe they have it figured out about margin and auditing the bills.

The problem is that resale requires volume. Volume necessitates efficiency. Without both, it isn't much of a business.

The move to cloud is a necessity as well. There just isn't enough margin left in the T1 and DSL business.

Remember that MVNO is just another resale model and how many of those didn't work out? Unless you have a Value Prposition and value add-ons, it becomes a commodity game - and you lose. Plus if you can't reconcile the LEC bill, you are in trouble.

Another piece to keep in mind is that even over a short time frame like three years, the reseller contract with the carrier is usually static. Meanwhile, the carrier can lower its prices at retail at will. An example is AT&T Southeast raising the tariff rate on Metro Ethernet transport, but the price of MIS remained unchanged, despite the underlying fiber pricing almost doubling (at the 10 MB level). That will eat at a reseller's ability to sell product and meet any volume commitments for the contract.

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