Recently in commissions Category

I received an email yesterday through my website contact form. From Dennis  asking me if I was a direct agent for Paetec. (I'm not; I sub through Microcorp). I reply that I am a sub-agent and ask why. His reply: "Because I'm an agent for PaeTec and I'd like to talk to you about our sub-agent program."

I explain I already am a sub-agent. His response: "I understand that and am interested in your commission structure. I'll cal anyway if you don't mind."

The fact is I did mind. I hate this crap in our industry. I email him that I think poaching agents is not very nice and that as a founding member of an agent association, TCA, I feel that integrity and ethics are an important foundation of The Channel. His reply: "For the record, I was not poaching other people's agents, I happen to see you web site and noticed the PaeTec representation so i thought I'd introduce myself. Besides that, I didn't know it was unethical to solicit other peoples agents; I thought that was what most would consider the free market system. Thanks your your input anyway; I was going to give you a lead for fiber but under the circumstances, I suspect you are well set in that area as well."

He teaches Technology Management at a local college and has been in the business many years.  It irks me. 

What's was going to be his pitch? I'll give you two more points if you move your business over? Does he think that I have no integrity? Does he think that my relationship with my Master Agent is based solely on commission points? 

The TCA spent some of 2009 composing a Code of Ethics for Agents which included the following:

• Honesty and Integrity are the foundation of an Agent.
• Agents should educated on the solutions that they propose to customers.
• Agents should always have the best interest of the customers at heart.
• Agents shouldn't churn Master Agencies.
• Every dealing of an agent - whether with a customer, prospect, carrier, master agent, vendor or other agent - should be performed with the utmost of respect and integrity.

Yesterday was a big day for The Channel. Two separate acquisitions occurred with both takeover companies expressing interest in the Channel of the company being bought.

First, we have GTT buying WBS Connect. WBSC is just a reseller of Transit and Transport with about $28M in revenue. It was bought for about $1.8M in cash and notes plus $600K in stock. A spreadout payment over 18 months. WBS Connect had 900 customers  (ARPU calculated at $2600 per month). Lots of hype about POP's and lit buildings touched but at the end of the day WBS Connect was just a reseller pushing IP pricing lower (i.e., in my experience, they sold on price. Get your best deal and I will beat it by $1/MB). If that's the sales approach, what value is that? I won't rant here. I'll let it speak for itself.

Second, ILEC Windstream (formerly Alltel combined with Valor) bought Nuvox. Nuvox was a combo of FDN, NewSouth and Nuvox. Apparently, Nuvox had $180M in debt with 90,000 customers bringing in $500M in revenue (ARPU of about $500 per month). Windstream will issue stock valued at $183M and pay $280 million in cash for $500M in revenue and access to business cutomers outside its footprint. With cellular assets an ILEC like Windstream would be swimming in the EarthLink pool: declining revenue from a declining customer base. The only way to attract new customers is to go outside its own region - or buy a cellular company or a cable outfit (both of which cost way more than $500M).

Nuvox pays out between 12 and 18 points to its Channel agents. Many people call me wondering how they do that when they sell PRI's in many markets for $400. I have no idea. One thing that stands out is that the $95M loan in 2006 grew to $180M in 2009, some it from its FDN acquisition in 2007, but how much because they sell underwater? Nuvox burned through nearly $500M in VC funding as well. 

It sounds funny but on the same day the two companies famous for driving the price of telecom down are acquired - and the Channel is given as a reason. Is this just a bunch of order-takers or is the state of the economy the reason that price is the main object (instead of value and reliability)?

Atlanta based Telecom Master Agency announced at their Annual One-on-One event that they would be providing Commission Insurance. The details are coming (Brad Miehl said in November), but it looks like Evergreen may get a new look. Is this more Master Agency 2.0 innovation? Looking out for the agent more than ever.

UPDATE:

We at MicroCorp want to make sure there is no artificial ceiling in the amount of carrier business you entrust under our care and management. You should have complete confidence that you are going to be paid no matter if you are placing your first order or your one thousandth order with us. The scale of your business with MicroCorp should not matter and it is up to us to remove any risk as your base continues to grow. Even if this risk is highly unlikely to ever even occur.

Therefore starting today, we will be launching our Commission Assurance Program™. MicroCorp will be the first and only Master Agency that gives our channel the legal protection and ownership of their MicroCorp commissions in the unlikely event the company experienced any type of financial distress that puts your income stream at risk. In other words, if MicroCorp went out of business, the Commission Assurance Program™ would kick in and your revenue stream would be protected. Therefore, by having this program in place, we effectively eliminate the need of you having to diversify your revenue outside of MicroCorp simply to mitigate this type of risk.

Effectively, agent commissions are insured against loss. Nice. I have to call my Channel Manager Van Wender now to sign up for this program.

Bandwidth.com just disbanded their agent channel. Other VoIP providers have done that as well.  And I hear some complaints about the cable company indirect channel programs.

The problem isn't the Agent Channel. The problem is the Channel Program design. 

You have to design a program that will work, folks.  You have to train your agents on the benefits, how it works, how it will be implemented, and how to sell it. You have to have a USP or marketing message that the salesperson can grasp and re-use. 

You can blame the agents, but most times companies don't spell out who the target prospect is and how that prospect will benefit. VoIP is not a replacement service. And you VoIP companies have over 1000 competitors all saying the same thing. It's like trying to differentiate between CLEC integrated T1's.

There's is also the whole compensation issue. Maybe you aren't paying enough to make it worthwhile for the agent. Again a VoIP sale is longer than a TDM sales and there are inter-operability and implementation issues to deal with, especially for PBX replacement.

There's a bias towards having a direct sales team in telecom. That bias is due to the huge expense - the office space, desks, laptops, utilities, cell phones, benefits, salaries and management structure. If you examined your direct team the same way you examine your indirect channel, you'd likely fire that division as well. Personally, I would put up Agents against AE's any day. I can pick 5 and outsell your direct team all day, any day - with less churn.

By the way, did you examine the channel sales process? How hard was it to get a quote or a sales engineer or a contract? What was the time from contract to install to commission check? All this will play into it. You look at AT&T's Channel sales process and it's just too freaking painful. 

In Internet Marketing, you can analyze the sales process to find out where the hurdles are, where the shoppers drop out. Is there a process in place to figure out the sales hurdles in the physical world? Do you track any of it?

I've been in the VoIP space since 2004, so many companies have imploded; not delivered; messed up; changed things again and again. With this kind of history, it gets more challenging to find agents willing to bet their business on it.

Being a telecom agent usually means that you will have commission challenges with your vendors (the carriers). 

I have been on the receiving end of a big dent in my pay a couple of times. (Netting sucks). But it is the nature of the beast.

I would like to point out that time and again when agents bring their commission issues to me (because I am a blogger and a founding member of the TCA, a non-profit association for the betterment of the  agent channel), the dispute is a Contract dispute. Your agent agreement is a contract. If you do not follow the contract, you do not get paid. For instance, if there is a quota which you fail to meet, the carrier has the option to stop paying you. Even some Evergreen contracts have out clauses. 

When Carrier A buys Carrier B and you do not sign a new agreement with Carrier A, do you expect them to keep paying you? You probably do, but that's not how it usually works. 

So while I was at the ITEXPO West I saw the disgruntled XO agent wearing his shirt, and all I keep thinking is: Would any carrier work with this guy at this point? And has he tried to settle it?

A client who ordered a 2xT1 MIS in March wants a stand alone Internet T1 at the same location to segment some traffic. Trying to pull a simple contract for this customer is a bear. Why?

DUNS number given to me by the carrier in March. Not found. Please request a DUNS number. HUH?

Nothing can be input without a DUNS. No where to just pull a contract. Why does it have to be so difficult? Why do agents have to spend hours in your systems to sell a sub-$500 standard service? Why do we have to take hours of training on these systems?

My first reaction is because RBOCs don't want agents. They keep cutting commissions and adding more requirements. Making it more difficult to make a living as an agent for them.

It is simply easier at this point to just sell resellers - Acces2Go or NIT or WBS. It's residual based commission. It's roughly the same rate. And it's so much simpler. 

At the Channel Partners Expo, on individual calls with agents, and on a conference call with a bunch of agents today, I noticed something big: the Channel is shifting.

I have known for a while that VAR's would replace the traditional telecom dialing-for-dollars, save-you-10% agents. It's coming because sales cycles are longer; the product set is very different; and it's all about IP and Apps. (Net-head versus Bell-head).

There's another shift happening: agents are banding together every way they can to get leverage against the carriers, who hold too much power. It started bubbling  in 2007 with my post called What's a Partner Worth? In the 2 years since that post, there hasn't been much change on the carrier side.

Agents first started bonding together as Master Agents. Then came the experiment called the Agent Alliance - a group of master agents banding together for group buying. I guess its a master master agency. None of those entities speaks for the agents.

"There is a serious disconnect between many agents and their suppliers on the expectations they have for each other in developing a mutually beneficial partnership," says PHONE+ Editor Khali Henderson. "Some of this may be a failure to recognize the changing dynamics in the telecom industry and their impacts on the participants in the value chain. Starting a formal dialog in the industry may help to overcome these gaps in understanding."

The dialog today starts when commissions aren't paid. You look at the situation for agents with MCI when Verizon bought them and changed the MCI Agent contract. Over 100 agents got screwed out of commission because the new contract was unfavorable or untenable. It happened with Cable & Wireless. Many mergers have had similar results for agents. 

I will have to say that most of these issues are contract related. The quotas and other issues are spelled out in the contract - IF you read and understand the fine print. If you use a Master Agent, you don't even get to see the fine print, because this Industry loves the NDA (non-disclosure agreement). It's why agents can't get a fair shake - they have no idea what is availble to negotiate. Cisco just lost in court with the judge declaring that Cisco's partner agreement was unconscionable, meaning that the contract is too one-sided. I think that if that precendent stands, agents will have a leg up.

I've been on the receiving end of a carrier (BellSouth) taking away a boatload of hard earned commissions, so I understand the frustration. (After 5 years, therapy, anger management classes, blogging and drinking, I can almost move past it). But at the end of the day, what band of agents has $1M to hire an attorney to fight a carrier over a contract dispute? That's what it would take. About $1M and a long time (7 years). What do you do in the mean time?

Not to be mean, but the industry is almost tipping over with bad debt, rising costs of goods, lower margins, and, let's face it, failing strategies. By that I mean, how many carriers have a solid long-term strategy?

[I deleted my FiOS is a losing strategy rant here]

Let's just say that I look at many CLEC's who are so obviously selling underwater that I want to take a SCUBA test. And it isn't just the Channel - the direct side is drowning in there too. In fact, the direct side is usually the one that starts the price war against the agent side. And where are the policies and guidelines in place for that Not to Occur?

Some carriers (like the ones on Moody's Death Watch list) may not be around in a year, so agents need to watch that to.  Agents need to be aware of how inter-connected the whole CLEC and Reseller market is. Reseller A buys from Carrier V and Reseller B and D, who buys from Carrier Q and Reseller A and D. When one collapses (like Alphared did recently), it cripples the rest. And there isn't enough margin - room - for that kind of error.

At the end of the day, the agents need to band together - to do more than swap tales of woe and vent - and that's why a bunch of us have put in many hours in the last year to create the Technology Channel Association. Join now! It's free through the end of March for agents and we offer group health insurance for our members.

At the Channel Partners Expo in Vegas last week, I helped man the booth for the newly formed Technology Channel Association, a non-profit agent association that was formed to create a community for best practices, a code of ethics, and solid training of the indirect channel.

Regrettably, the TCA received two separate pleas for help from agents. Both agents were no longer receiving commissions from a carrier.

In one case, the agent was wearing a shirt to advertise the lost commissions. The word I heard was that he had failed to meet quota for a few months. The contract allows for the carrier to discontinue payment for missed quota; almost like you stopped being an agent so we don't have to pay it any more.

I don't know if the agent was warned prior to the checks stopping. Is it a sad state? Absolutely. Is there anything the TCA can do about it? Possibly. We did dialogue with the carrier about the situation and encouraged a resolution.

As a fledgling non-profit with 100 agents, funded at this time only by the dues of our vendors, the TCA is not in a position to take up a dispute like this. This falls under contract law. As far as I can tell, arbitration is not included in my agent agreements, so I don't see how the TCA - or any organization - could help with this kind of dispute.

I realize that agents are hampered by carrier agreements that are heavily weighted in favor of the carrier. (Believe me, I have been on the receiving end of BellSouth not paying me my commissions to the tune of six figures, so I understand the frustration and pain). I also realize that agents that use a master agency don't even get to see the contracts that they are compensated under, which leaves even less room for resolution.  It certainly seems like a good time to change these things. To do that we need the strength of numbers - 100 won't do.

I'm kind of disappointed in the Channel, because the first year of dues was free if you signed up for the TCA at the show. It seemed like a no-brainer to me. But even the two agents with disputes did not join. How does the TCA achieve critical mass if the very agents that want help won't join?

Starting in April, any accounts that fall out of contract will no longer receive a commission from Embarq. So you will need to stay on top of your contract re-casting.

It's a PITA because not every carrier pays for re-casts. But ILEC's are funny and this one will be CenturyTel soon, so who knows what that will lead to.

You should be using CRM any way to track your sales activity as well as when contracts renew. (I have gotten really lax at this myself).

Want a free CRM? Zoho has up to 3 users free, plus Zoho Business is free too. Let me know if you are giving it a shot.

Should an agent's commission get dinged when the carrier issues a credit over an outage or SLA issue? I have two cases of this happening right now.

In good faith, I sold a circuit that the carrier gave me permission to sell. But on a performance issue - months post-sale - the carriers ding my commission when they have to issue a credit for SLA violations.

Do they do this to their direct people? Unlikely.

Here's the other issue: because these sales were made through a Master Agent, I don't even know how the contract reads between the Master Agency and the Carrier. Nor can I take the carrier to court without taking the Master Agency to court (and destroying that relationship along with the revenue stream).

It was bad enough when I had to act as collections for carriers. If the carrier  wasn't getting paid by the customer, I would get dinged and then pinged to go collect the money. The carriers have a collections process and departments for this. It just seems like more and more is heaped on the indirect agent with less and less money. (Let's not even talk about the risk increasing as reward decreases).

Is anyone else having this issue? Please let me know.