On Rad's Radar? - commissions Archives

Transactional Agents Called Names

2012-05-04T15:56:44Z

Over at CP, the transactional agents are being called Prostitutes and Zombies in opinion pieces. I find that sad considering that the Zombie comment comes from a guy who whined because he couldn't make huge commissions off call centers any more.

The one thing that most of these opinions neglect is that the World of Telecom is all about Transactions. It is a business based solely on Arbitrage.

Going back to the Golden days of Long Distance, newcomers (the IXC's like MCI, Sprint and Qwest) entered the market by starting a price war. It continues to this day.

Every CLEC that enters a market does so by undercutting the ILEC. Rarely has this been done with any innovation. Even the DLEC's that launched the DSL market in 1999 - Covad, Rhythms and Northpoint - disrupted it with old Bell Labs technology. Bell Labs had discovered DSL technology in the sixties but did not introduce it until 1987. DSL wasn't standardized until 1998. Their whole schtick was to undercut the T1 market.

Hookflash pointed out today that not much has changed in telephone since 1876. Layer 1 may have changed from copper to fiber to radio spectrum, but voice is ultimately the same.

Even VoIP is just another example of arbitrage. Phone.com and other VoIP Providers - most notably MagicJack and Vonage - constantly talk about the cost savings of VoIP, using the technology as simply a replacement for the POTS line.

If you can sell it online, it is Transactional!

As a nation we might have been better off NOT breaking up AT&T. Bell Labs was a national treasure of research. And, look, the gang is back together. The Death Star still flies.

So when you jump on Transactional Agents, take a good look at your own business. You probably market on Saving Money. Where's the Value in that?

And don't give me the "It's how we get their attention" dribble. This industry is in a race to zero. It's the Wild West of prospectors looking for short-term gains -- and I don't just mean just the newer providers. Look in the C-Suite and the Board of Directors at any ILEC or CLEC. All they care about is short term gains.

So who is really the Prostitute here?

The CEO (and his other C-Staff) who lies to the FTC and FCC about a merger and cries about it later, because they didn't get their bonuses?

The Congressmen who take trips, meals and money to stay in office to maintain the status quo?

The CEO of a yet-another VoIP company, who is just out to grab some market share with an Asterisk-based switch?

Just because you sell some cloud services, doesn't make you a non-transactional agent. When you take a customer's telecom spend from $500 to $650 per month by upselling cloud, then you can say it. But if you take $500 per month in spend and shrink it, you are just as transactional as the Zombie - you just color it different.

Cable has come storming into this sector with nothing more than a price gouging grab at market share - which is strictly Transactional!!!

We are all going to suffer because of the Arbitrage mindset. Commissions will decline right along with price. It will be harder to make a living. It will be harder for the LEC's to hit revenue, so debt will cost more, eventually leading to BK.

We have too many players in this Industry and not nearly enough that are innovative or add any real value. And many that barely make ends meet. All of that just adds to the price war, which leads to more transactions.

So who are you calling names?

Basic Math for TNCI

2012-04-26T14:47:36Z

TNCI (Trans National Communications International) filed for Bankruptcy in October of 2011, owing Sprint ($5M), AT&T ($1.66M), Verizon ($1M) and Qwest ($1.9M). VZ and AT&T have liquidated CLEC's before for less than $2M. I'm not trying to be pessimistic here, but realistic. Commpartners was liquidated for less than $2M and AstroTel was forced to sell for less than $1M.

Other debt includes Citizens Bank of Massachusetts with a secured claim of $4M and USAC for $1.3M (that's USF funds they collected and did not pay to the government).

TNCI filed a reorganization plan, according to Channel Partners. This is where Basic Math skills act like a fan to the smoke. "In financial statements filed with the court, TNCI projects 2012 total revenues of $73.3 million. Of its projected $60.2 million in total direct costs, TNCI anticipated that agent commissions will account for nearly $8.3 million in costs." First off, $73M - $60M - $8M = $5M left over to run the business and pay back debt. Payroll, benefits, rent, utilities for a CLEC for less than $5M per year in Boston. Out of that $5M they have to pay back the secured debt to the bank and the USF money to USAC - a total of $5.6M. That's lean. That's the kind of math skills that got them in BK to begin with.

There is also the question of the commissions. At a standard rate of 15% on $73.3M, the commission payments should be $11M not $8M.

I just don't see how this works out for the 600+ agents. The customers will be fine either by going direct to the underlying carrier (who wants to recoup losses and maintain revenue streams) or moving to another carrier. Hopefully, agents are working on that now.

Get Off the Agents' Back

2012-04-12T21:48:50Z

These were my thoughts on the 2011 CPZ that I was a panelist on. These are my thoughts as a reaction to the latest CPZ.

Surprisingly, not everyone read my post about how the whole telecom eco-system is shifting. Agents, Masters, Carriers and Cloud Providers are all going to experience a Shift.

Did you ever see Shift Happens?

Considering all these factors - Quota, Debt, declining revenue, pricing pressure, and flat markets - the future does not look bright.

Most of the people who were talking on the CPZ 2012 video about transactional agents are not actually agents and to my knowledge never have been.

Does a subset of Agents shop masters? Probably. On the other hand, I know masters who shop to sub-agents with "I'll give you another point or two to go with me." Part of this is due to the weight of quota on the Master Agency business. Master Agents are under a tremendous pressure to hit quota to keep the support level and sustain the commission revenue at its current level. So don't get mad at the Sub-Agent when Masters are doing it too.

Value and Telecom

The whole Industry talks about VALUE, but can they describe it? No. Our Industry has been a series of me-too, arbitrage bandits selling the same thing: UNE-P, Integrated T1, SIP Trunking, and today it is MPLS. It's all just similar looking and sounding services. How does an Agent or a Prospect tell the difference?

Branding is non-existent in our space, except for the Duopoly of ILEC and MSO. You create value with branding. Other value comes from benefits and differentiation. We are lacking the Differentiation.

Without value, it becomes a commodity. Commodities are price shopped. Tell me the difference between any two Internet T1's or any two SIP Trunks.

Carriers are Unhappy with Agents

Just because Agents don't act like you want them to doesn't mean they are all in the wrong. You built this current eco-system. Now you want the ship to turn on your say so. Easier said than done, pal.

Truthfully, have you done all you can to give Agents the tools they need to sell your product? Not to be repetitive, but have you established your value statement? Do you know who the target market is? Do you know what triggers the sale? Who is the actual buyer? Answer those questions first.

The Industry wants the Channel to go upstream, except they don't. By that I mean, the carriers want revenue. Period. It's all about quota. While they might want an Agent to sell MPLS, they aren't turning away T1 business either. However, they want the Agent to turn away from that business to go upstream. Yeah.

Keep in mind that it might be that the marketplace doesn't want to go upstream either.

Right now, Cable is doing an excellent job of disrupting the market and stealing business with cheap loops.

At a CLEC training, it was stated that cable would own the sub-$500 business. It sounded like they were conceding it. The cablecos will become the de facto ILEC's. I have no idea what the ILECs are going to do. Only the 2 RBOC's have a cellular business. And CLEC's will probably run into too many problems to continue to sell network access.

In that same training, the CLEC stated they wanted Multi-site, multi-access business. Unfortunately, everyone wants that business. Masergy, Smoothstone, EarthLinke, Megapath, Netwolves, Wind, CenturyLink - just to name a few. To hear carriers talk, I guess, MPLS is the new Integrated T1 (in every way). They say there is more margin in it. No there is not. There is more revenue per customer, but they will have to give away margin to (A) hit every site and (B) win the business in a hyper-competitive marketplace.

No one buys the way most service providers sell either. That's why the carriers are always searching for Consultative Sales Professionals. The whole industry sells what they want - and it is followed up by a series of me-too. Just because one CLEC is selling Managed Security does not mean that the marketplace wants it or will buy it or that it will want it delivered that exact way. It also doesn't mean that the next eight CLEC's or service providers need to market that same offering. Do we know what the marketplace is expecting?

How Things Can Shift

One thing that could cause a big shift is if Tech Data becomes a Master Agent. With TDMobility, they already have the platform and are selling cellular in a Master Agent model. Plus by offering mobile device management, TEM and all that hardware, they have caught up to the big Masters. CDW could become a Master Agent if they wanted to - and they might have to in order to sell more hardware.

Dell could become a Cloud Provider. As it stands now, they are an MSP Enabler. And Dell is selling CDN now! It will be interesting to see what Ingram and SYNNEX - both betting on cloud services for their future - do to not have to compete with Dell head-to-head, while also competing with Tech Data.

I don't think that most telcos will make the shift to managed services and cloud successfully. It's labor intensive. It doesn't scale like telecom. They think they can automate everything, but that only works for cookie cutter stuff. Plus they can barely deliver telco services without a headache. I think MSP's will win this war. Any company that can integrate apps (like CRM and invoicing with Exchange and Sharepoint) will be successful. If they partner with VAR's who can handle the on-going maintenance and support that all this technology will require, they win big.

Can the Channel change to become Trusted Advisors? Probably not all of them. Selling Cloud is different than selling telecom. Period.

The Channel basically sells replacement services. Here are some examples: VoIP for POTS: SIP Trunk for PRI; Ethernet for T1. Each transaction is replacing like for like. Even MPLS is just a replacement for Frame Relay, ATM and IP-VPN.

That is why selling Hosted PBX and other cloud services are so challenging: It is not a simple replacement. It's not like for like.

The sales process for selling replacement services is pretty easy. When the sale becomes about business process change or fork-lift upgrades (like Hosted UC or Virtual Desktop), the sales skills are different. The sales cycle is different - and longer. Provisioning takes longer. Ultimately, commission payments are much later.

This is really important to remember.

Selling Cloud and Managed Services will not just be more of a challenge, but it may be less satisfying. Why? Transactional sales types are motivated and driven by quick hits and a lot of ink in a month. Extended sales cycles are less motivating to this type of sales person.

Moreover, as commissions decline with the price decreases, agents have to sell more and more to maintain their revenue goals. Shifting to new products, new sales skills, and a different sales approach will be a huge leap, especially without training, a financial cushion, a deep desire for change, and vendor support.

Agents are not FARMERS! They are Hunters! They do not do Account Management, cross-sell or upsell to the base. Smart agencies will higher a couple of farmers to work the customer base and perform account management.

All of this makes me wonder who will be the Agent of tomorrow, who will be grooming accounts and performing consultative selling of complex solutions to their customers?

An Interview with StartMeeting

2012-03-19T17:40:38Z

I had a long talk with Greg Plum, new VP of Channel Development at start-up, SmartMeeting.com at ITEXPO East. He agreed to a short interview.

What's the special sauce for StartMeeting?

StartMeeting incorporates components of web conferencing that have become familiar and trusted, while introducing some new features, including fully integrated toll, toll-free, and HD VoIP audio options, custom greeting and on-hold music, and a fully customizable meeting wall for meeting hosts, all at price points well below the industry.

Why should agents and VARs choose to sell StartMeeting over other web conferencing options?

StartMeeting offers a simple, intuitive, and effective communications solution. Our aggressive pricing, starting at $19.95 per month for a 50 seat license, coupled with a reliable, fully-integrated, audio bridge, will get a prospect's attention. Our differences, including HD audio, social platform integration, and our customizable meeting wall, will make them loyal, long-term customers. Since ease of sale is paramount to the agent, our proprietary provisioning system affords the agent 80 pricing scenarios, paying commissions ranging from 25% to 35%, all via a promo code matrix. It doesn't get any easier than this.

Name one sales trigger for web conferencing.

When a prospect tells an agent they are using ANY web conferencing solution, the agent should recognize this as an opportunity to win this prospect as a customer and save them money by offering StartMeeting. This could also be used to get the attention of a seemingly impervious prospect. Agents can now show them something different... Disruptively different.

CALL TO ACTION: StartMeeting will be offering free demo accounts to agents and VAR's.

Zayo Buys AboveNet

2012-03-19T15:31:01Z

It was a big surprise this morning to hear that Zayo bought AboveNet for $2.2B. My first thought was "Where did Zayo get the money?" I mean, the Dealbook writes, "As of Dec. 31, Zayo had about $25.9 million in cash and short-term investments, along with $682.7 million in long-term debt. It currently has a credit rating of B2." Apparently, Zayo backers and bankers went into their reserves to buy AboveNet. I guess the heady days of Bain LBO is back, thanks Mitt! (LBO is leveraged buy out).

AboveNet was one of the few fiber shops that had its act together. They know where their fiber is. They can quote it fast. They can deliver on what's quoted. And they knew their sweet spot. Except for US Carrier and FiberLight, no other fiber CLEC's that I have dealt with can say that. (I'm waiting over 6 weeks for quotes and maps from IFN and L3.)

This will be Zayo's 21st acquisition. I hope the integration goes well, because in the past Zayo has had issues with their knowledge of fiber assets. It has improved. Google earth!!

Zayo doesn't sell via the Channel - direct sales only. Via email from Dan Caruso, when asked about the Channel this morning, "I am sure we will be supportive of efforts Abovenet has underway."

Rob Powell likes this deal, even at 9.2x projected 2012 EBITDA. I think scale for scales sake is the problem with telecom. Mounting debt combined with shrinking prices does not make for a healthy business. Zayo and Level3 are buying up a lot of the competition, but that hasn't really increased pricing because Cogent and resellers are still there dropping their pants to win any revenue. And the ILECs are in a price war with the cablecos.

I mainly sell transit and transport. Fiber companies are my bread and butter. It is certainly easier to just check a single fiber map, as opposed to a number of them. Here's hoping for a smooth integration.

DEBT

The debt in this industry is crazy. AT&T and VZ combined have $105 Billion in debt. The top 5 MSO's have about $100B with Comcast at $40B. Level3 is at $8.5B. WIND has $9B. CenturyLink has $22B. When you are paying 7.75% on those notes, that's big bucks! Zayo already had $682.7 million in long-term debt; now it will have about $2.9 Billion in debt on approximately $900 million in annual revenue.

I still think that taking Cogent out would be a good move for L3 or someone. You get fiber, revenue, lit buildings and take the low priced carrier out of the market. It did take almost a year for AboveNet's investors to sell, so maybe in 3Q or 4Q. Most buyers - L3, CTL, WIND - have already bought something and are still refinancing debt as well as integrating what they bought.

For the Channel, this mounting debt is scary. Why? Because the CFO looks at the line item for commissions that grows every quarter. He wonders why he has to keep paying it, The CFO thinks, "If I wipe that line item out, our books look great." That's the scary part.

Correction: Savvis Comp

2012-02-03T06:14:51Z

I blogged about Savvis/Qwest halting MMR commission to the Channel. However, Dale Tucker of the CenturyLink Channel program was at CVX before my panel telling me his people had read the blog post and that I was wrong. CenturyLink/Savvis/Qwest are paying MMR on hosting but it varies.

Check with your CCA channel manager.

Thanks for reading!

End Caps

2012-01-21T14:49:32Z

This was the week that we learned that online protesting can work -- if enough people get involved and if you get the support of some powerhouse websites like Google and Wikipedia. It looks like SOPA was dropped and the vote on PIPA was delayed. (It is still alive due to Democrat lawmakers who are beholden to Hollywood like Florida Senator Bill Nelson. If he knew how to turn on his laptop by himself I could understand it, but come on!)

We don't really need any more copyright laws. If we did, would the feds have been able to fly to New Zealand to arrest the owner of MegaUpload? What was he arrested and renditioned for? Online piracy.

Not for nothing, but don't we have more important things to be spending federal dollars on? We are a nation with lost priorities.

And yet another carrier joins the CLOUD: "US Signal recently released an Infrastructure as a Service (IaaS) product offering, what US Signal calls Managed Data Center. Customers have increasingly requested US Signal to host their applications, for financial reasons, scalability, security, and more."

Yesterday, TCA held its monthly agent webinar with Netwolves presenting on Managed Services. With most of the telcos offering Managed Servcies, we at TCA thought it was time to give an overview of what Managed Services are from carriers, who is buying them and how does an Agent sell them. How does an Agent start that conversation with the prospect about managed services? The webinar was recorded and TCA members can play it back at any time.

Nemertes Research predicts a shortage of colocation space in the U.S. beginning this year. That is likely because some colo space is being used for PAAS and IAAS. Also, some colo houses don't want to sell colo any more because there is more cash in xAAS. (Or so they say.) I have seen that trying to find single rack colo slots are getting more difficult. Personally, I thought that when Amazon, Facebook, Google and others built their data centers, a lot of space would be opened up in other data centers.

The other issue with colocation is that Equinix, InterNAP and now Savvis have cut the channel out of selling their space. Other data centers - like Vegas' SwitchNAP - are difficult to deal with. That kind of affects colo sales, too. Luckily, ViaWest and TELX are still agent friendly.

Code 42 Software, a cloud backup service named Crashplan, got $52M in funding from Accel Partners. It seems a massive amount of funding for an online backup company.

Is 5G around the corner? Heck, most of the US is still in 2.5G-3G land.

Thought of the Day

2012-01-13T21:00:07Z

In what other business industry would make it so flaming difficult to give revenue to?

CenturyLink just issued Channel Rules of Engagement (part II): "CenturyLink Channel Alliance, in conjunction with the Savvis Alliances partner program, has developed Phase II of the Savvis-CenturyLink Rules of Engagement (ROE). The attached Phase II ROE document identifies six unique customer types and outlines business rules for each selling scenario." Don't ask because I am still scratching my head to understand it.

AT&T has made it incredibly difficult to sell services in the former RBOC areas - SBC, Ameritech, BellSouth, etc. Even for its own direct reps.

VZB is renewing its commitment to the Channel and is revamping its Verizon Indirect Sales Partner (VISP) program.

It's kind of like an abusive relationship sometimes. "Honey, I'm sorry I hit you and kicked you out of the house. I won't do it again. I promise."

Savvis Changes Comp Plan

2012-01-10T20:58:37Z

I just received confirmation that channel compensation for hosting under CenturyLink will no longer be residual. Savvis, which is owned by CenturyLink, took over management of the Qwest Cyber Centers.

At a time when cloud providers want agents selling, data center companies - Equinix/Switch&Data, InterNAP, now Savvis - has changed up the game on agents at a time when agents are trying to adjust to the whole cloud ecosystem. It just doesn't make sense.

From a purely CFO perspective, sure, that commission line item on the balance sheet keeps increasing because agents keep selling stuff and, by golly, they still want to get paid for it three or more years later. Really? Selfish b@stards. The CFO is scratching his head, thinking, "How do we reduce that number?"

The one thing that most sales organizations can tell you is that changing compensation plans can be disasterous. Salespeople loss trust in the organization. They stop selling your services - and start looking for ways to turf their clients to somewhere that WILL pay that.

Now I know that sounds like agents only care about the commissions, but that's not the case. Imagine going to a pro athlete and saying, "Hey, I know we said we would pay you $5 mill, but we changed our mind. You only get $3 mill." That's the exact same thing.

One reason it boggles my mind is that Savvis is still making bank on data center sales and can absorb the commissions in the price, since data center sales are not usually about price, but location and other factors.

Once again the Channel takes it in the chops. Thanks CenturyLink!

3 Things Agents Need to Look at in 2012

2011-12-30T21:14:19Z

It will be a busy year in 2012 as all the carriers try to synergize their mega-mergers and get their back-office in order so that we can actually place orders.

Besides selling the traditional circuits - POTS, T1, SIP, PRI - there are some interesting things for an Agent to look at in 2012.

M2M is growing. We are seeing that the 3G/4G system is creeping in everywhere - from broadband backup systems to surveillance systems to fleet management to home healthcare monitoring to security monitoring. There are an unlimited number of ways that devices and the wireless network can interact. Think about the Kindle. There is money to be made in M2M.

More wireless but mixed with TEM. If you haven't moved your big accounts to TEM, 2012 may be the year you think about it. Auditing has increased in the last two years as governments (local, county, state) and medium businesses look for ways to reduce the ever-increasing telecom bills. (Cellular/3G/4G is big and growing, which is increasing the total cost of telecom spending.) Telecom Expense Management (TEM) can help accounts that spend more than $5K per month. It also makes the Agent the point person all the total telecom spend. It's a great way to become vital to the organization.

In addition, you can add Mobile Device Management. If a company has more than 250 employees, it likely needs help tracking laptops, data cards, cellphones and the like. There are software platforms for this to make an Agents life easy. This is yet another way to become integral to a clients business. Notice I'm not suggesting selling cellphones, but manage those assets for the business.

Lastly, there is Cloud and Managed Services. I'm going to skip cloud unless you want to sell apps to businesses. If you sell within a vertical, I would suggest that you certainly start selling apps into that vertical, because it will add revenue for you and make you the go-to person for all things IT and Telecom for that Vertical!

In Managed Services, we are seeing a few trends: hacking is increasing; security is lax; IT is pervasive in today's business environment but there is not enough money or staff to handle it all. That's where managed servcies comes in. If the company has a lot of empployees and a small IT staff, managed servcies would be a fit. Things to ask:

"What task would you like to relieve yourself of?"
"What routine task could we outsource to your ISP to free up your staff's time?
"You are consuming a lot more bandwidth, what are you doing about firewall and other security?"
"How are you tracking wireless spending and devices?"
"What would you do if a company laptop was stolen or lost?"
"How much private company data is on a smartphone or laptop? How much access does either device have to your network?"
"Do you backup your data regularly and off-site?"

You have to adjust for the changing times, unless you just want to push pipes. But your customers are under a strain to handle devices, billing, auditing, tracking as well as security and more. You can make some extra money -- and become more than just a sales guy -- if you move beyond the pipes and help your customers with the rest of the story. HUH? They buy those pipes from you for a reason. Help them with that.

Happy New Year!

3 Things to Watch for in The Channel in 2012

2011-11-22T02:48:34Z

2011 has yielded some surprising momentum for the Channel. With the cable industry, cloud providers and so many other companies making more commitments to the Channel. I think that there are 3 things we need to watch for in The Channel in 2012.

In 2012, we will see more M&A. Credit is cheap. Companies are sitting on cash. It's a good time to buy instead of build, especially cloud services. Look for any company that offers managed services to be acquired if they have real revenue, an engaged Channel, and a unique product set (that the acquiring company doesn't have.)

Certifications have been popping up all over - not just at the TCA. There is a lot of variation in product offerings in both cloud and managed services. It will take much education for the Channel to understand what is being offered, by whom and for whom. Webinars and marketing collateral alone will not work. Certificate programs will identify the professionals - those that are committed and deserve the limited resources available.

Without a doubt, we have not heard the end of the noise of the Cloud. It's no prediction. What we will see is what cloud providers can (A) differentiate themselves with a clear, concise value message and (B) what cloud providers - cloud comm providers included - can gain organic revenue in the face of cable competition. As I write this, one RBOC is pushing a 10MB ethernet bundle with a SIP PRI for cheap against a similar Comcast package. The competition for every deal will increase as the economy remains flat and each slice of the telecom pie - TV, broadband, voice, cellular - remains flat as well. The problem with this is that sales will be tough, revenues will decline and with it commission checks. Ouch!

Frontier Gets Cell Service, Agents Should Too

2011-11-18T18:23:01Z

Frontier Communications has inked a deal to be a channel sales agent for AT&T for voice and data cellular plans, as reported by the Fool. "This was a natural extension of a product that we are not currently offering that would fit well with our product suite," Steve Crosby, Frontier's senior vice president of government affairs and public relations. At least they realize that cellular is an important part of the total telecom send. Do you?

When master agent,TBI, launched its SAAS-based TEM platform, Geoff Yearack, director of TBI's wireless division, stated that it was a way to aid agents with getting some of the wireless spend of clients.

Agents have to start looking at ways to get more of the telecom wallet as that budget is absorbed into the IT budget. The simple approach is to offer TEM to your clients. Another approach is to offer asset management. To tie into cyber-security , laptops, data cards, mi-fi gadgets, tablets and smartphones not only need to be tracked by businesses but secured against data theft and loss.

Cbeyond, XO, TelePacific and other CLEC's are offering cellular plans in conjunction with Dynamic T1 and other services. With the average T1 price at an all time low, it's one way to increase ARPU or MRR -- and in turn, increase commissions.

Sprint recently raised $4B in a debt offering in order to pay for network upgrades for "iPhone and its Network Vision network modernization plan". Rumor is that some of it will be used for Clearwire build-out, which seems likely given that Clearwire has some of Sprint's spectrum and has been Sprint's 4G partner. How do you hang that up now? But it goes to show that even after the billions already spent by the the cellcos - VZW, ATT, Sprint, Clearwire, and even MetroPCS - billions more will have to be spent to -- not buy more spectrum -- but to just deploy the spectrum they are currently sitting on, for tower backhaul and for network management. Big pie there that Agents need to take a piece of.

Channel Ethics: Part V

2011-11-01T04:38:11Z

Recently, I learned that a Channel Manager is also an Agent. I asked him about it and his reply: Who better to manage agents than an agent. It makes sense on the surface (like partison). And it is not uncommon. I was surprised how many Channel Managers have agent deals on the side or have a deal with an Agent.

When I asked this on LinkedIn today, "Is it wrong of me to frown on people who hold channel manager positions and are agents too?" Most agreed that it is unethical. One person noted, "Most telecom sales guys at one point or another have been in between jobs and have signed an agent agreement with company Y to take care of a friend or an old customer, so when they get a job with company X you think they should call up company Y and cancel the agreement?"

No, but that agent agreement should be dormant - and he shouldn't be double dipping.

I think as quotas increase and master agencies are under pressure to hit the ever rising quotas (or be unable to pay sub-agents), this practice of double-dipping will increase. Why? Masters will have to do whatever they can to bring in sales. Both the Direct sales guys (who also do this) and the CM's with Agent deals will dictate terms. It's going to get ugly.

TNCI Files BK

2011-10-11T01:32:56Z

The reseller that spent so much effort trying to sign agents up for its Equity Plan - cash out when TNCI sells out - went south today by filing for bankruptcy. TNCI owes $10 million dollars to its wholesale carriers - Sprint, CenturyLink, AT&T, VZ and others. Agents are worried about commission payments paid and unpaid.

[That's all I had at the time and not much has been added.]

An update from a Master Agent: "On Sunday, October 9, 2011, TNCI filed for Chapter 11 Bankruptcy Protection. As we understand the situation, TNCI filed for Chapter 11 protection as a means of addressing some outstanding carrier issues. We've spoken to TNCI management and are encouraged that they will be able to work through the reorganization process quickly. In addition, we've been assured TNCI will continue to operate without interruption to customers and agents, and that all financial commitments to the channel will be met. A workgroup of Agent Alliance shareholders, including legal counsel, is in place and will be closely following the situation to ensure that the interests of our collective subagents and customers are protected."

That's great except you filed for bankruptcy owing unforgiving carriers $10 million. They can liquidate you. (They have done it before.)

The Boston Biz Journal broke the story.

Is the Transactional Agent Model Sustainable?

2011-09-01T20:32:22Z

This was a topic in Chicago last week: Is the Transactional Agent Model dying? It isn't dying because the telecom business is such a commodity. Dumb pipes will always be a commodity. That's why managed servcies was invented. (Unfortunately, that is not clearly defined to the marketplace as of yet.)

One thing that I have been mulling is that when the master Agent model was developed telecom services were very expensive. In 1999, Internet T1's were $1500 and PRI's were still $1250 in many parts of the 9 states. A Master Agency could pay out 70% of the commission to the sub-agent easily and still cover overhead with the 30%.

Today, that same Internet T1 is $400 and 10MB of DIA is $900 in much of the country. Broadband, cellular, POTS and LD are flat or declining markets. New entrants - like cablecos - can come to the Channel to sign up customers but the price points are low. So low in fact that the difference between 15% and 20% is negligible - on a $100 sale its $5.

However, the overhead for the master agency has not gone down, it's gone up. Contract negotiations, commission auditing and collections, LNP requests, and other provisioning hassles (FOC anyone?) have added to the cost of back office. And this doesn't scale well. The more agents and the more orders means more humans. Much of telecom still requires human intervention.

So is this model sustainable?

I don't know.

The Cloud guys are always harping about moving away from the transactional model, but, guess what? The transactional stuff - T1, broadband, 4G - is the access to the Cloud. DUH! So you can't get away from it.

What has to change is just being transactional. Maybe access has to be a separate conversation AFTER you talk about apps, cloud, business drivers, productivity, etc. THAN you have a conversation about bandwidth and access. It would take training and discipline.

In the meantime, Agents have to re-think the quoting process. Getting 4 or more quotes for a circuit and beating the carriers up for cheaper rates may make you a hero to your customer ... this one time... but it isn't building a business or loyalty or value. Getting the cheapest quotes for broadband or voice or cellular is such a commodity that agents can be replaced by websites - GeoQuote, Commission River and others - that reduce the commission to an affiliate fee or referral payment. This is not where you want the Industry to go!

What the carriers pay the Channel for is Lead Gen and Customer Acquisition. Continued payment of commissions is preticated on servicing the customer. Except for contract renewal, many agents do not service the account. If they did service the account, the customer would be sticky and the Agent would have a major chuck of the telecom wallet share.

September 20th at 1 PM, Brian Miller of Mach4 and Dan Vidal of Telecom Advisors will be talking about Are You Treating Your Agency Like a Business? It is a TCA webinar for members.