Times They are Re-Channeling

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Times They are Re-Channeling

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.

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