Is the Transactional Agent Model Sustainable?

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

Is the Transactional Agent Model Sustainable?

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.

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