Winstream's Blunder Customers, Agents Are Paying For

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

Winstream's Blunder Customers, Agents Are Paying For

In the news, Windstream on its trek up-market is plowing through a field of customers and partners.

"In December, Windstream sent letters to 171 small-to-midsized business (SMB) customers and their partners explaining that negative or low-margin accounts would be subject to significant rate increases, or these customers were also given the option to move to another carrier without penalty. As part of an ongoing effort, more letters will be delivered to partners and customers in March."

Is it the customers' fault that WIND signed a contract to deliver services they couldn't afford to?

Windstream quoted an MPLS network for me a few years ago. The underlying carrier was TWT, but WIND came in at a good chunk lower. I asked how that was possible. The channel manager's reply was they WIND had great wholesale contract rates.

I just didn't see how they could provide that service at that rate AND pay me my commission AND provide any kind of service. I explained it to the customer and they agreed with me.

How awful it must be to sell something then have the customer be told mid-contract that rates are increasing. Deltacom/EarthLink has done that a couple of times to one client of mine. It never goes over well. It seems like fraud. The client can't walk away if he gets a better offer. Why does the carrier get to raise contracted rates? Seems lawyers will be involved.

According to the article, the SMB segment (under $1500 in monthly billing) is Windstream's Windows XP. About 2% of the accounts were underwater! As Windstream's CEO said, Cable owns the SMB space. CLECs can't compete on reselling network alone. Apparently if you don't understand margin, math and what good revenue is, you probably shouldn't be running a CLEC.

Will partners stick with WIND as they go upstream? I don't know. I am not even sure how they compete up-market. AT&T, Verizon, Level3, CenturyLink, TelePacific and even cable compete in the "Enterprise" space. Comcast just dropped $500M for an enterprise division. It will AGAIN be a price war for WIND - and a couple of years from now, these new customers will be getting a letter.

The only place that WIND can compete would be in-region as an ILEC or any location that they have fiber to the building (preferably fiber that they own). It would seem that Type II circuits for them will again become a problem.

What kind of bundling will they be offering the Enterprise?

There are are only 600K businesses with more than 20 employees in the US. There are over 5 million firms with less than 20 employees! [source]

Windstream sold off its data center business for cash. They abandoned the Hosted UC platform they were using in lieu of going with Avaya and MITEL for UC. Those names are familiar to the enterprise space - and maybe to the channel partners who stay with WIND, although I would think they have their own contracts with those manufacturers.

Lesson to be learned here for partners, customers and the industry.

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