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PAETEC Co-Founder Starts New Provider, Looks to Agents

Brad Bono, one of PAETEC Communications Inc.s co-founders, has settled into a new, yet familiar, role: He has started another company.

Bono left PAETEC earlier this year to establish Magellan Hill Technologies, a provider of telecom services, e-mail security products and a directories publisher. He remains a PAETEC shareholder.

Magellan Hill is based in Mount Laurel, N.J., and focuses on the SMB market. The company is certified in Pennsylvania, New Jersey and New York, and Bono said he is working to obtain certification in Delaware, Maryland, Virginia and Washington, D.C. Outside of the PAETEC footprint, Magellan Hill sells T1-and-above service. Within that area, the new company offers POTS lines. Magellan Hills underlying providers are Global Crossing and Verizon Communications Inc. VoIP switching could be in the companys future, too, after it gains more customers.

One of the hallmarks of Magellan Hill is its focus on and attention to agents, said Bono. Agents are the first place I went because Ive found no better channel than the agent channel, he added.

In that vein, too, Bono named his agent program after his friend and mentor John V. Budney, who died of cancer in 2004. He also talked with agents he mostly contracts with subs right now about the terms they would like to see, or not have, in their agreements, and formed his requirements based on their feedback.

Mostly, the Magellan Hill agent program is tiered based on volume. The ranges in commission are based on the products they sell, Bono said; the income also depends on how much business agents send to Magellan Hill. He said if agents are able to charge higher prices for a product or service, they will reap higher commissions.

Its very agent-determined, he said. They can pick and choose where they want to be aggressive, and where they dont need to be aggressive.

Magellan Hill also is developing co-branding opportunities for larger agents, as well as a program that would give agents an exit strategy. In essence, Bono is devising a way for agents to effectively sell their business back to us. The details are still in the works, but Bono envisions that Magellan Hill could buy agents entire businesses, if they like. That portfolio could include other carriers. Magellan Hill then likely would pay those agents a multiple of their monthly commissions, Bono said.

Bono has signed a dozen agents so far. He said he plans to do his big company launch at the Fall 2006 Channel Partners Conference & Expo in Washington, D.C.

Magellan Hill does employ a small direct sales force, but it mostly sells the providers directories publishing services.

Most of the services Magellan Hill offers are limited to the northeastern United States. One, however, can be sold anywhere in the country. Magellan Hill has partnered with MessageLabs Ltd., based in the United Kingdom, to provide a suite of e-mail security products such as antispam, antivirus, images control and mail storage.

Meanwhile, Bono also has set Magellan Hill apart from other providers by creating a charitable giving plan similar to the one established by actor Paul Newman and his organic products line, Newmans Own. The U Care Now division which provides phone and Internet services donates a percentage of an end-user customers monthly bill to a charity of that customers choice. Bono has been active on the charity front for a number of years, especially with United Way and the Ronald McDonald House.

Bono said he is not interested in growing the company to be so large that he no longer knows the names of his employees or customers. He also does not want to sell Magellan Hill (he sold his first company, Vista International Communications to ACC Business, a division of AT&T), nor did he pursue private equity funding when forming Magellan Hill.

Ive funded this 100 percent myself because so much of that leads to going public, he explained. I really have no interest in that stuff. I have no interest in selling, either. I want to build a solid company and reap the rewards of a really strong, cash-flowing business. In terms of exit strategy, I have none. Im going to look back 20 years from now Ill be 57 and see what Ive built.

Magellan Hill www.magellanhill.com
MessageLabs Ltd. www.messagelabs.com


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