Posted: 12/1999
Is Local Victor After Long Distance's Fallout?
Part One of Two
By Jill Collins
As agents diversify into local services to compensate for shrinking margins in long distance, they are finding this market is not an easy nut to crack. A steep learning curve and provisioning woes are among the primary challenges. Most agents are tenacious, believing local service to be a must-have for the foreseeable future, and optimistic that affairs will improve once the dust of new competition settles. In this two-part series, we'll look at selling local services as an agent. This month's installment will focus on the origins of local resale and its challenges and rewards. Next month, we'll look more closely at provisioning, training and compensation.
Long History
Selling local service is by no means a new arena for independent agents. Regional Bell operating companies (RBOCs) officially have had an agency channel since mid-1984, when the MultiMedia Telecommunications Association (MMTA), a Washington-based group devoted to driving the convergence of communications and computing, successfully argued the case for agents to the Federal Communications Commission (FCC).
In the breakup of AT&T, the government decided AT&T was the only company that could make and sell telecommunications equipment. Shortly thereafter, the Bells decided they wanted the leverage to sell equipment and network services via their own subsidiaries. After the MMTA caught wind of this effort, it brought a case to the FCC to allow non-Bell equipment manufacturers the ability to do the same. The FCC then mandated that if the RBOCs sold products and services through their own subsidiaries, non-RBOC companies could do it as well. Hence, the inception of the RBOC agency programs.
But Bell agency programs got off the ground slowly. During the 12-year interim before the Telecommunications Act of 1996, the Bells held a monopoly in the local exchange, making it nearly impossible for non-RBOC agents--and resellers--to break in to the local scene.
"You couldn't go out easily and start selling local services, so the RBOCs sort of kept their monopoly until resale was mandated in the 1996 Act," says Wayne M. Thomas, D.B.A., former agent and AT&T and RBOC executive, and currently president of Sudbury, Mass.-based Thomas & Company Inc., a management consulting firm specializing in marketing channels for telecommunications companies.
During this same time, competitive access providers (CAPs) started popping up to bypass the local exchange carriers (LECs). The Telecom-munications Act of 1996 freed all CAPs, long distance carriers, cable and wireless service companies, broadcasters and gas and electric utility companies to sell local telephone service. "With these new entrants trying to gain a foothold in the local arena, many new distribution opportunities became available to agents," Thomas says.
Many agents wanted to contract with the Bells and were denied. "In New England, for example, New England Telephone, which became NYNEX, used to brag that only one out of 70 applicants was chosen in the early days, so they were very selective," Thomas says. "Many providers today would take anybody who signed up. It was a different story in those days."
CLEC vs. RBOC Agency
Since the emergence of the competitive carriers or competitive local exchange carriers (CLECs), opportunities for agents abound. CLECs offer an attractive alternative to RBOCs because they sell not only local service, but also Internet and long distance, the latter of which RBOCs cannot yet sell in their own territories.
There are differences, however, in selling for an RBOC vs. selling for a CLEC. First and foremost, RBOCs are ubiquitous, "So you can go to anybody on any street on any floor in any building and sell them," Thomas explains. CLECs, on the other hand, have two types of buildings. One type is CLEC-connected and can be sold local service, while the other type is not connected and, therefore, cannot be sold local service. "If you're an agent [for a CLEC], you have to worry about where you're selling," Thomas says.
Another difference in selling for RBOCs vs. CLECs is the commission structure. Although CLECs aren't ubiquitous, they pay up to 20 percent commission on residuals, and RBOCs do not.
On the swing side, most RBOCs offer impressive training programs for agents, while most CLECs provide very little training, sometimes completed in a day or less.
Challenge and Reward
Regardless of the stiff challenge, agents are finding that a viable option to selling long distance is to jump on the selling-local bandwagon. However, according to many agents already involved in selling local, it is much more challenging and resource-intensive than the long distance market they are so used to. There are many pitfalls, not to mention that it may not be as profitable a market, they say.
"The upside is, it's the future--you have to be there," says Mark Solomon, president of Global Systems Telecommunications Inc. (GSTI), a Coconut Creek, Fla., CLEC agent. "You have to go through the growing pains because it's going to be a bigger market than the long distance market."
Solomon explains that the local market today is much like the integrated services digital network (ISDN) market was eight or nine years ago: brand new. As a result, "There's going to be a learning curve until it gets smoothed out; I think it's going to be about six months," he predicts.
Those that stick it out may find not only a new revenue stream, but also larger account size. Greg Praske, CEO, Association Resource Group (ARG), McLean, Va., also a CLEC agent, says his company's total account value so far this year is 134 percent larger than the previous year, while its long distance revenue plummeted by 38 percent this year. Praske attributes the surge in his company's revenue to the addition of local service to the product mix, because it expands what he is able to sell. In his company's experience, local service accounts for 90 percent of every long distance bill.
Scott Swartzbaugh, vice president of sales for Network Consulting Group, Tustin, Calif., is an exclusive agent for Pacific Bell, San Francisco. He says that once an agent secures a customer's local service, long distance typically follows and, thereafter, Internet. It seems simple: more revenue for bundled services. However, Swartzbaugh is quick to note that although companies are claiming the ability to bundle, thus becoming everything to everyone, "no one can directly achieve full, end-to-end bundling of services at this point in time."
Bill Howard is a principal in Rochester, N.Y.-based Peloton, a company that trains CLEC salespeople to sell local service. He says selling local service enables agents to build much more sustainable customer relationships because the agent is becoming the single point of contact for the customer. He admits that by acting out the role of customer interface for all telecom-related questions from customers, whether they are local-, long distance- or Internet-related, the perception of added value remains in the customer's mind. Selling local "enables [all] agents to differentiate their product in a market where that product is increasingly becoming a commodity," Howard says.
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"The upside is, it's the future you have to be there. You have to go
through the growing pains because [local service is] going to be a bigger market than the
long distance market." -Mark Solomon, president, Global Systems Telecommunications Inc. |
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"No one can directly achieve full, end-to-end bundling of services
at this point in time." -Scott Swartzbaugh, vice president of sales, Network Consulting Group |
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"If you're an agent [for a CLEC], you have to worry about where
you're selling." - Wayne M. Thomas, D.B.A., president, Thomas & Company Inc. |
Jill Collins is agency channel editor for PHONE+ magazine. Wayne M. Thomas, D.B.A., president, Thomas & Company Inc., Sudbury, Mass., contributed to this article. He can be reached via e-mail at wayne@thomasandcompany.com.
