RESELLER CHANNEL: Turnkey Platforms Turn Out Virtual Telcos

Posted: 10/2002

Turnkey Platforms Turn Out Virtual Telcos

By Tara Seals

MAYBE IT'S THE ECONOMY, maybe it's outsourcing momentum or maybe it's just a really good business model. Whatever the reason, a new trend of virtual telecom opportunities has emerged, giving agents and other channel partners an opportunity to take their businesses to new levels at a fraction of the cost.

Wholesale Carrier Services Inc., for example, has launched a "Virtual Telco" program, a turnkey solution for agents, ISPs and other channel partners to make the leap to reselling private-labeled service. Partners can sell for WCS on a rebranded basis and avoid negotiating with carriers directly. WCS buys wholesale services from 80-plus carriers and suppliers. Rates are customizable, and agents will make their money on margin.

Chris Barton, WCS president, says WCS offers "complete, self-controlled destiny" to the agent. "We come in and negotiate a buy rate for the agent from us for carrier services, and the agent decides what he wants to charge his customer -- customer by customer, carrier by carrier," says Barton. "We'll bill whatever the agent wants, under his brand."

The customized rate program for the agent is automated and self-administered -- a partner simply goes in via the Web and picks the rate to put on the bill. The system tracks WCS' wholesale rate, the agent's buy rate, and the agent's end user price.

"It's an instant commission platform -- it tracks all the margins," says Barton.

Rate attrition, carriers going bankrupt, the inability for the agent to control the end user price, and carriers going after agents' existing customers are all problems that disappear under the Virtual Telco program, says Barton.

"We have every carrier on the planet," says Barton. "Agents can pick the carriers but just change the PIC if one goes south, and the customers' bills don't change."

The payments to the agent are handled in a "lockbox" setup. WCS drops the bills, and customers remit payments to the box. WCS then deducts the virtual telco's service buy rates and charges for outsourced services from the box, and whatever's left every month goes to the agent.

WCS has licenses and certifications in all 50 states, a legal team, tech support, customer service, a tax remittance infrastructure and a comprehensive Web-based billing system -- a business setup that would cost a channel partner hundreds of thousands of dollars to acquire. WCS offers these resources on an outsourced basis to partners that want to offer services through WCS under their own brand, essentially allowing agents and other partners to go into the resale business nearly overnight.

"Our carrier buy rates include regulatory, certification and tax remittance," says Barton. "But I also charge for billing, that's 2 or 3 percent. Help desk support, provisioning, tech support and so on are all separate charges."

The Virtual Telco program is the top tier of a four-level channel strategy. WCS also offers a referral program with upfront bonuses, a distributor partner program that offers set rates, recurring commissions and a value-added reseller program. VARs must sell at least $25,000 and are responsible for bad debt and level one customer service.

To participate in the Virtual Telco program, a partner must meet a sales tier of $50,000. The program also requires the agent to secure the bad debt. However, the agent retains ownership of the customer.

Similarly, Unified Signal Inc. provides private-label customer acquisition Web sites where agents, ISPs, retailers and other channel partners can sign customers up for service. Unified Signal's back-office platform performs service selection, equipment selection, credit checks and billing account creation/fulfillment, while agent "virtual resellers" maintain ownership of the customer and make money on margin.

"Many agents would like to become resellers, but are deterred from doing so because of the difficulty of establishing carrier contracts and building a quality back-office and billing system," explains Kimberly Tassin, a spokesperson for Unified Signal. "Unified Signal removes these barriers and allows agents to transform their agent business to a reseller business and immediately realize the increased profitability the reseller business model offers, which can be four to 10 times more profitable than an agent business."

The Unified Signal network is built through alliances with various vendors. For instance, it has signed deals with NUI Telecom to access NUI's long-distance offerings. Earlier this year it signed with AT&T Corp.'s global division for access to AT&T's Internet dial-up network, and to AT&T's suite of global business services, including dedicated and switched services, voice, data, long-distance, VoIP, Web hosting and gateway services.

For service providers, WCS' and Unified Signal's value proposition is in the aggregation of traffic volume and the pooling of back-office resources, to create economies of scale.

"[This] technology creates so much efficiency in customer acquisition, that it makes great business sense to take advantage of it," says Michael Latimer, global network consultant for AT&T. "Their technology creates a powerful buying consortium that makes it profitable for us to offer them below-market rates."