PARTNER CHANNEL: How the Rest Was Won

March 1, 2003 By Tara Seals Comments

Posted in Articles

Posted: 3/2003

How the Rest Was Won
Agents Stick by CLECs Despite Rough Ride

By Tara Seals

Consolidation. Bell long-distance re-entry. The use of facilities vs. the unbundled network element-platform (UNE-P). These and other threats have made the open range of competition a dangerous place to roam. But some CLECs have conquered the frontier and captured growing customer loyalty thanks to good customer service and innovative integrated offers. And that means agents still are riding posse for CLECs in the local market, despite the rough and tumble atmosphere.

While the Bells always will have a percentage of existing lines in any given market, CLECs are winning customers, particularly in the small and midsized business (SMB) market. Market research firm Atlantic-ACM predicts CLEC revenue will grow at a compound annual growth rate of 27 percent to reach $62 billion by 2006.

Customer service may have a lot to do with success. SMBs gave higher satisfaction ratings to CLEC providers than to their ILEC competitors in 2002, according to a recent Yankee Group report. The Bells saw what report author and analyst Helen Chan characterizes as "major declines" in customer satisfaction in most areas, particularly in the small business market. While CLECs may soon face even stiffer competition from the incumbents in light of 271 relief, they can keep their market edge if they "continue to provide superior customer service at a value price; and they continue to get feet-on-the-street salespeople in front of prospects and customers," writes Chan.

Some agents see general value in selling CLEC services. "Most often there is the cost savings and the flexibility of integrated service offerings in going with a CLEC, which gets the customer's attention," says Christine Gistaro, owner of agency TeleStrategy LLC. Before becoming an agent, Gistaro was vice president of the agent channel for now-defunct CLEC Net2000 Inc. "Better billing options, user-friendly invoicing or Web-based and multilocation billing, increases the CLEC competitive advantage," she adds.

Integrated offers that bundle voice and data on a single circuit specifically target the SMB market, and can save customers money. They have been the main area of differentiation for CLECs when competing for customers, say agents.

"The CLEC's offerings are very compelling compared to the ILEC," says Kevin Fecher, an agent at OpenAir Technologies Inc. "Integrated services ... solve many problems for smaller businesses: Affordable high-speed Internet access and lower-cost local and long-distance services. The technology is rapidly changing while the ILEC is slow to adapt."

Another popular application for CLEC services is redundancy, says Steve Murphy, director of business development at telecom consultancy NetGain Communications. "What we're really seeing a lot of need for and interest in, especially for large organizations, is network diversity," he says. "[Customers] don't want to put all their eggs in one basket because they understand that networks are networks, and the events of 9/11 have taught them they need to consider diversity, and we can usually optimize price points across a number of providers."

In this multivendor environment, Murphy says a typical sale is to place service with the incumbent, with CLEC service as a backup.

Aside from applications, customer service is paramount. "When we are selling CLEC services, customer care is very important," says Murphy. "People are willing to pay more when they're comparing CLECs, based on customer care."

Facilities-based competitive service provider TelePacific Inc., which operates in California and Nevada, says it has focused on agent care to set itself apart with the "feet on the street."

"Agents are a part of your business, not the redheaded stepchildren," explains Ken Bisnoff, senior vice president of strategic opportunities at TelePacific. "Our TelePartner program is built around simplicity, support and success."

Despite the advantages, some tumbleweeds still are blowing around the CLEC front, such as regulatory issues, consolidation and the technical complexity of local service compared with other service providers.

For instance, with the RBOCs gaining 271 relief in most territories (37 states at press time in mid-February), CLECs will lose the bundle advantage -- the ability to package local, long distance and Internet on one bill, with price breaks. However, some say consolidation in the sector has affected customer trust in some instances.

"There are a lot of customers willing to target the difference in service quality between a CLEC and a Bell operating company, because they've seen the bloodbath in the CLEC industry and some of them have been left high and dry out of service," says Murphy. "And they're not going to risk their business on a CLEC again because they look at network and financial stability."

However, customer service can sway a customer. "Ultimately, I believe most agents and customers believe that the LECs offer the most reliable service, but is it worth it for the price you pay and the indifferent service and billing you receive?" says Gistaro.

Similarly, some agents have jitters concerning the viability of UNE-P providers in a dynamic regulatory environment. "I think agents need to look at putting their customers on facilities-based services, and the process is longer and it takes longer to get paid, but it's actually more secure because you know your customer's not going anywhere," says Tom Jeffries, principle of Jeffries-Consulting. "But then, you're talking a 30-plus day conversion period, whereas a UNE-P conversion can take five days."

InfoHighway Communications Corp., a UNE-P-based CLEC, says regulatory advances and setbacks come and go, but strong UNE-P providers will survive. "We now have over 10 million UNE-P lines in the country, and UNE-P has now become the fastest-growing form of local entry, accounting for over 85 percent of competitive gains in the last half of 2002," says Gene Rogers, director of marketing and product management at InfoHighway.

And finally, local service is simply a more difficult order to provision. "It's important to have a CLEC that will help you and work with you to understand different complex services," says Jeffries. "Working with master agents that understand local is key."

TelePacific's Bisnoff says the main issue is learning how to submit a clean order and selecting a CLEC that has a transparent provisioning process. "The agents that are successful understand this is more challenging than long distance," he says.

The big catch to selling a CLEC is to "completely understand the application of the customer, know what services the CLEC can and cannot provide ... have all existing telephone and DID lines mapped out, knowing what every single line is used for and knowing how to troubleshoot prior and after installation," says Bob Morrison of the Morrison Group, a California-based agency.

But taking the good, the bad and the ugly together, most agents recommend adding CLEC services to a portfolio.

"I believe, unless the ILEC wakes up and starts to offer competitive, next-generation services, the CLECs will prevail," says Fecher. "Who really likes dealing with the ILEC anyway?"

SMB's Local Service Providers
Source: The Yankee Group