Channel partners remain optimistic despite America’s faltering economy and extreme credit crunching. Behind their optimism is a belief that all businesses — large and small — need telecommunications to survive, so cutting those budgets significantly is unlikely.
Sure, there is a demand for telecom services, but what if customers start dropping left and right, closing up shop or filing bankruptcy? And what if carriers’ and service providers’ inability to secure proper credit lines leads to a reduction or cessation in commissions? Here’s to hoping this isn’t just the calm before the storm.
The biggest concern about the fragile economy, according to Adam Edwards, president of master agency Telarus Inc., is carrier solvency. “If the credit crisis hurts [carriers] or their ability to pay us, we’re in big trouble,” said Edwards. “The concern is that carriers will find it financially attractive to cease to pay residuals on a current customer.”
Intelisys co-founder Rick Dellar said although it’s too soon to tell exactly what effects the credit crisis will have on his business, it would be careless to assume carriers will not be affected. “We worry about the fiscal challenges of several of our carriers who have had their stock prices hammered over the last year and may be dealing with debt and restructuring crises of their own,” said Dellar. “With companies like Lehman Brothers and AIG, etc., taking the beatings they have, you can no longer assume that telecom providers will just be there and may not go out of business. That worries me.”
However, many master agents feel they and their subagents are protected by providers’ contractual obligations. In fact, master agents’ ability to negotiate contracts in favor of agents and with a number of different providers is a selling point over operating as an independent agent. And if those contracts are honored, residual commissions should help keep agents afloat when sales slow down.
Geoff Shepstone, president of master agency Telecom Brokerage Inc., said one of the key differentiators among master agents is the negotiation of terms and conditions with carriers. For example, he feels TBI’s contractual negotiations have even kept it safe from carrier bankruptcy — in the cases of MCI, McLeodUSA and others, TBI was still paid commissions because of its terms and conditions.
Similarly, Dellar said Intelisys “vigorously enforces” its rights under carrier contracts. “The only thing that we see as a viable break in that stream is bankruptcy or bankruptcy protection on the part of one of our suppliers. ...We have been through that in the past with Global Crossing, Worldcom and XO, and in all cases, we were kept whole.”
Bankruptcy aside, should agents be worried about their commissions being halted? Dellar said no. “The carriers, in my opinion, will not simply stop paying, because they realize they are legally exposed in some very serious ways if they just stop paying their bills and obligations,” he said. “The one no-no in this is if carriers try to change payment on our existing base. That would be a death spiral for carriers.”
