Agents make commissions. Resellers make margins. That’s generally true, but some service providers are blurring the lines, enabling agents to pick their margins.
There are many approaches, but the general idea is offering agents the ability to choose the price they want to sell and, thus, how much margin they will make.
A true resale arrangement in the carrier space is not as simple as it is with gear, for example. Resellers of local and long-distance services are regulated even if they don’t own any facilities themselves. This requires expensive regulatory certification at the state and federal levels. It also requires a robust billing system that can process wholesale call detail records, rerate them and produce an invoice complete with accurate taxes and government surcharges. For these reasons, most agents shy away from becoming a reseller.
However, one company, Wholesale Carrier Services Inc. (WCS), enables an agent to do just that. Chris Barton, president and CEO of WCS, said his company offers a Virtual Telco option that enables agents to ride its certifications and WCS provides the billing under a service bureau contract. The partner buys wholesale and sets its own price. It owns the customer as well as the bad debt. Receivables go into a lock box from which WCS and the partner are paid.
Another option is to become a WCS Value-Added Reseller (VAR). It’s similar to the Virtual Telco model, but WCS manages the LOAs, its name is on the bill (or it’s co-branded or not branded). Most importantly, the VAR is not on the hook for bad debt, but still gets 100 percent of the margin. “What other companies do is cost plus plus plus,” Barton said.
Despite the opportunity to control and improve margins, the VAR program is not for everyone, Barton said. “Agents have to manage retail price points. They are not used to it, and they don’t like to do the math,” he said. But for the right partner, a “super agent” or a master agent with a direct sales force, he said the model is appealing as a way to optimize commissions. He said VAR partners average 38 percent margin, but some make more.
He also said it’s a great way to get into the resale business; there is a seamless migration from being a VAR partner to a Virtual Telco built into the contract. WCS can transfer ownership of the customers; the partner doesn’t have to start over to build the base.
PHONE+ spoke to one WCS VAR partner on condition of anonymity. “My main concern is not only building a base, but building an asset,” the agent said. The impetus for joining WCS’s VAR program came after the agent was cut off by another service provider for not selling enough new business despite a large installed base. “After you get burned, you need to take control of your destiny,” he said.
One advantage of working with WCS is that there is no margin split. You get 100 percent of the margin, he said.
