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Conflict and Controversy: Toshiba, Avaya, CenturyLink Raise Eyebrows

Controversy

It’s never a dull day in the world of telecommunications and information technology — particularly when it comes to issues that impact the channel.

Whether it’s surprising M&A, sudden departures or promotions, changes in channel strategy, and new products and services aimed at disruption, there’s always something newsworthy happening.

Also from time to time, we see controversy — such as the ongoing escalation of class-action lawsuits against CenturyLink, Avaya’s chapter 11 bankruptcy filing, labor issues with carriers, and Toshiba Telecom’s surprise shutdown and sale. These are the stories that get the industry – and the channel – buzzing.

In this gallery, we revisit this year’s controversies and provide a look forward.

Follow contributing editor @EdwardGately on Twitter.

Breakout at VMware VMworld 2017
Toshiba 'Blindsides' Dealers

In March, Toshiba shocked dealers in the United States, Canada and Latin America when it announced it was shutting down sales of new systems in its business phone division as part of its continuing global restructuring. After the closure, Ben Stiegler, Snaptech IT’s vice president of business development for Northern California, said dealers still didn’t have clarity on existing inventory levels, which Toshiba said would be replenished, “so prudent customers are stocking up now on spare and expansion components to support their short-to mid-range business plans.”

And then, seemingly out of nowhere, Mitel announced it had purchased the division from Toshiba, providing a “clear path forward ... including ongoing access to existing Toshiba products and services.” Dealers still are learning what this transition will mean to them.

Cloud IoT
Avaya Files Chapter 11

Although not exactly a surprise, Avaya rocked the channel when it filed for chapter 11 bankruptcy in January. Avaya has been transitioning from a legacy hardware business to a software and services company, and had been looking for ways to decrease its debt load of about $6.3 billion.

Avaya’s partners actually were relieved by the filing and look forward to it emerging from chapter 11. However, reassuring nervous customers has proved to be a challenge. In the meantime, Avaya sold its networking business to Extreme Networks for about $100 million.

In August, Avaya filed an amended reorganization plan and announced a new CEO effective Oct. 1. The company originally planned to emerge from chapter 11 this summer, but now hopes to exit by the end of the year.

Avaya's John Colvin
CenturyLink Lawsuit Pileup

In the midst of preparing to acquire Level 3 Communications, CenturyLink has found itself the defendant in a growing stack of class-action lawsuits alleging overbilling and overcharging for services. The suits followed a lawsuit filed in Arizona by former employee Heidi Heiser, who said she was fired from her job as a CenturyLink customer service and sales agent days after notifying CEO Glen Post of the alleged billing scheme.

Class-action suits now have been filed in Arizona, California, Colorado, Idaho, Nevada, Oregon and Washington. In addition, CenturyLink faces a suit by Minnesota Attorney General Lori Swanson, and numerous investor class-action lawsuits.

CenturyLink spokesman Mark Molzen said his company is treating the suits “very seriously.” CenturyLink expects the acquisition to be final by Sept. 30.

Top of Arena at VMware VMworld
Strike Threats: AT&T, CenturyLink

While less attention-grabbing than last year’s extended Verizon wireline workers’ strike, this year has had its share of union contract drama. For example, in March, 17,000 contract-less AT&T call-center workers in California and Nevada left their jobs in a two-day “grievance strike.” The Communications Workers of America (CWA) represents the employees and said AT&T violated terms of their contract.

And in May, AT&T wireless and wireline workers in 36 states left their jobs on a Friday afternoon and picketed through the weekend. Their walkout was designed to spur contract talks. The carrier said it was forced to close hundreds of stores temporarily from coast to coast over the weekend as a result.

Also in May, CenturyLink technicians and other workers in Florida who are CWA members rejected a proposed contract and approved a strike authorization vote. CenturyLink spokesman Mark Molzen said the telco and Local 3176 had mutually agreed to extend the current labor contract, and it remained in full force and effect. Workers remain on the job, he said.

A breakout session at VMware VM world 2017
Sprint-T-Mobile-Charter Merry-Go-Round

So, what’s the endgame for Sprint? At this point, it’s anyone’s guess.

Talk of a Sprint T-Mobile merger spiked in January followed by, nothing. Then in June, German publication Handelsblatt reported that T-Mobile’s Germany-based parent company, Deutsche Telekom, was preparing a plan to merge with Sprint. Then just days later, Sprint reportedly was in talks with Charter Communications and Comcast about a partnership to augment the cable companies’ wireless offerings. Also, Sprint was said to be pursuing Charter. However, that was followed by Charter saying it has no interest in acquiring Sprint.

Speculation has waned for now, with Bloomberg reporting early last month that Sprint is back to talks about a T-Mobile merger.

Bitter Rivalry: Comodo vs. Symantec

In June, Comodo announced that seven former Symantec channel leads had jumped ship and joined its global channel and business development team. Collectively, the team was the driving engine behind Symantec’s website security channel business, a unit that at one time represented about one quarter of the total revenue for the company’s website security business.

“We believe Symantec’s governance and compliance problems over the past two years, which came to a head recently, made it difficult for the channel to do business with Symantec,” said Michael Fowler, Comodo’s president.

And then last month, Symantec said it is selling its SSL issuance certificate business to rival DigiCert for $950 million in cash and a 30 percent stake in DigiCert stock. Symantec CEO Greg Clark said selling the assets will allow his company to sharpen its enterprise focus on “delivering unparalleled protection for the cloud generation through Symantec’s Integrated Cyber Defense Platform.”

However, Fowler said the acquisition “represents a huge disruption for businesses of all sizes that rely on Symantec, and associated brands of Thawte, GeoTrust and RapidSSL, as their primary certificate authority (CA).”

“Customers and partners have been coming to us in droves because they feel they were left without a lot of answers at a time when their businesses are at risk,” he said. “Meanwhile, Symantec profits from the highest bidder, who will be saddled with picking up the pieces.”

Avaya's Gary Levy
Special Access and the FCC

In April, the Federal Communications Commission adopted an order stating that because of “substantial and growing” competition in the business data services (BDS) market, legacy regulation “inhibits the investment required for the transition of BDS (also known as special access) from legacy TDM networks to high-speed Ethernet connectivity.” The order includes ending price caps on special-access service. Windstream, Incompas and BT oppose the rollback, while AT&T, CenturyLink and Verizon are among the supporters. A federal court is set to hear the case against the rollback.

Also in April, FCC Chairman Ajit Pai, chosen by President Trump, announced a plan to roll back net neutrality rules, which has drawn both praise and condemnation from companies in the channel. Verizon and CenturyLink support Pai’s plan, while the Internet Association, a group that represents more than 40 top Internet companies, including Google, Facebook and Netflix, said the rules are working and shouldn’t be changed. The FCC has yet to render its decision.

Hurricane Harvey
Cloud Conflict in the Channel

Heated competition and increasing channel conflict for cloud business are creating untenable conditions for many channel partners, according to a recent survey by Techaisle. From 2013 to 2017, the percentage of partners experiencing competition from vendors has gone up by 15 percent, whereas from distributors it has increased by 55 percent.

“To be fair, cloud by its very nature resists territory-based conflict management strategies, but the current results demonstrate a need for a better approach to cloud channel conflict management,” said Anurag Agrawal, Techaisle’s CEO and analyst. “Vendor/channel conflict, reported by the channel as the primary source of cloud competition in over half of cases, clearly requires better strategies than are currently in use. Similarly, distributor sales to end-customers is also well beyond a level that encourages the channel to invest in cloud solutions and enables channel firms to compete on traditional price/value/capability differentiation. Vendors will need to be more crisp in their policies and consistent in execution — and channel members will need to seek out vendors whose approaches allow for long-term channel practice viability.”

The survey data describe a real dilemma for vendors looking to build cloud traction through channels, he said.


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