Verizon Changes Upset Channel

By Khali Henderson Comments
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Verizon Communications Inc. has made changes to the Verizon Indirect Sales Partner (VISP) for 2011 that agents claim cuts their commissions by two-thirds and sends a signal that the country’s largest carrier is moving away from the agent channel.

Specifically, Verizon agents told Channel Partners that VISP will cap commissions at one year of the contract value even on multiyear term contracts. One agent who spoke anonymously said the result for him has been a “66 to 77 percent pay cut" since most deals are sold on contracts of three years or more. “This to me is saying you don’t want agents," the agent said of the change.

The agent, which historically has counted on Verizon for 80-90 percent of his company’s revenue, says it will be about “5-10 percent or lower" in 2011. Verizon has created a “disincentive to sell them," he added.

A master agent, which also declined to go on record, said that the agents still need to sell Verizon’s service to certain customers, so the result of these changes will be that they sell shorter deals.

The cut is one in a series of changes over the last year. In June 2010, for example, agents said the carrier reduced its renewal commission from 7 percent to 3 percent. Commissions on new business range from 6-18 percent of the customer’s monthly recurring charges, agents said.

Also in June 2010, agents said Verizon scrubbed its midmarket accounts lists and reclassified them as protected accounts. Among these reclassified customers were many of agents’ largest accounts, agents told Channel Partners. As a result, agents said they are gearing up to move those accounts to other providers when the terms are up.

Agents also cannot sell small business accounts (those with fewer than 20 employees) unless they go through the mass markets channel manned by select agents with telemarketing and door-to-door sales reps.

In response to Channel Partners inquiries, Verizon did not confirm the details of the changes, but did issue a statement from the carrier’s new channel chief, Michael Ruhnke, director of indirect sales program for Verizon: “To operate more efficiently, we modified our VISP (Verizon Indirect Sales Partner) channel program to align with the segment’s strategic direction. This year, like in years past, there are changes to our agent program. Some of these changes include re-aligning the agents over specific customer segments and focusing the compensation plan on acquiring new business.  We have also updated the list of restricted accounts as a partner agent isn’t needed to manage a business where a Verizon sales member is already assigned to an account. Overall, compensation is still competitive and is on par with current market conditions."

Ruhnke is a 19-year veteran at Verizon. His most recent role was director of the Mid-Atlantic region for the Verizon midtier business segment. He replaces Sue Molnar, who has moved to another assignment within the company.

In addition to new leadership, VISP also laid off an undisclosed number of channel managers in February 2011. Agents estimated the number to be as high as 10, leaving about two dozen CMs. A Verizon spokesperson declined to confirm the number. “We are always adjusting our headcount to meet the needs of the business … sometimes, it goes up and sometimes it goes down," the spokesperson said. 

Agents said more layoffs could be in the offing since the number of agents and the volume of their sales is likely to dwindle as a result of the 2011 contract changes. “By summer, they won’t have any producing agents and the rest [of the CMs] will lose their jobs, too," one agent predicted. Agents said the numbers of partners in the VISP program as decreased; one agent estimated the number to be 20 or less. This compares to estimates of 60-70 in 2010 and more than 160 in 2008.

Interestingly, one master agency told Channel Partners it is planning to sign a direct agreement with the carrier in 2011, after not having one for a few years. Commenting anonymously, the agency’s spokesperson said that going through other master agencies to do so adds layers that further reduce the compensation.

The recent changes to the Verizon channel are just the latest since the ILEC acquired with MCI in 2006. In 2007, the ILEC created VSPP to consolidate the former MCI and legacy Verizon channels. The following year, Verizon split the channel program apart into the Verizon Solutions Partner Program, which targeted small and medium businesses, and the Verizon Business Indirect Channel Alliance, which targeted enterprise. Then in 2010, Verizon created VISP by combining VSPP and VBICA.

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