Repositioning Your Agency to Ride the CLEC Train

Posted: 04/2000

Soap Box

Repositioning Your Agency to Ride
the CLEC Train
By Bill Power

used to struggle when someone asked me what I did for a living.

“We sell telecommunications services” or “I own a telecom agency” usually resulted in blank stares or follow-up questions asking for more details.

In the past year or two, however, it’s become increasingly clear to me exactly what it is that I do. Now, when I am asked that question, without hesitation I say, “My company is a telecommunications consulting and brokerage firm.”

That says it pretty clearly. We consult with our customers to identify their telecom needs, then we broker services to meet those needs.

Association Resource Group has been around since 1991. In our early days, we simply sold cheap long distance. Today, we put together and implement complex telecom solutions for our clients that involve long distance, local service, internet access, data connectivity and a host of other related telecom offerings.

To prosper, we’ve had to change our approach to business. Sometimes after a particularly tough day dealing with customers’ problems, we sit around the office and reminisce about the “good old days” when our challenges centered mainly around removing a customer’s PIC freeze, getting account codes activated or canceling a stolen calling card. Our issues today seem infinitely more complicated. But the opportunities that accompany this more complex world are much more exciting.

We’re located in the suburbs of Washington, D.C., and almost 80 percent of our customers’ traffic originates from this metropolitan area. About five miles from our office is the telecom Mecca of America. It seems that every CLEC in the country is either headquartered in our backyard or has put a significant sales force in the field to compete for the same customers we’re targeting.

Most of those sales forces sell services their companies are not really ready to provide. But in reality, those salespeople are in the streets day in and day out, pitching their services to a marketplace that is desperate for alternatives to Bell.

Small and medium-sized businesses are receptive to their pitch, and as a result, we’ve had to work very hard to maintain our customer base while we figured out exactly how we would respond to this challenge.

For the past few years, we’ve known the CLEC train was coming. To prepare, we’ve invested a huge amount of time researching the players to identify the providers we want to add to our portfolio of services. At the same time, we’ve been telling our customers to be patient not to jump into the CLEC world too soon to wait for us to complete our due diligence and identify those companies that can offer the highest levels of service.

Frankly, we’ve been walking a very narrow tightrope. On the one hand, we’ve needed to offer local service alternatives as soon as possible so we can respond to the changing marketplace. On the other hand, we don’t want to jeopardize very successful relationships with our existing customers by selling them services that don’t work.

Fortunately, because we’ve focused our company on doing the right thing for our customers and building long-term relationships, our clients trust us enough to wait for our recommendations. While we recognize anything can happen in the future, so far we haven’t lost a single account to any of the upstart CLECs in our backyard.

In talking with other agents around the country, we know that CLECs have developed a noticeable presence in other markets. We’re not saying that our situation in Washington is more or less competitive than anywhere else in the country. But we do know that we’ve had to find a way to become very CLEC-centric in order to continue to prosper.

Other top-quality agents, to whom we speak on a regular basis, also have taken this approach.

They’ve been revamping their organizations to prepare for the onslaught of CLECs in their marketplaces. They’ve realized what a tremendous opportunity this changing marketplace presents.

Every CLEC out there needs distribution. Wall Street has invested gigantic sums of money into this industry, and now providers are expected to deliver on their business plans. Plain and simple, CLECs have to generate customers. While they’ve all developed direct sales forces, most we’ve talked with are extremely anxious also to incorporate an agency channel into their sales and marketing efforts.

The revenue opportunities for agents selling CLEC services are outstanding. ARG’s average customer buying only long-distance services bills about $1,100 per month. Extensive analysis has shown us that adding local service to the mix increases the average to a little more than $2,000. Throw in some Internet access or data connectivity and the typical $1,100 long-distance user becomes a $2,500 integrated access customer. And the commissions we see that are available to experienced agencies with a track record of success are quite attractive.

Virtually every CLEC uses stock incentives in some form to attract qualified employees. Ask your local CLEC salesperson what his or her stock option formula is and your head will spin. Those same kinds of compensation opportunities exist for agents. Combining the attractive residual commission streams with the possibility of significant equity results in a very exciting compensation package.

As agents, we used to be the bastard stepchildren in the telecom industry. Those days are gone. At ARG, we contend there has been no better time in the history of telecommunications to be an independent agent. But this optimistic view of the future applies only if you’re willing to do what it takes to become proficient at supporting a more complex product line of integrated long distance, local, Internet and data services.

Please notice that I didn’t say “selling” integrated services. I said “supporting.” Clearly the difference between the two is huge. Your company may be like ARG. When we first got started, we thought we could sign up customers for the services we represented and then spend our time on the golf course while the commission checks rolled in. How surprised we were to learn that selling the customer was often the easiest part of the equation!

Provisioning integrated access services can be a complicated and frustrating process. Stories abound of RBOCs’ “strategic incompetence” in providing–or stonewalling, as some would asser–the circuit(s) from the customer premise to the CLEC’s point of presence. But RBOCs aren’t the only players who complicate the process.

CLECs are developing their systems and procedures as they go. All too often, they change those procedures just when you think you have them figured out. To further complicate the equation, there is a fierce demand for seasoned CLEC employees. The turnover is high, which results in noticeable inefficiencies.

We now have supported CLEC services since mid-1999. During that time, we’ve discovered a whole new arena of backroom operations that we have to provide–not actually provisioning the services, but developing and implementing systems and procedures to make sure the provider does–and recruiting and training our operations staff to oversee the process to ensure the services get installed and turned up in a timely manner.

Making the change from selling cheap long distance to being a telecom consulting and brokerage firm in an integrated access environment has been a stressful but very exciting process for our company. We say we made the strategic decision to go in this direction, but in reality, the marketplace made the decision for us. We’ve simply made the tactical decision to go along for the ride.

I’m very clear now in what we do. Even though the challenges sometimes can be a little overwhelming, I’m glad we’re not just selling plain old long-distance services anymore. The opportunities are huge right now for telecom agencies that are positioned correctly.

If you agree with our assessment of today’s marketplace but you haven’t changed the direction of your agency, it’s not too late. You’ll have to act quickly, but there’s still time to get repositioned to support integrated access services. We’ve found that it takes a big commitment to accomplish, but we believe the rewards are worth it.

Bill Power is president of the Association Resource Group, a Washington, D.C.-based telecommunications consulting and brokerage firm. He can be reached at +1 703 734 3500 or

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On the enhanced extended link (EEL)…”Unrestricted EEL access is critical. We want unfettered access in order to provide the full integration of services that our customers want.”

–Jason Karp, director of legal and regulatory affairs, Net2000

“The CLECs should be able to do what they want with them. My fear is that the ILECs will deploy network technologies that competitors can’t interconnect with.”

–Jonathan Askin, general counsel, ALTS

“We have unbundling but then the FCC approves an increased horizontal reconcentration of the ILEC industry [through BOC mergers]. It makes no sense.”

–Lawrence J. Spiwak, president, Phoenix Center

“There’s been the arguments made that if you make it too easy for competitors then they won’t build. This didn’t occur in long distance and plenty of networks have been built. Those making these arguments have been the ones who have the most to lose from there being too many networks–all the ILECs make this bypass argument in which they say they’re getting killed by competitors bypassing their networks. Unbundling creates demand for facilities because a competitor enters a market, develops a customer base and then must build networks to handle the traffic.”

–Jeffrey S. Lanning, special counsel, FCC

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