Channel Conflict and Controversy: Bankruptcy, Zoom Security, Layoffs

The COVID-19 pandemic may have slowed business and sent employees home to work, but it sure hasn’t curbed the amount of conflict and controversy in the channel.

Among the expected news of the day, such as new hires, breaking M&A and changes in channel strategy, there also are controversies that get the channel talking. There have been quite a few since our last channel conflict and controversy roundup last October.

Recent hubbub involves Frontier Communications filing chapter 11 bankruptcy, Zoom facing heavy criticism for its security and privacy, and layoffs by AT&T, CenturyLink and others.

In addition, the pandemic has eliminated all tech sector hiring and McAfee was rocked by executive leadership departures.

Grab some popcorn and click through the slides below . Revisit the controversies and conflicts that have rocked the channel over the past several months.

Frontier chapter 11
Frontier Communications Files Bankruptcy

Frontier Communications, the provider of telecom services in 25 states, last month filed Chapter 11 bankruptcy. It was part of a restructuring support agreement to cut its debt by more than $10 billion. The filing came as no surprise to many as the company's financial struggles were well known.

The Frontier Chapter 11 bankruptcy filing joined similar moves by Windstream, Sungard Availability Services, Fusion Connect and other big channel players — in just the past year. Financial issues aren't the only thing plaguing Frontier.

The company might have an uphill battle winning over both business customers and its residential consumers. It faces widespread complaints about service quality, poor plant maintenance and lack of planning for future rural broadband expansion.
Windstream issues
Windstream Bankruptcy Drama Continues

Windstream, the business communications giant, moved a step closer this month to a chapter 11 bankruptcy exit.

A federal judge in New York approved Windstream’s proposed settlement with Uniti Group. Uniti spun off from Windstream in 2015 when the latter sold off some of its network assets. Uniti controls the broadband network that is critical to Windstream’s operations. Windstream supplies about 70% of Uniti’s revenue in exchange for access to the network.

Windstream now expects to emerge from bankruptcy in late summer. In the meantime, Windstream continues its court battle against Charter Communications. it claims Charter tried to poach its customers through a deceptive mailer about its competitor’s bankruptcy.
Zoom security
Zoom's Security Woes

The COVID-19 pandemic sparked a massive surge in video conferencing, and Zoom was among the biggest beneficiaries.

However, along with that surge came a massive backlash from users complaining about lack of security and privacy. The FBI issued a warning that video teleconferencing (VTC) hijacking, also called “Zoom-bombing,” is emerging nationwide. The FBI has received multiple reports of conferences being disrupted by pornographic and/or hate images and threatening language.

In addition, the New York Attorney General’s office sent a letter to Zoom with a number of questions. It wanted to ensure the company took appropriate steps to ensure users’ privacy and security. Those issues have since been settled.

Zoom has vigorously defended its security practices and has acquired Keybase. Keybase, a startup with encryption expertise, will help Zoom further beef up cybersecurity on its platform.
Layoffs at AT&T, CenturyLink, FireEye, Cloudera

AT&T, CenturyLink, FireEye and Cloudera all have shed workers this year in cost-cutting measures.

Thousands of AT&T workers began 2020 hunting for new jobs after training their foreign replacements. Many of the workers had been with AT&T for more than a decade, but didn't get severance or early retirement. They also might struggle to find a comparable job elsewhere with similar pay, according to Axios.

More than 300 CenturyLink employees will lose their jobs by the end of this month, including 150 of the more than 2,000 workers in Minnesota. CenturyLink spokesman Mark Molzen confirmed the layoffs, saying “based on continuous assessment of our business needs and workforce alignment, we are reducing our field operations workforce by approximately 310 employees.”

Also this year, T-Mobile laid off workers within its Metro by T-Mobile prepaid business, FireEye is laying off workers as part of a restructuring process planned long before the pandemic, and Cloudera confirmed job cuts in direct response to the pandemic.
COVID-19 unemployment
COVID-19 Guts Tech Sector Job Growth

The pandemic is shattering tech sector employment, with more than 102,300 IT pros losing their jobs last month.

That’s according to Janco Associates. In all, the IT job market has lost 81,700 jobs this year. Janco reduced its forecast for overall tech sector job growth to a little more than 40,000 for 2020. In March, the firm reported 120,000 new IT jobs created in the last 12 months.

“IT pros who do not have a job are finding it difficult to even find contract work,” said Janco CEO Victor Janulaitis. “Until the public begins to feel they can go back to a normal lifestyle and companies open their doors, IT hiring will be nonexistent.”
Wildix vampires
Wildix Calls Competitors 'Vampires'

Speaking at the company's UC&C conference in Dallas, Robert Cooper, Wildix‘s general manager of North America, stirred stuff up. He blasted RingCentral, 8x8 and other prominent UCaaS providers, calling them "vendor vampires." He said the companies are prevailing in the market due to strong branding.

Cooper said customers increasingly abandon local providers in favor of a company with a global brand. He listed RingCentral, Fuze, 8×8 and Vonage as examples of companies that have poured money into marketing and reaped the benefits.

“If you work with them, they will reduce you to acting as a mere sales agent in the market," he said. "They do that so they can have a cool image, a cool brand, a cool name, so that end users remember who they are. They’re still vampires. They’re not headquartered in Transylvania, but they’re in Silicon Valley. And they have offices all across the United States and scattered around the world; in summary, their appeal to customers comes from their large market presence."

None of the companies Cooper mentioned decided to comment to Channel Partners.
McAfee leadership
Leadership Purge at McAfee

After nearly three years, Chris Young stepped down as McAfee's CEO to join private-equity firm TPG as a senior adviser. Peter Leav, BMC Software’s former CEO, replaced Young as McAfee’s CEO.

Under Young's leadership, McAfee transformed into a "very fast-growing and aggressive company." So said Tony Massimini, senior industry analyst, information and network security at Frost & Sullivan.

Other executives – such as Allison Cerra, senior vice president and chief marketing officer, and John Giamatteo, president and CRO for McAfee’s enterprise business group –.also left the company. At the same time, McAfee has added new channel leaders.

"Whenever you have executive leadership changes, there is an uneasy feeling with the partner community," said Ken McCray, McAfee's head of channel sales and operations for the Americas. "I can see the partner community benefiting from the executives coming on board and working with the executives in a very positive manner."
CenturyLink settlement
CenturyLink Pays Settlements for 'Unfair' Advertising, Billing

In March, CenturyLink agreed to pay a nearly $11 million settlement with the Arizona Attorney General’s office to resolve allegations that it engaged in “deceptive and unfair” advertising and billing practices.

This is the latest settlement with Centurylink for its billing practices. In January, the communications giant agreed to a nearly $9 million settlement in Minnesota, and a $4 million settlement in Oregon.

According to Arizona Attorney General Mark Brnovich, CenturyLink offered consumers various “closer discounts” as an incentive to sign up for service, but frequently failed to apply discounts to consumers’ accounts. Between 2013 and 2016, CenturyLink promised Arizona consumers about $1.9 million in closer discounts that consumers never received, he said.

Pursuant to the settlement, CenturyLink is required to provide consumer restitution and refund the entire amount to Arizona consumers. The settlement is subject to court approval.
LogMeIn hire
Rick Ribas Leaves Intelisys

In an unexpected move, channel vet Rick Ribas left Intelisys in April after nearly 11 years to become LogMeIn‘s vice president for global channel sales.

In his new role, Ribas is leading the company’s growth strategy for channel sales. He will create new channel business partners and bring new sales opportunities to LogMeIn partners globally.

This is a newly created role.

"I was not actively looking," Ribas said. "I had my eyes open as we as we were coming to the end of the earn out. But that didn’t mean that there was an end, but it was a good time for me to start looking at other opportunities in the industry and it was just good timing. This seemed to fall into place as far as me attending the sales kickoff and becoming aware of what the company was really all about, and then realizing there was a position open."

Ribas' exit is just the latest in a handful of exits by prominent execs and managers from the master agent.
AT&T throttling
AT&T Faces $60 Million Throttling Settlement

Last November, AT&T Mobility agreed to pay $60 million to settle litigation with the Federal Trade Commission (FTC). It was over allegations it misled millions of its smartphone customers, charging for “unlimited” data plans while reducing their speeds.

In a 2014 complaint, the FTC alleged that AT&T failed to adequately disclose to its unlimited data plan customers that, if they reach a certain amount of data use in a given billing cycle, AT&T would reduce or “throttle” their data speeds to the point that many common mobile phone applications, such as web browsing and video streaming, became difficult or nearly impossible to use.

The $60 million AT&T paid will go into a fund to provide partial refunds to both current and former customers. Affected consumers will not be required to submit a claim for the refunds.

AT&T customers will automatically get a credit to their bills. Former customers will get checks for the amount they are owed.
T-Mobile merger
T-Mobile-Sprint Merger Approved Despite Opposition

After facing opposition and delays, T-Mobile completed its $26 billion merger with Sprint on April 1.

T-Mobile said the combination creates the “New T-Mobile, a supercharged Un-carrier that will deliver a transformative 5G network.” The parent of the combined company is T-Mobile US, whose stock will continue to trade on the Nasdaq. The combined company will operate under the name T-Mobile.

In February, a U.S. District Court judge dismissed a lawsuit from 14 state attorneys general. That was the last federal regulatory hurdle for the two companies. The merger also got heavy opposition from the Communications Workers of America and consumer groups.
AT&T to End '5G Evolution' Advertising

AT&T says it will stop using “5G Evolution” and “5G Evolution, the First Step to 5G” in its marketing. The decision is in accordance with a ruling from the National Advertising Review Board (NARB).

T-Mobile USA challenged the advertising before the National Advertising Division (NAD). AT&T appealed NAD’s recommendation that it stop making those claims.

NARB is the appellate unit of the advertising industry’s system of self-regulation and NAD is the investigative unit. Both are divisions of Better Business Bureau (BBB) National Programs.

The NARB panel determined that both claims will mislead reasonable consumers into believing that AT&T is offering a 5G network.

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