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Channel Conflict and Controversy: Racial Reckoning, Verizon, AT&T

Forget President Trump’s refusal to concede. There’s been plenty of channel conflict and controversy involving T-Mobile, Verizon, AT&T and more.

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 May.

Recent hubbub involves Datto suing one of its former employees, issues and controversies involving racial diversity, and a fresh wave of COVID-19 prompted layoffs.

In addition, there’s been more drama involving Frontier Communications’ bankruptcy filing. And unexpected changes in channel leadership at Lumen, Windstream, Vonage and VMware had readers talking.

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

Racial reckoning

The Channel’s Racial Reckoning

As America faces its own diversity and racial reckoning, so, too, is the technology sector.

First up, Oracle shareholder R. Andre Klein filed a 106-page complaint calling out the longtime Silicon Valley company for its lack of diversity, specifically regarding African Americans. Even though Oracle has repeatedly asserted in various public documents that “diversity and inclusion in our workforce starts at the top,” Klein says the vendor has failed.

Next up, a seemingly unprovoked racist tirade on the part of San Francisco-based Solid8’s founder and former CEO, Michael Lofthouse.

On July 4, Lofthouse was dining at a posh Carmel Valley restaurant when he started in on an Asian family — and for no apparent reason.

“[G]o back to whatever [expletive] Asian country you’re from,” Lofthouse says on the recording. He adds, “Trump’s gonna [expletive] you.”

Jordan Chan caught the incident on video. (Warning: language. The restaurant tossed Lofthouse out, by the way.)

“We were celebrating my tita’s birthday, literally just singing happy birthday to her and taking pictures, when this … white supremacist starts yelling disgusting racist remarks at us,” she wrote on Instagram.

Lofthouse later resigned.

Finally, the state of California accused Cisco Systems of discrimination. Reuters reports that regulators say the vendor allowed two Indian-American managers to harass an employee because he hails from a lower caste than them.

T-Mobile penalty

T-Mobile Faces Largest Ever FCC Penalty

T-Mobile will pay a $200 million civil penalty to resolve a Lifeline investigation involving Sprint taking millions of dollars in subsidies.

In the Lifeline program, the subsidies aim to help make phone and broadband service more affordable for low-income consumers.

The Federal Communications Commission (FCC) launched its investigation last fall. It centered on Sprint’s compliance with the Commission’s rules regarding waste, fraud and abuse in the Lifeline program.

The payment is the largest fixed-amount settlement the FCC has ever secured to resolve an investigation.

Earlier this year, Sprint and T-Mobile merged, with Sprint continuing as a wholly owned subsidiary of T-Mobile.

The settlement comes after an FCC enforcement bureau investigation into reports that Sprint, prior to its merger with T-Mobile, was claiming monthly subsidies for serving about 885,000 Lifeline subscribers, even though those subscribers were not using the service. This was in potential violation of the FCC’s non-usage rule.

Verizon and AT&T

Verizon, ATT Pay For ‘Shocking’ Conduct in Whistleblower Case

Verizon and AT&T in September agreed to pay a combined $116 million to settle a whistleblower lawsuit alleging overcharging in California.

The suit claimed they overcharged California government customers for wireless services. This is the second-largest California False Claims Act settlement in the state’s history outside of the health care industry.

Verizon will pay $68 million and AT&T will pay $48 million. The suit claims that for more than a decade the carriers knowingly ignored two cost-saving requirements included in multibillion-dollar contracts. The contracts offered wireless services to state and local government users in California and other states.

Constantine Cannon filed the whistleblower lawsuit.

“The conduct alleged by the whistleblower was shocking,” said Wayne Lamprey of Constantine Cannon.

CenturyLink violation

Justice Department: CenturyLink Violated Terms of Level 3 Acquisition

CenturyLink in August settled U.S. Justice Department allegations that it violated a judgment to prevent anticompetitive effects from its Level 3 Communications acquisition.

The judgment barred CenturyLink from soliciting customers that switched to the buyer of assets divested during the acquisition. CenturyLink failed to comply. Instead, it initiated contact more than 70 times over more than a year with former Level 3 customers.

The telecommunications giant completed its $34 billion acquisition of Level 3 in November 2017.

CenturyLink didn't deny the allegations and agreed to an amended final judgment, the Justice Department said.

“When a defendant violates the terms of a settlement decree, it must be held accountable to its obligations to the department and the American consumer,” said Assistant Attorney General Makan Delrahim of the Justice Department’s antitrust division.

Lisa Miller out

Top CenturyLink Channel Exec Unexpectedly Out

Speaking of CenturyLink, In a surprise move, Lisa Miller, a high-profile CenturyLink channel executive, left the company this past summer.

Miller was CenturyLink’s president of wholesale, indirect and SME. She joined CenturyLink in November 2017 and was with Level 3 Communications for more than 11 years. CenturyLink has since rebranded as Lumen Technologies.

Miller left CenturyLink on June 1 to pursue other opportunities, according to CenturyLink. She is now president and COO of Spearhead Advisors, a Lumen partner.

Ed Morche, CenturyLink’s president of North America enterprise and public sector, took over leadership duties for the indirect organization. His role expanded to include leading the indirect sales organization, in addition to the North America enterprise and public sector.

Representation

Frontier Communications Bankruptcy Drama Continues

A labor union and consumer advocacy group in August raised concerns about Frontier Communications‘ proposed “virtual separation” plan that could split the company between areas.

The Communications Workers of America (CWA) and The Utility Reform Network (TURN) filed comments with the Federal Communications Commission (FCC) regarding Frontier’s bankruptcy. It raises concerns about whether the company’s proposed reorganization plan is in the public interest.

It also questions whether the reorganized Frontier will invest in improved customer service. That includes service quality commitments, and broadband deployment under state and federal programs.

In April, Frontier filed chapter 11 bankruptcy as part of its restructuring support agreement to cut its debt by more than $10 billion.

The CWA and TURN said the “virtual separation” plan in the fourth amended restructuring plan appears to refer to a separation of Frontier’s fiber deployment from its non-fiber operations.

Frontier could “seek to capture the revenues from fiber deployments for investors,” the groups said. That could potentially deprive retail operations of necessary cash flows, personnel and other resources, they added.

The groups want the FCC to require Frontier to commit to investing in its network for all of its customers. They also want assurances of no job reductions post-restructuring.

Penalty Flag

Datto Lawsuit Says Ex-Employee Took Trade Secrets, Confidential Info to ConnectWise

A Datto lawsuit claims a former employee took trade secrets and confidential information he could potentially use at his job with ConnectWise.

The lawsuit was filed last month in U.S. District Court in Florida and Daniel Moore is the defendant. He previously was Datto’s director and head of commercial operations for APAC and EMEA. Datto deemed Moore redundant and his last day was July 31.

Moore is now vice president of sales operations at ConnectWise.

Datto said it sued due to Moore’s “unlawful misappropriation of Datto’s valuable trade secrets and other confidential information to use at a direct competitor, ConnectWise … and to unlawfully gain a competitive advantage in the marketplace.”

It also arises from Moore’s breach of a noncompete agreement with Datto Europe. He was to refrain from competing with Datto Europe for six months following his departure.

Jason Magee, ConnectWise‘s CEO, said the lawsuit is “between Datto and their former employee.” Also, Moore has been placed on leave pending an investigation into the allegations.

Datto owner

Datto Owner’s CEO Takes Non-Prosecution Agreement for ‘Serious Crimes’

And more news around Datto. The founder, chairman and CEO of Vista Equity Partners, which owns Datto, last month entered a non-prosecution agreement involving an international tax fraud scheme.

Robert Smith entered the non-prosecution agreement with the Department of Justice (DOJ). It’s for his role from 2000-2015 in an illegal scheme to conceal income and evade millions in taxes by using an offshore trust structure and offshore bank accounts.

Smith willfully did not report to the IRS over $200 million of partnership income. He also failed to report his ownership of his foreign bank accounts as required by law. Smith will pay more than $139 million in taxes and penalties, according to the non-prosecution agreement.

Datto was acquired by Vista Equity Partners for about $1.5 billion in late 2017.

COVID-19 layoffs

COVID-19 Layoffs Take Heavy Toll on Channel

COVID-19 layoffs have rocked the channel since the pandemic started this past spring.

Salesforce, NetApp and AT&T are among companies in the channel that have shed workers since last March as part of a cost-cutting strategy and/or business transformation. Many resulted because of financial constraints due to the pandemic.

COVID-19 layoffs continue, with HPE and Dell Technologies as the latest examples. Furthermore, with no end in sight to the pandemic, companies continue to tighten their belts.

For example, a round of AT&T job cuts reportedly displaced more than 3,400 technician and clerical jobs across the country in June. And HPE cut hundreds of sales jobs last month in a major sales reorganization.

Windstream channel chief

Windstream Changes Channel Chiefs Post-Bankruptcy

Windstream Enterprise partners have a new channel chief as Matt Milliron left the company to join Dobson Technologies.

Brad Smith (pictured) joined Windstream nine months ago as vice president of indirect sales. He’s now head of strategic channels. MillIron is now Dobson Technologies’ chief revenue officer

Windstream emerged from chapter 11 bankruptcy in September.

Curt Allen emerged from retirement in October 2017 to take over as Windstream’s channel chief. Milliron was hired as the successor-in-waiting. Allen moved to an advisory role.

Smith has over 20 years in the communications industry. Before joining Windstream, he was president of Managed Communications Group and Fusion Connect‘s vice president of alternate channels. He also had roles at Asentinel and Birch Communications.

Service edge

Vonage Channel Chief Merry-Go-Round

In June, Mario DeRiggi (pictured), who spent less than two years as Vonage channel chief, became Fusion Connect‘s new chief revenue officer.

There was familiarity in the move for DeRiggi, He worked with Brian Crotty, Fusion’s new CEO, at Broadview Networks, which Windstream acquired in 2017. Crotty was COO and DeRiggi was executive vice president.

And just weeks after DeRiggi vacated the role, Curt Allen took over as Vonage channel chief.

VMware channel chief

VMware Channel Chief’s Sudden Departure

VMware global channel chief Jenni Flinders left the company in June. There was little public fanfare about her departure, even when the company announced it hired three new executives including Flinders’ successor, Sandy Hogan (pictured).

VMware provided this statement about Flinders’ departure:

“Over the last two years, Jenni contributed her expertise to revamping the global partner organization, including the successful launch of Partner Connect. We thank Jenni for her passion and commitment and wish her well. Sandy Hogan, senior vice president of worldwide commercial and partner sales, will lead the Worldwide Partner Organization.”

VMware appointed Flinders as global channel chief in April 2018. She was responsible for developing and executing the channel strategy and programs for the company’s global collection of solution providers, distributors, OEMs and telecommunication partners.

IMB splitting

IBM to Split Into 2 Companies by End of 2021

IBM surprised the channel last month with a strategic plan to unleash the power of the company on the $1 trillion hybrid cloud opportunity.

To achieve this vision, IBM will separate its managed infrastructure services unit from its Global Technology Services division. It will become a new public company, a spinoff that for now IBM is calling “NewCo.”

“IBM is laser-focused on the $1 trillion hybrid cloud opportunity,” said Arvind Krishna, CEO of IBM. “Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating. Now is the right time to create two market-leading companies focused on what they do best. IBM will focus on its open hybrid cloud platform and AI capabilities. NewCo will have greater agility to design, run and modernize the infrastructure of the world’s most important organizations. Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities — creating value for clients and shareholders.”

Ultimately, the company split will simplify and optimize its operating model for speed and growth, according to the vendor.


One comment

  1. Avatar Jon W November 18, 2020 @ 6:16 am

    Lofthouse was provoked, just watch the non stop baiting from those people before he said anything. The waitress escalated the situation even further. He must have felt totally ganged up on and not only that, the term Asian is not a racist term it is factually accurate to describe a persons ethinicity. He apologized, took action and still has been nailed by people like you who refuse to see things from his side and continue to stoke the fire 4 months after the event. Why not get some fresh material Edward, borrrring

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