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August 1, 2006
LAST YEAR, WE ALL WONDERED what was going to be the impact of the big megamergers: Sprint Corp. with Nextel, followed by MCI with Verizon Communications Inc., followed by AT&T Corp. with SBC Communications Inc. and then BellSouth Corp. thrown in on top. Surely, this was going to be bad for those of us building our businesses in the alternate channel. What good could possibly come from all this turmoil?
Well, as time passes, we at ARG, an independent agency based in McLean, Va., are finding more good than bad. We see a future totally opposite of the gloom and doom predictions that are spreading throughout the channel. Thats not to say that we arent experiencing problems that result from mergers on this large scale. However, the reality is that Sprint, MCI and AT&T werent clicking on all cylinders before their mergers. They struggled mightily with multiple billing platforms they had yet to integrate. They could not enter a contract with associated discounts prior to the order being provisioned. And when, inevitably, the bills were in error, it would take a minimum of six months of persistent follow-up to get credits processed. Their processes constantly changed (not necessarily improved) without advance communication to channel partners like ARG. And, good luck trying to find somebody within these companies who was accountable. In our experience, the only decisions came from those unnamed people in legal, who never were available to speak to us. As a result of the inefficiencies, at one point last year, ARGs commission receivable (solely due to errors) from these big providers topped $200,000.
Now, the new Sprint, Verizon and AT&T will send in teams to fix everything. Well, not exactly! But, lets not forget what course we were on. Sprint, MCI and AT&T werent getting better maybe more familiar, but not better. In fact, when each didnt perform to expectations, there would be a wholesale change in channel management and strategy. How many more of those transitions would we face if everything stayed the same? We dont expect an instant turnaround, but we believe theres a greater chance for things to get better operationally under the new regimes.
Most financial analysts question the long-term synergies of the MCI and AT&T acquisitions. When you trend the existing businesses, theres an inherent devaluation of the surviving companies. We believe that means there will be increasing pressure on AT&T and Verizon to produce increased sales results while aggressively reducing current expenses. The most successful method to accomplish both goals has been to ramp up the alternate channel strategy. (Not surprisingly, we happen to be big fans of that approach!) Its going to be a long process to integrate the RBOC channel programs with the less regulated national carriers. But, it seems the former Bells are committing top talent to the task. Assuming we can help develop a program that channel partners can get behind (were going to have to do our part on educating the new powers at the megaproviders on our channel), these merged companies will provide us a product set thats unmatched in the history of telecom.
On top of that, there are a number of other benefits. In ARGs markets, the top competitors for new business were the direct sales forces at AT&T, MCI and Sprint. That competition has all but disappeared, particularly for accounts that bill less than $20,000 per month. For accounts that bill $20,000 to $100,000 per month, we dont run into the larger carriers A-teams; those are saved for the relatively small group of accounts that bill more than $100,000 per month. The net result of the changed sales strategies is a tremendous opportunity for channel partners.
Were already beginning to see some positive competitive responses to the emergence of the megaproviders. Resellers are getting creative and expanding their product offerings. They, too, are finding the megaproviders need them more than ever and are finding ways of accessing a larger product set through their wholesale offerings. Now, as an independent channel partner, we can bring our customers direct and reseller options. Products, such as wireless, that were never meaningfully available through the channel, are now becoming available, opening extraordinary expansion opportunities. Second-tier providers are working aggressively to enhance their offerings with valueadds beyond what the Tier 1 providers offer. And, mergers are beginning among the Tier 2 companies that we hope will create real synergies and stronger companies for the channel to represent.
For ARG, we believe were entering a phase of historical opportunity for the channel partner. Over the past 12 months, weve increased our staff by 33 percent. We recently expanded our office space to provide for an additional increase of 67 percent in the coming year or so. (If youre planning on attending the Channel Partners Conference & Expo in Washington, D.C., we invite you to come by our office; its just a 20-minute cab ride from the Omni Shoreham Hotel.) Were not getting too far out in front, however. Well grow from our success, but times are good right now. Were excited about our business, excited about our industry and very excited about the opportunities that seem to emerge from the chaos at the top of our industry.
Greg Praske is CEO of ARG, an independent agency based in McLean, Va., that he co-founded with company president Bill Power in 1991. He can be reached at [email protected].
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