New Excel Counts on Channel for Comeback

As it emerges from reorganization, VarTec Telecom Inc. is counting on new owners, new money, new managers, a new distribution strategy and a familiar, but controversial, brand to put it back on track.

In early June, Comtel Telcom Assets LP completed its asset acquisition of VarTec Telecom Inc., including its VarTec Solutions subsidiary formerly known as eMeritus Communications Inc. The new company will operate under yet another VarTec brand, Excel Telecommunications a decidedly controversial decision given the companys checkered history with its failed MLM. In late 2004, VarTec severed ties with a network of 130,000 independent sales representatives working on behalf of Excel, the business it acquired in 2002 from Teleglobe Holdings Corp. Although the company worked to transfer many of these reps to other sales organizations, many were disgruntled. I was a rep with Excel and they voided my agreement and kept the customers that I brought to them, and settled with me for approximately one-tenth per year left on the contract with the customer, writes former Excel agent Gary Suttell, in a blog at the PHONE+ Web site. His experience makes the choice to revive the Excel name particularly curious.

I wouldnt have voted for that, quips one agent.There is just too much baggage associated with Excel.

James Cashiola

Excels new CEO James Cashiola, a veteran of the telecom resale industry, says the decision was made after great debate. He cites a slew of positives including many practical considerations, such as the name being trademarked and registered in all 50 states. Then, the debate was, How bad is the name tarnished and how expensive is it to rebuild it or to start over with a name that is not as good but doesnt have any negatives? he says. The companys investigation found the negativity was confined to the Excel agent channel and that it could rebuild the Internet search engine results. The decision came down to the wire two weeks before closing. The clincher was the opinion of the former eMeritus dealer channel. That was the group [in which] we were most interested. When they had no negative feelings toward it, thats when we said, thats a big plus, he says.

But, what about the former eMeritus dealers opinions of the organization itself? To its credit, the restructuring team accepted all active agent contracts (inactive agents were terminated, however) and continued to pay commissions through the reorganization. Excel claims to have 15,000 agent-sold accounts still using its services.

They did a very nice job, says master agent Ted Schuman, CEO of PlanetOne Communications Inc. in Phoenix. We never missed a payment. They always paid right on time. Frankly, they were very admirable in the way they handled it.

Deep cuts in the channel support staff were not wellreceived, and some agents say they made moves, adds and changes frustrating and new sales near impossible. Agent John Ruby, president of Global Communications Network Services Inc. (GCNS) in Andover, N.J, however, says his support level never waned. To this day, it is my favorite, and as far as customer support, it is the best company I have worked with and I work with them all, Ruby says.

GCNS was one of the first agents for Telco Communications Group Inc., a company acquired by Excel in fall 1997. VarTec Telecom purchased the domestic operations of Excelcom Inc. and its wholly owned subsidiaries, Excel and Telco, as well as eMeritus from Teleglobe in the spring of 2002.

The new logo and branding

Notwithstanding Rubys experience, the new Excel executives cop to the lack of support for agents approximately one-tenth the staff remained during the restructuring and say the company has been in account maintenance mode.Now, however, the company is staffing back up. Its indirect channel is headed by John Davis, director of channel sales, who has rehired many members of the eMeritus support team.

In the past VarTec/Excel had a more retail focus, says Excel COO Jerry Ou, noting that more than 1.5 million 1+ and 10-10 dial-around customers are being served on the network, down from 4 million at its high. We see the opportunity in light of the consolidation is to team up with the dealer channel, which we see as more creative and innovative in going to market and getting customers on board.We are looking to leverage that channel, really focus our business there and fine-tune our business to their needs, fine-tune our products to their needs.

At press time in late June, Excel still was formulating its partner program based on input from a newly formed dealer council. The council, which is not fully assembled, met with Excel executives in mid-June. GCNS Ruby was among them. The best part is they are asking us, Ruby says. You dont have the arrogance of a larger carrier saying this is what we are coming out with and this is what you got to sell and this is the way it is. Instead, they were like an open book, saying, OK, what do you need? If it makes sense we will get it for you.

Cashiola says they are looking to the dealer council to help Excel with input primarily on product, incentive programs, training and Excels competitive position in the market. Because this is our only distribution channel, we have to listen, he says. According to the council members, the company scores a four out of five on rates and product scores with which Cashiola says he is not content.

Excel operates a Feature Group D (FGD) network and switching facilities in Atlanta; Chicago; Dallas; Denver; Houston; Los Angeles; New York; Orlando, Fla.; Pittsburgh; Sacramento, Calif.; and Seattle. The company has completed installation of an IP-based infrastructure, including softswitches from Veraz Networks Inc. and submitted orders to ILECs for its FGD circuits to be cut over; the transition is expected to be completed by January 2007. Based on the new infrastructure, the company expects to launch new products, such as integrated T1, MPLS, private Line/VPN and IP video, as well as applications, such as Web and audio conferencing.

Excel also has consolidated nine OSS systems into one and is working on making all of the new functionality extensible to end users and agents. An agent portal, code named ION, will be launched Sept. 1, and will include ordering, order status, provisioning and commission reporting capabilities, Cashiola adds. If this is our only sales force, we have to treat them like internal salespeople. Internal salespeople would be able to see order status and the normal things that would be available at a telephone company that arent extended outside the company. To us, they are the company.We have to give them those tools, he says.

The company prides itself on its customer care systems, which are proven to scale to support millions of customers, and expects to leverage those capabilities to help support the agents, Cashiola says, adding it also hopes to distance itself from other carriers on its partner incentive plans. Details of the new program are expected to be available for release at the Channel Partners Conference & Expo in Washington, D.C.

Jerry Ou

He adds Excel also will put a lot of resources into marketing support. Because we have no other marketing channel, we have to support them on co-marketing, he says. Ruby says the company has told him they will be helping his agency with customer acquisition by splitting some of the costs for his participation in trade shows for the time-share property and telemarketing industries. They will be adding dollars to my advertising and my booth. They are willing to fork out the money; there is no other carrier willing to do that, he says.

Similarly, Excel will advertise to recruit agents for its master dealers. Cashiola says the company is going to embrace the two-tier distribution model by creating an authorized dealer program stipulating requirements for partners that can contract with the company directly. All others will be rolled up under master agents. We are absolutely committed to having master agents because they have to be able to do a lot of the work for us, he says. We see our role to be instrumental in the recruiting, training and motivation of the end agent, but not the management of them on a day-to-day basis.

As one of the countrys largest master agencies, TBI (Telecom Brokerage Inc.) applauds vendors like Excel who through forward-thinking support the master/sub agent or two-tier distribution model, says Geoffrey Shepstone, president of Telecom Brokerage Inc. in Chicago. In contrast to maintaining thousands of distributors and layers of channel managers, directors, regional managers and vice presidents, this approach moves the cost and responsibility of managing the smaller agents to the master agent.

Finally, company executives also are considering requests to offer partners secured creditor status a soughtafter contract inclusion among agents burned by the slate of bankruptcies following the telecom crash in 2001. Excels new bank account, however, offers agents some level of comfort about the companys future prospects. The company has revenue exceeding $450 million, and $50 million in cash flow. As agent Schuman notes: They paid cash for the company, and they have money in the bank. Theres not many telecom companies that can make that claim right now.