20 Group Reorganizes as Agent Alliance

Posted: 02/2000

20 Group Reorganizes as Agent Alliance
By Khali Henderson And Jill Collins

The 20 Group, a small association of network service agencies formed in mid-1998, has
reinvented itself as the Agent Alliance.

The change is not merely cosmetic, its founders say. It is substantive, adding members
and purchasing power to what was a loose networking and informational forum. If
successful, the group’s existence could have influence beyond its membership, affecting
the larger agent community and the vendors that supply them.

Launched in late December, the alliance includes 14 of the larger master agencies in
the telecommunications industry. While it is not actively recruiting additional members,
the group plans to publicize in February its final roster, which could reach as many as 20
agencies. Membership is by invitation only. Members do not pay dues, but are responsible
to pay expenses as incurred on the group’s behalf.

The Agent Alliance extends the 20 Group’s charter beyond sharing information among its
agency members to consolidating their negotiating and buying ability in order to add new
vendors and new product lines to its members’ offerings.

According to the alliance, the membership controls annual billings of more than $100
million and a distribution channel of more than 2,000 agents and subagents. In size and
scope, the combination compares to a third-tier long distance carrier.

"We believe the Agent Alliance represents the single most formidable independent
distribution channel in the telecommunications industry. Additionally, we are confident
the Agent Alliance will create a new paradigm that will permanently impact and enhance
relationships, support and product offerings between agents and suppliers for many years
to come," says Alliance President Bill Power, president, Association Resource Group,
McLean, Va.

The alliance already is in negotiations with several undisclosed telecom carriers,
enhanced service providers and nontelephony vendors for distribution contracts. Alliance
Vice President Ted Schuman, president and CEO, U S Telebrokers Inc., (www.ustelebrokers.com), said the group expects to
announce its first deal by the end of the first quarter at the PHONE+ AgENt Conference
& Expo (www.phoneplusmag.com/agent) in
Las Vegas.

As part of its organization, the alliance has consulted with legal counsel to set up
bylaws and rules of engagement for working with vendors. Schuman explains that, in
general, any member can propose a deal to the membership and that upon majority vote, due
diligence will be undertaken by the deal proposer and a negotiating committee.

The process is not unlike that of previous telecom buying groups formed by carriers and
resellers, such as the Telecom Buying Alliance (TBA), the International Carrier Group
(ICG) and the Associated Communications Companies of America (ACCA). Although ICG and ACCA
were successful in securing vendor contracts, the TBA met with resistance from carriers
that did not want to negotiate agreements that would displace and devalue existing pacts
with the group’s individual members.

The Agent Alliance appears to be mindful of such potential backlash and has set its
sites on new vendors and new product lines, rather than renegotiating with members’
current suppliers.

Another potential pitfall of any buying group can be in assigning liability for
shortfalls in volume or revenue commitments. Power says the alliance is negotiating those
details with each vendor on an individual basis.

Currently, the alliance has no formal staff or budget to facilitate provisioning or
commission disbursements on behalf of the group’s members, but has not ruled out that
possibility if a vendor requires it. So, it is likely that a vendor may negotiate with the
alliance as a single entity, but interface operationally and financially with each agency
separately on the back end of the deal.

Power says
the primary motivating factors for formation of the alliance are achieving economies of
scale and streamlining processes (due diligence and contract negotiations) for bringing
products to market quickly. Additionally, Schuman says the breadth of experience of the
membership–from voice to data services and from residential to commercial
customers–makes due diligence and negotiations more effective.

Although the group’s formation is self-motivated, its members expect vendors will find
working with the alliance advantageous as well. "What our primary asset is [is] our
distribution channel," Schuman says.

Harry Torpey III, regional wholesale manager for local and Internet services provider
(ISP) RCN Telecom Services Inc. (www.rcn.com) says,
"If they control that much revenue, obviously companies like mine are going to take
notice and cut them special contracts."

One potential pitfall of working through the umbrella organization, Torpey says, would
be RCN’s inability to control who is selling its product. "Local and Internet
products are getting more and more technical. Agents need to know more in order to process
orders correctly."

Aside from contract provisions against misrepresentation, Torpey says his company would
likely ask that agents be trained. He takes some comfort, however, in knowing that the
alliance members are select agencies. "The companies in the 20 Group are all
successful. They understand the additional requirements to sell local and Internet
services to have such high billings," he says.

Agent Alliance Executive Committee

President-Bill Power
president,
Association Resource Group,
McLean, Va.

Vice President-Ted Schuman,
president and CEO,
US Telebrokers Inc.,
Scottsdale, Ariz.

Secretary-
Ron Bohm,
president,
King Communications Inc.,
Hoffman Estates, Ill.

Treasurer-Ben Humphreys,
president,
COMTEL Communications Services,
White Stone, Va.