Dear Expert Eye,

What does the loss of UNE-P mean for agents? How are we affected by the recent regulatory changes, and what do we need to do to avoid losing business? –Anonymous

Dear Anonymous,

The recent wave of regulatory changes regarding UNE-P resale is already having profound implications for both service providers and agents. Recently AT&T Corp., for example, has communicated that it will stop selling local residential service and will most likely stop marketing to new residential customers for any services. MCI Inc. has recently announced that in Verizon Communications territories, it can only sell customers who require up to three lines. Most carriers that have embraced UNE-P resale in the past are now scrambling to find alternative solutions to enable and sell local service. These service providers will continue to offer local services, as they have been very successful at raiding local customers from the RBOCs. The recent changes regarding UNE-P have no bearing on the success alternative service providers have had with selling local services; the biggest near-term impact will be related to the decrease in margins that will result from the inevitable increase in UNE-P wholesale rates. In addition, end users fully expect local/long-distance/data bundles from service providers. Likewise, agents are now expected to offer bundled solutions to their customers.

In general, I expect most service providers that have been reselling UNE-P to businesses to continue to offer local services, but they may change the underlying infrastructure that enables the service. Many service providers are aggressively moving to enable VoIP services. The market acceptance of VoIP has just started to move into mass adoption as the technology has matured. Those service providers that have been relying on UNE-P and have been thinking about enabling VoIP have already accelerated their VoIP plans as a result of the recent regulatory changes. In general, VoIP enables service providers to provide the same local service that they have been providing under UNE-P with greatly enhanced functionality and better margins. Most traditional UNE-P providers are starting to implement the service through one of two means either through purchase and enablement of their own VoIP infrastructure through providers such as Sylantro Systems Corp. and BroadSoft Inc., or through resale of hosted infrastructure through wholesale service providers such as Level 3 Communications Inc. UNE-P resellers also will have to invest in obtaining additional IP expertise in both sales and support, as well as adding the sales and fulfillment capabilities for VoIP-oriented CPE such as IP phones and IAD devices.

Agents, likewise, will have to quickly learn the VoIP landscape, and may have to beef up their ability to provide integrated voice and data solutions to end users. This will require the ability to understand, monitor and manage the LAN environment at the end user. In general, this opportunity will be substantial for those agents who are willing to make the move to understand this new environment. It is important that agents pick the carriers that have an accepted brand and will be around for the long term. There will be a wave of new entrants into the VoIP space. Like any new market there will be winners and losers. Be sure to pick the right carriers to sell. We also have seen a recent move by some of the larger master agents to become service providers themselves. These master agents are willing to invest in the billing and customer service infrastructure required to become a service provider, offering hosted resale VoIP solutions under their own brands. Agents are seeing the potential benefit to get closer to actual customer ownership and VoIP represents the best way to move quickly into this world.

Michael Fair
founder, MarketRace LLC
Michael Fair brings MarketRace an extensive background of executive relationship management and strategic sales experience. Prior to founding MarketRace, Fair was regional vice president of strategic partners for the Qwest Communication International Inc. Business Partner Program (QBPP). There, he managed a team responsible for deal structuring and executive relationships with strategic partners, including Cisco Systems Inc., IBM, Perot Systems, Sun Microsystems Inc., EMC and others. Fair joined the pre-IPO Qwest in 1997 as director of marketing and started QBPP in late 1997.Fair received his master’s degree in international business from the University of Texas at Dallas, and a BBA in finance from Southern Methodist University.