E Channel - Maine Carrier Buys Customer Base from Defunct Essential.com

Posted: 10/2001

E Channel

Maine Carrier Buys Customer Base

from Defunct Essential.com
By Josh Long

In a $1.3 million agreement, United Systems Access Inc., a small competitive carrier based in Kennebunk, Maine, has acquired the telecommunications customer base from online retailer Essential.com.

Burlington, Mass.-based Essential.com, a marketplace where consumers could purchase utility and telecommunications services on one bill, filed for bankruptcy protection in June. In August, it sold its customer list to United Systems Access while in the U.S. Bankruptcy Court in Boston.

United Systems Access, which also is known as USA Telecom, says the agreement potentially will expand its base from about 5,000 to 60,000 customers. The service provider reportedly made the last-minute offer after reading about the proposed sale in the Boston Globe, outbidding the combined bids of four other companies. The carrier declined an interview with PHONE+.

United
Systems Access, which has about 5,000 local and long distance customers in Maine and Rhode Island, paid more than $22 per name for Essential’s customer list, according to the Boston Globe.

The competitive carrier plans to inject $700,000 into the new subsidiary and retain the Essential.com brand name along with its Burlington location and some employees. In a prepared release regarding the transaction, the company says that rates will remain the same or will be lowered. It also says customer service will be improved.

“In fact, USA’s primary focus will be take Essential’s current 45 minutes-on-hold experience and rapidly reduce it to immediate answer,” according to the company’s statement.

United Systems Access says it will notify customers throughout the Northeast of the change in ownership, a move that could result in attrition and opportunities for service providers and other telecom e-marketplaces.

It is estimated Essential.com owes vendors, including Qwest Communications and Verizon Communications between $700,000 and $800,000 each with an unsecured debt of roughly $5.5 million, according to the Boston-based consulting firm, The Yankee Group.

Essential.com, which stopped providing electricity services last year, has been plagued with customer service problems, analysts say.

As of late August, the online retailer had made no mention of its bankruptcy filing on its web site. Some customers reportedly learned of the company’s troubles after reading about the bankruptcy filing at 1010phonerates.com, a consumer site that offers tips on service plans, and essentiallygone.com, a web site created by 1010phonerates.com founder and editor, Rich Sayers, to alert customers about the company’s troubles.

Several customers complaints, ranging from duplicate credit card billings to disconnected telephone service, were listed on the essentiallygone.com web site. A man from New Jersey said Essential cut off his telephone service and refused to turn it back on when his payment was one day late. Another customer complained Essential.com cashed her $177 check but did not post it to her account and consequently disconnected her service, according to essentiallygone.com.

“The company originally was well funded, but spent heavily on marketing campaigns, allegedly neglecting crucial business processes including customer service centers,” writes The Yankee Group analyst Margo DeBoer, who also says the company had more than 100,000 paying customers in July 2000, most of whom purchased telecom services.

“The marketing campaigns proved to be successful and the startup was flooded with more customers than it was equipped to service,” she adds.

AMR Research (www.amrresearch.com) analyst Allison Bacon echoed those remarks in an analysis. “Essential has been plagued by technological difficulties in its back-office and customer service operations from the beginning, despite a $90 million investment in building the infrastructure,” she writes.

“Customer complaints were numerous: 45 minutes hold time on the phone, delayed e-mail responses, inaccurate bills, weeks to initiate or terminate service and more.”

And Bacon adds, “The company lacked a consistent workflow for customer interactions. Therefore many processes that should have been automated were handled manually.”

Bacon says Essential.com is not the only online distributor of utility services to disappear. After withdrawing from the California and Massachusetts markets last winter and partnering with utility companies to provide electricity services over the Internet, Utility.com sold its platform to FirstPoint Energy Corp., shutting down its web site, she says.

Essential.com sold its wireless platform subsidiary in April to Simplexity Inc. (www.simplexity.com), a Herndon, Va.-based e-commerce platform provider for telecommunications services.