By Khali Henderson

Anyone who knows Sherm Henderson knows networking comes naturally for this telecom entrepreneur. It’s served him well as a businessman and led him to the top of his industry association. Presently, he is chairman of CompTel/ASCENT, the organization for competitive service providers. It is no wonder then that he is counting on networking to fuel the sales of his company’s nascent local residential services business and the launch this summer of a VoIP product.

Last year, J. Sherman Henderson III, president and CEO of Lightyear Network Solutions LLC, recruited his son, John S. “Josh” Henderson IV, back to the company to oversee the UNE-P rollout and the formation of a network marketing organization focused on the residential market. The younger Henderson took a hiatus from Lightyear in 2001, but had been with the company for the previous five years, most recently as vice president of sales. He also had led the Lightyear’s Network Marketing Services division from 1997 to 1998, building it up to a $5 million run rate per month.

Josh Henderson returned in summer and by fall 2003, his new task became a full-fledged operating division known as Lightyear Alliance with himself as its president.

“What better way than through relationship marketing to get those customers instead of trying to compete against [MCI’s] The Neighborhood and BellSouth and SBC and Verizon and all their commercials.

It was easier for us to go out and get that belly-to-belly, face-to-face sale,” explains Josh Henderson. Lightyear is no stranger to the indirect channel; it has sold to commercial accounts through agents since its inception as UniDial in 1993. Lightyear serves more than 300,000 customers nationwide generating annual revenue of $120 million through its agent partners. This Alliance model is different, however, zeroing in on coaches, teachers, preachers and other community-connected individuals seeking extra income.

The elder Henderson is encouraged by the results since the Oct. 1 launch of Lightyear Alliance. “The numbers that we are fielding right now are amazing to me compared to some of the other product launches that we have had trying to do it another way,” he says.

The Alliance reports adding 500 to 900 representatives and 1,500 to 2,500 new customers per month. Not only is this broad approach attracting new business, the company reports it is proving to reduce churn because of the ties between the customer and the rep in the field. Josh Henderson explains: “We don’t have the marketing dollars to compete against AT&T and MCI, but, my mom will never leave the service because I asked her to be my customer,” he says.

The Alliance’s initial product was a residential $49.99 offer of local and unlimited long-distance. Internet and other options are available for an incremental fee. By Aug. 1, the Alliance will be adding Lightyear Xstream VoIP, a nationwide residential and small business VoIP product featuring local calling, unlimited nationwide long-distance, voice mail, caller ID, call waiting, conferencing and discounted pricing on international calls. Facilitating the service is an appliance called the Lightyear Blue Box. Josh Henderson says the Blue Box connected to a broadband connection will enable subscribers to get dial tone wherever they are. The service is $49.99 per month. The service was introduced to the network marketing group at its national conference held in mid-May (see photos).

By September, Lightyear Alliance expects to be able to bundle in a nationwide DSL service as well. The underlying vendor was not disclosed.

Sherm Henderson explains the new product is complementary to the existing TDM-based local service, which is available in about 30 states. “One of the things that’s kind of neat is we release the product where we can get into areas with our local service like [those served by] Alltel, Cincinnati Bell, some of the Verizon territories. If folks have got [broadband] in there - whether it be cable or whether it be a broadband connection through Covad or DSL.net or anybody - we can sure sign them up,” he says.

Signing them up is the goal, says Josh Henderson, noting that, unlike other MLMs focused on recruiting, Lightyear Alliance’s business model is focused 100 percent on customer acquisition.

Compensation for Lightyear Alliance representatives is not given until a customer has been acquired, either directly or indirectly. If the customer acquisition is direct, representatives can earn up to $20 for each one; if customers are acquired indirectly (i.e. through the distribution channels), a representative can earn $5-$15 for each one, depending on his or her level within the organization.

Representatives can earn additional compensation in two different forms. One method is by building distribution channels, which can earn a representative from $50-$185 depending on his or her level within the organization. The other method is through a monthly residual, where reps are paid a monthly commission based on their personal customer base and the base of their distribution channel up to eight levels.

The Lightyear Alliance reports it paid out $200,000 in commissions in its first six months. “We have a group that makes around $6,000 just off customers and their residuals,” says Josh Henderson.

Representatives pay $149 to access the Lightyear Alliance Payout Distribution (LAPD) system and starter kit. LAPD shows representatives their entire team, customers on the team, their activity and the points and promotional levels. Josh Henderson says the real support is in the field.

Lightyear Alliance supports the network marketing organization with seven full-time staff; three are in the field five days a week, traveling to cities where representatives work, to train and recruit. In addition, two weekly conference calls are held to issue corporate announcements about product and pricing, training opportunities and more. Representatives do their own team training calls on Saturday mornings.