PARTNER CHANNEL: Home Sweet Home

Posted: 8/2003

ANY-DISTANCE BUNDLES REVITALIZE
RESIDENTIAL AGENCY PROGRAMS

By Tara Seals

The
agent business once thrived on selling long distance to consumers, but it’s a
model that has waned as downward price pressure on long-distance service,
"anywhere minutes" mobility plans and a telemarketing backlash eroded
the moneymaking prospects in the residential market. Today, the demographic is
seeing a renaissance as local exchange carriers roll out any-distance bundles
that combine unlimited local and long-distance service into one plan, at one
fixed price. Suddenly, the millions of home phone users out there once more have
become a lucrative market.

"We have about 50 products —
local and bundled services, Web, DSL, satellite, home security, calling
cards," says independent agent Q. Ester Woods, who sells residential and
small business service for Cognigen Networks Inc. "People are going for
bundled services with the unlimited long distance, especially in some of the
rural areas where sometimes the costs tend to be a little bit more that what we
would pay in the cities. Our $29 unlimited has really been a big hit."

It’s a trend: Momentum Business
Solutions Inc., Z-Tel Communications Inc., MCI’s The Neighborhood, Lightyear
Communications Inc., Excel Communications and most RBOCs are just a few of the
players in the bundling space. Some agents offer a smorgasbord of opportunities,
but many prefer to stick with one carrier.

"We try to keep things
simple," explains Brad Edwards, vice president at master agency Telebay.
"You give them 20 or 30 different products, agents tend to lose focus on
what they want to sell. So we believe in selling one thing and selling it
well."

Specifically, Telebay concentrates
on selling Z-Tel’s product, ZLineHOME. The CLEC’s plan offers unlimited local
calling and unlimited nationwide long-distance from home, popular calling
features such as call waiting and a unified communications feature called
Personal Voice Assistant (PVA), for one price.

When asked about fears that market
pressures will commoditize the business proposition, as was the case with long
distance, Edwards says the competition has actually helped in approaching the
market.

"You have to fill an
educational role," he says. "With some of the competition that’s out
there competing with Z-Tel, like the Bells, it’s actually helping our agents
sell better, because before there was an element of skepticism in the public —
what are you talking about, free, unlimited long distance? And they’re like,
well, that’s too good to be true."

When an incumbent hires a celebrity
like Danny Glover, or MCI launches a media blitz as it did for its Neighborhood
unlimited product, it means that it’s not such uncharted territory.

Nonetheless, some agents are not
convinced. "The fact of the matter is, I don’t know of a way we can really
concentrate on residential and make a lot of money on it," says Devaux
McLean, president of master agency Prodial Communications. "Today with the
prices the way they are you either have to concentrate on something that’s very
easy to do, or else you have to sell an awful lot of them, or maybe both."

He notes volume sales via the
Internet or affinity groups may make selling to consumers worth the effort, but
that many people will balk at the $49 per month price tag for a bundle primarily
because they don’t spend that much now. He explains, "Some of them have
commented that they may use long distance one month for some reason, but not
every month. So, they’re looking for a good deal. The traditional split between
local and long distance is going to go away anytime soon. There’s a lot of
momentum to overcome."

However, many are bullish on the
prospects of the bundle. Jason Guck, president of agency 5 Linx Enterprises
Inc., sells Internet, wireless, long distance, satellite TV and, for the past
few months, local/long-distance bundles.

"I think the best way to
indicate what’s going to happen in the future is to look back at the past,"
he says. "And when we look at the deregulation of long distance, people
left AT&T for MCI and Sprint, and the price wasn’t even any better. So based
on that model alone we know that 15 percent of the market will leave the Baby
Bells just because there’s never been a choice."

Agents in the space say the key to
approaching the residential market is finding the type of sales tactics and the
range of marketing that works for an agent’s particular situation.

For instance, Z-Tel’s PVA can help
open a tough account.

"We
tell our agents to focus on the hard sell first, the hard sell being something
that customers have never heard about, that being Z-Tel’s Personal Voice
Assistant," says Edwards. "So we tell people to educate customers
about that. And customers aren’t likely to switch on the basis of Personal Voice
Assistant alone, but it will get them thinking." Just when the customer
thinks he or she may not want to switch on that basis alone, the agent brings up
the unlimited long distance as a closer.

While Edwards says he has subagents
doing traditional telemarketing, Telebay is doing most of it’s marketing online.
"People can sign up online, and we’ve set up the Web site so customers can
do an instant chat with a representative, and we can address questions right
then and there with instant messaging," he explains.

The friends-and-family approach also
works well with this model, say agents. "Our model is strictly network
marketing, word-of-mouth approach, friends, family, people we know, there’s a
trust factor, credibility established there," says Guck. "And if we’re
going to refer someone to the service, will that trust factor they’ll at least
try it."

Face-to-face presentations are also
on the rise. "I find that face-to-face and the personal approach has been
better for me and that’s because people kind of like to put a face to the
services that they’re using," says Woods. "They know if they call
someone else, each time they get a different person. With me, I establish a
personal relationship with them so they know if they have any problems, I’m real
to them. But I’ve gotten quite a bit of online business too."

"Z-Tel really helps us because
they provide $20 referral credits to the customer’s phone bill," says
Edwards. An agent can thus talk to a potential customer and say, how would you
like to have your next phone bill for free? Give me some names and I’ll call
them for you and if they sign up you’ll get a credit, and that’s huge with
face-to-face."

As for the business market being
more lucrative for less work because of the size of the account, players that
focus on residential these days are loyal. They say it just makes sense.

Momentum pays agents up-front
commissions, the same amount agents would make with a business account, says
Todd Zittrouer, area vice president for Momentum. And, the demand is there.
"We are absolutely hitting it out of the park," says Zittrouer.
"This is easy to sell, and it targets the main focus group of those
middle-aged and 30-somethings who want call waiting and caller ID and all the
features, but they also want to know what the bill will say every month so they
can plan their finances."

Others see agents that shy away as
missing out. "Agents that don’t want to approach the market, thanks for the
opportunity," says Guck. "Our core business is residential. It’s a
no-brainer to say, here’s a service, unlimited, with all these additional
features. We go into a new marketplace like New York, and I see 11 million
people, we think, over the next 24 months if we just attracted 3 percent of this
market, what would that be? And that’s how we approach the market.

"Local service can target
everybody because there are different plans," he adds. "It runs $40 to
$60 for dial tone alone in the New York area. We can put people in a better
position 90 percent of the time."

ztel.comZ-Tel’s Personal Voice
Assistant is a new feature of Z-LineHOME Unlimited home phone service.

Study: Bundling Ups Consumer $atisfaction

Competition in the long-distance
telephony market and the increasing popularity of bundling services are causing
steep price drops and increased customer satisfaction, according to the J.D.
Power and Associates 2003 Residential Long Distance Telephone Service Study
released July 1.

The study finds mean household
monthly expenditure on long distance now is $24.40 per month — down 30 percent
since 1998. These spending drops coincide with a significant overall increase in
customer satisfaction levels over 2002.

"The fast-growing popularity of
bundling telecommunications services with a single company is one of the big
reasons behind price drops," says Steve Kirkeby, senior director of
telecommunication research at J.D. Power and Associates. "As states began
allowing more local telephone companies to offer long distance service over the
past year, consumers jumped on board with bundling, thanks to attractive
discounts and the convenience of paying just one bill for multiple
services."

The share of households that report
bundling at least their local and long-distance services with one carrier has
increased from 26 percent in 2002 to 40 percent in 2003 — an overall increase
of at least 10 million households. The study finds customers who bundle services
report higher overall satisfaction than those who are not bundling services.
Forty percent of respondents say they most likely would choose their local
telephone company to provide bundled services, followed by their long-distance
company (21 percent) and cable company (16 percent).

"Even though prices are down
and customer satisfaction with long distance companies is on the upswing, we’re
also finding that consumer intent to switch carriers is surprisingly high due to
the lure of bundling," said Kirkeby. "Wireless phones with
long-distance packages also continue to displace traditional long-distance
calling, which is an ongoing challenge for long-distance providers."

In the mainstream user segment,
which includes customers who spend less than $30 per month on long distance,
Cincinnati Bell Inc. ranks highest in customer satisfaction for the third
consecutive year. AT&T Corp. ranks highest in customer satisfaction among
high- volume users who spend more than $30 a month on long-distance service.

The mainstream segment includes the
addition of two cable companies in the study — Cox Communications Inc. and
AT&T Broadband (now Comcast Corp.), with Cox performing near the top of the
rankings. Talk America Inc., which ties with Cox to rank second in the segment,
is the most improved provider with particularly strong performance in the cost
of service and customer service factors.

The 2003 Residential Long Distance
Telephone Service Study is based on a national representative sample of more
than 8,500 households.