PARTNER CHANNEL: How the Rest Was Won

Posted: 3/2003

How the Rest Was Won
Agents Stick by CLECs Despite Rough Ride

By Tara Seals

Consolidation.
Bell long-distance re-entry. The use of facilities vs. the unbundled network
element-platform (UNE-P). These and other threats have made the open range of
competition a dangerous place to roam. But some CLECs have conquered the
frontier and captured growing customer loyalty thanks to good customer service
and innovative integrated offers. And that means agents still are riding posse
for CLECs in the local market, despite the rough and tumble atmosphere.

While the Bells always will have a
percentage of existing lines in any given market, CLECs are winning customers,
particularly in the small and midsized business (SMB) market. Market research
firm Atlantic-ACM predicts CLEC revenue will grow at a compound annual growth
rate of 27 percent to reach $62 billion by 2006.

Customer service may have a lot to
do with success. SMBs gave higher satisfaction ratings to CLEC providers than to
their ILEC competitors in 2002, according to a recent Yankee Group report. The
Bells saw what report author and analyst Helen Chan characterizes as "major
declines" in customer satisfaction in most areas, particularly in the small
business market. While CLECs may soon face even stiffer competition from the
incumbents in light of 271 relief, they can keep their market edge if they
"continue to provide superior customer service at a value price; and they
continue to get feet-on-the-street salespeople in front of prospects and
customers," writes Chan.

Some agents see general value in
selling CLEC services. "Most often there is the cost savings and the
flexibility of integrated service offerings in going with a CLEC, which gets the
customer’s attention," says Christine Gistaro, owner of agency TeleStrategy
LLC. Before becoming an agent, Gistaro was vice president of the agent channel
for now-defunct CLEC Net2000 Inc. "Better billing options, user-friendly
invoicing or Web-based and multilocation billing, increases the CLEC competitive
advantage," she adds.

Integrated offers that bundle voice
and data on a single circuit specifically target the SMB market, and can save
customers money. They have been the main area of differentiation for CLECs when
competing for customers, say agents.

"The CLEC’s offerings are very
compelling compared to the ILEC," says Kevin Fecher, an agent at OpenAir
Technologies Inc. "Integrated services … solve many problems for smaller
businesses: Affordable high-speed Internet access and lower-cost local and
long-distance services. The technology is rapidly changing while the ILEC is
slow to adapt."

Another popular application for CLEC
services is redundancy, says Steve Murphy, director of business development at
telecom consultancy NetGain Communications. "What we’re really seeing a lot
of need for and interest in, especially for large organizations, is network
diversity," he says. "[Customers] don’t want to put all their eggs in
one basket because they understand that networks are networks, and the events of
9/11 have taught them they need to consider diversity, and we can usually
optimize price points across a number of providers."

In this multivendor environment,
Murphy says a typical sale is to place service with the incumbent, with CLEC
service as a backup.

Aside from applications, customer
service is paramount. "When we are selling CLEC services, customer care is
very important," says Murphy. "People are willing to pay more when
they’re comparing CLECs, based on customer care."

Facilities-based competitive service
provider TelePacific Inc., which operates in California and Nevada, says it has
focused on agent care to set itself apart with the "feet on the
street."

"Agents are a part of your
business, not the redheaded stepchildren," explains Ken Bisnoff, senior
vice president of strategic opportunities at TelePacific. "Our TelePartner
program is built around simplicity, support and success."

Despite the advantages, some
tumbleweeds still are blowing around the CLEC front, such as regulatory issues,
consolidation and the technical complexity of local service compared with other
service providers.

For instance, with the RBOCs gaining
271 relief in most territories (37 states at press time in mid-February), CLECs
will lose the bundle advantage — the ability to package local, long distance
and Internet on one bill, with price breaks. However, some say consolidation in
the sector has affected customer trust in some instances.

"There are a lot of customers
willing to target the difference in service quality between a CLEC and a Bell
operating company, because they’ve seen the bloodbath in the CLEC industry and
some of them have been left high and dry out of service," says Murphy.
"And they’re not going to risk their business on a CLEC again because they
look at network and financial stability."

However, customer service can sway a
customer. "Ultimately, I believe most agents and customers believe that the
LECs offer the most reliable service, but is it worth it for the price you pay
and the indifferent service and billing you receive?" says Gistaro.

Similarly, some agents have jitters
concerning the viability of UNE-P providers in a dynamic regulatory environment.
"I think agents need to look at putting their customers on facilities-based
services, and the process is longer and it takes longer to get paid, but it’s
actually more secure because you know your customer’s not going anywhere,"
says Tom Jeffries, principle of Jeffries-Consulting. "But then, you’re
talking a 30-plus day conversion period, whereas a UNE-P conversion can take
five days."

InfoHighway Communications Corp., a
UNE-P-based CLEC, says regulatory advances and setbacks come and go, but strong
UNE-P providers will survive. "We now have over 10 million UNE-P lines in
the country, and UNE-P has now become the fastest-growing form of local entry,
accounting for over 85 percent of competitive gains in the last half of
2002," says Gene Rogers, director of marketing and product management at
InfoHighway.

And finally, local service is simply
a more difficult order to provision. "It’s important to have a CLEC that
will help you and work with you to understand different complex services,"
says Jeffries. "Working with master agents that understand local is
key."

TelePacific’s Bisnoff says the main
issue is learning how to submit a clean order and selecting a CLEC that has a
transparent provisioning process. "The agents that are successful
understand this is more challenging than long distance," he says.

The big catch to selling a CLEC is
to "completely understand the application of the customer, know what
services the CLEC can and cannot provide … have all existing telephone and DID
lines mapped out, knowing what every single line is used for and knowing how to
troubleshoot prior and after installation," says Bob Morrison of the
Morrison Group, a California-based agency.

But taking the good, the bad and the
ugly together, most agents recommend adding CLEC services to a portfolio.

"I believe, unless the ILEC
wakes up and starts to offer competitive, next-generation services, the CLECs
will prevail," says Fecher. "Who really likes dealing with the ILEC
anyway?"

SMB’s Local Service Providers
Source: The Yankee Group

SMB’s Spending Habits
Source: The Yankee Group