By Tara Seals

Posted: 09/2002

Defining
the Master Agent

By Tara Seals

MASTER AGENTS LONG HAVE BEEN THOUGHT
of as aggregators of business. Webster’s Dictionary defines an "agent"
as one who is authorized to act for or in the place of another as a business
representative. "Master," as an adjective, is defined as being a
device or mechanism that controls the operation of another mechanism. Thus, a
"master agent" is a business representative who controls the operation
of other business representatives.

But that definition is evolving:
Customer and subagent requirements, carrier expectations and industry pressures
are creating the need for service-oriented, national organizations with
up-to-date support infrastructures, in-house sales support and diverse
portfolios.

"The master agent as we know it
is dead," says Ben Humphreys, president and CEO, Comtel Communications Inc.

He’s not alone in the thought.
"It’s becoming more of a managed channel," says Brad Miehl, president
and CEO of Microcorp Inc. and theAgentsNetwork. "The pure model based on
the aggregation of agents to hit a commitment with a carrier is starting to have
limited value."

Master agency Communication
Management Services (CMS) put out a report in 1999, predicting "major
competition among agencies and providers will lead to the crystallization of
market dominance by efficient master agencies."

Agencies with a high level of
automated IT systems that streamline operations will transform the telecom
industry into an efficient industry, wrote CMS president and CEO Gene Foster.

Today, "this is now becoming
reality," he says.

"Carriers are forcing smaller
agents to become subagents of master agents, master agents are gaining market
share and seasoned master agencies have invested in infrastructure," Foster
explains, "such as back- office staff, Web-based information sources
deploying ‘at a glance’ information and support for all carriers that the master
agent contracts with."

At Your Service

Customer and subagent service is a
new key to building a value proposition and running a successful master agency.
Good service especially builds value now that no-brainer long-distance sales
have given way to data and larger voice applications. More complicated sales
often necessitate ongoing customer and subagent support.

"Carriers in general are doing
a terrible job at customer service," says Humphreys. "This is our
competitive advantage. It will demand a thought shift from closing the sale to
ensuring customer satisfaction."

Master agents’ back-office systems
enhance customer service and often are integral to interaction with the customer
or subagent. "Agents have been forced first by carrier streamlining and now
by industrywide economic necessity to operate back offices that not only
provision but become the whole customer interface for their telecom services,
and this is where we need to be," says Humphreys.

Back-office support also has taken
on higher visibility for subagents that also are service-sensitive. "Agents
shop around master agents," says Ted Schuman, president and CEO of
PlanetOne Communications Inc. and master agency U S Telebrokers. "For the
first time there’s a competitive environment."

To win the business, U S Telebrokers
has implemented an extensive online information strategy; systems take
information from providers’ systems and disseminate it to the subagents in a
standardized way, giving them access to information once only available at the
provider level, in a consistent format. The agency also prides itself on never
being late on a commission payment in its 11 years in business. In-house sales
engineers and direct sales associates round out the picture. "We’ve made a
significant investment and try to stay ahead of the curve in technology and
service," says Schuman. "That’s a huge differentiator for us."

Other master agencies also are
investing in service mechanisms. MicroCorp, for instance, is hiring channel
managers in different areas of the country to manage sales "pods,"
which consist of independent agents, systems integrators and VARs. "Then
they all tie into our online system, where they get leads, training and learn
about products and events, all in a single portal," says Miehl. "The
portal manages everything."

Master agency World Telecom Group
offers detailed carrier comparison grid charts for quick reference; FAQ sheets
on local, long-distance, data, wireless, operator services and equipment; a
"footprint finder" to see which vendors offer local service in that
area; a local loop-calculator and the "Killer APP," or Agent Product
Portal, for real-time quotes on all products, paperwork, account status tracking
and commissions information. It also offers in-person training sessions and
"Webtours."

Subagents should perform due
diligence, making sure to ask about the back office, past successes and
shortcomings, alignment with providers that may have gone bankrupt. Call with
questions and check the referrals, says Schuman.

"There are 10 to 20 premiere
master agents in the country that represent a significant amount of the business
being written with carriers," says Schuman. "Subagents need to ask the
same qualifying questions they would ask a provider."

The Carrier Factor

In the current rough-and-tumble
telecom business environment, carriers want to drive costs out of their indirect
programs and actively look for master agents that have infrastructure in place
to manage commissions, technical support and sales help for smaller partners.

"Through the consolidation of
the direct and indirect sales channels, there are more agents claiming to be a
master agent, when in reality there are less then 50 true master agents in this
industry. " explains CMS’ Foster. "There are some carriers that
understand the true master agent and their contract requirements state that you
must have a minimum of ‘x’ amount of subagents, and can demonstrate that you
have the infrastructure to support subagents, including the continuation of
adding on new subagents."

Master agents often become the top
tier in a channel program, with second-tier partners purchasing underneath them.
These second-level partners almost never deal directly with the carrier, which
leaves the support, commissioning, technical resources and training
responsibilities to the top tier partner. Many carriers also require at least an
eight- to 10-person master agency staff to help ensure the agents have adequate
resources. Also, the magic number of subagents that carriers look for, CMS’
Foster says, is in the neighborhood of 50.

"We look for masters that have
a process in the way they manage their subagents — a back room, a marketing
vision, a growth theory," says Jeannine Haney, director of channel sales at
Internap Network Services Corp. "They are marketing-centric and
process-centric."

Schuman concurs: "Carriers are
looking at systems, headcounts and technical expertise. A lot of providers are
doing roll-ups under master agents, and so you have to be positioned correctly
and have the resources for a scalable buildout."

In fact, last year Qwest
Communications International Inc. and Cable & Wireless Inc. announced
"channel optimization" strategies to consolidate their agent channels
under master agents. In addition, Sprint Corp. announced last fall that it would
move to a two-tier model when acquiring new business partners. In the second
tier, regional and national VARs and existing independent agents still can
contract directly with Sprint, but new agents who can’t commit to higher volume
commitments are encouraged to represent Sprint under tier-one master agents or
distributors.

"Being profitability-challenged
in the market today, over the last year we adopted a two-tier strategy,"
says Sprint’s Darlene Daude, group manager of indirect channels. "We can
generate higher levels of revenue while still driving costs out of the channel
that are inherent in the back-office support infrastructure."

Sprint’s criteria for master agents
include a proven track record and a level of technical expertise in dealing with
carriers, in addition to volume. Sprint is networking with master agents to
create an interface for seamless order-entry and flow-through process.
"Subagents don’t want to deal with all of the back office," says Daude.
"They look to the master to interface with the carrier and provide
back-office support. We look at their applications and how they provide that
support, so the sub in turn can sell more Sprint [products], and the
facilitation of the back-end processes is very easy."

Some master agents have created an
environment to manage multiple vendors within a back-office system or portal,
with everything from commission payments and order entry to lead dispersal and
training available online for their subagents.

"Every vendor we have is
gravitating to this model," says Miehl.

Portfolio Diversity

The master agent model also has
shifted toward consistently bringing new products and services to market.
Independent agents often don’t have the resources or expertise to package
solution sales for customers’ communications needs and business processes.
Master agents can perform complicated sales and often must in order to add value
to their bases continually and remain viable.

"In the past, small voice deals
have been the master agents’ bread and butter," says Humphreys.
"Today, data and larger voice applications are becoming critical for our
survival."

For instance, as new applications
and opportunities emerge, MicroCorp often takes a best-of-breed approach, tying
services together for complete solutions. The company is focusing on
applications that drive bandwidth. "With Internap we’ve negotiated our own
MicroCorp product," says Miehl. "We’ll put together dedicated Internet
services and a disaster recovery ASP application."

MicroCorp also constantly monitors
its base of customers based on vertical markets and new services. "Our
system build a prospect list based on existing customers as new offerings become
available," he explains. "We can go back and upsell, and the more
services, the better the retention."

While it’s in an agent’s interest to
look for add-on and complementary services, vendors also encourage master agents
to embrace portfolio diversity. "Managed network services is a product we
think has a lot of opportunity for growth and opportunity in the
marketplace," says Sprint’s Daude. "So in that area we’ll be looking
not at the partner models so much as what other kinds of services they’re going
to provide, such as wireless applications."

Since launching its partner program
in January, Internap has signed up several strategically chosen partners across
the country, including some of the largest master agencies. It also has specific
criteria for signing up master agents, including 50 or more subagents, the
potential to bill $1 million in revenue on an annualized basis and a
complementary portfolio.

Internap offers intelligent IP
routing as a managed service, which ensures customer data are routed with
reliable and predictable response times across the public Internet. It
automatically selects whichever Internet backbone will bypass congestion and
avoid packet loss and latency issues.

"We look for agents that are
data and IP-centric and can sell a noncommodity-based product," says
Internap’s Haney. "This is more of a value-added proposition, a
mission-critical sale, a solution sale. We don’t sell price only."

To fit the program, a master agent’s
portfolio needs to align with Internap’s core business. "We meet with them,
look at their facilities, talk to their employees, then we see if there’s a
strategic alignment that we can help them round out their portfolios," says
Haney.

"Also, the bigger carriers want
to fly out and check out the operation, because they want to know that a
master’s shop is focused on their product," says WTG’s founder, president
and CEO, Vince Bradley."

Is a master just signing to have the
product and still focusing on LD, or are they really selling a lot of local
and/or data?"