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The Secret Threat to Agents Business

Channel Partners

April 9, 2009

5 Min Read
The Secret Threat to Agents Business





Justin McLain, CEO and President, Endeavor Telecom Inc.

On a foggy, cold morning in Washington, D.C., a shiny black stretched Lincoln sits idling on the tarmac of a nearby executive airport. A private jet lands, taxies to the waiting limousine, opens its doors, and produces a suited man with two attendants who enter the car as quickly as they exit the plane. Within 20 minutes, the same scene unfolds when a second plane breaks through the low fog, lands and produces another well-dressed man who enters the hired car with his two attendants. With all six occupants secured, the long black limo speeds out of the airport and expertly works its way through the streets, cross-streets, and traffic of our nation’s capital until it pulls into an underground garage beneath a dated, yet ominous, federal building.

The six occupants are ushered out of the car into a private elevator, through a non-descript receiving hall, and into a private waiting room where the four attendants take post in an assortment of traditionally upholstered chairs while their chiefs enter an oversized office and close the door. The warm greetings of old friends are exchanged between the two visitors and the gentleman standing in front of the desk in the middle of the well-appointed office. After pleasantries and a beverage service delivered by a nervous young intern rattled by the sheer concentration of power in one room, the three men sit on couches cornering a coffee table by a window with a view of the Washington Monument. They begin to speak with deliberate tones of foreboding.

“We simply cannot make that large of an investment only to have the rug pulled out from under us again,” says the older of the two visitors. “$8 billion is one hell of a jump to take without knowing how secure the return is going to be,” says the other. The arguments politely persist as such until the third gentleman interrupts with the statement: “Gentleman, I understand your concerns. My and the president’s primary interest is the security of our country. Having an infrastructure that can support the growing needs of our nation while reducing security risks is a requirement of that goal. If you upgrade your networks, you need not worry about your competition using that investment against you.”

And, with that or some similar conversation, it was decided that the CLEC strategy of utilizing incumbent copper loops for the last mile had an expiration date.

While it will take a decade or longer for the results to fully unfold, the single most pivotal change in utility regulation since 1996 took place out of the legislative branch, without appeal, and without so much as a ripple in the competitive waters, which compose America’s telecommunications industry. While the description of the events that led up to that crucial inflection point in our industry is an over-dramatization, the long-term effect is not. Copper is now on its way to an inevitable end-of-life and the new fiber plant being installed to the homes and curbs of America is off-limits to the CLECs and the agents who sell their services.

The simple truth is that the major incumbents have embarked upon fiber-to-the-curb and fiber-to-the-home initiatives, which have FCC-sanctioned competitive amnesty against the CLECs. Once their fiber networks are fully operational, they have no need to continue to maintain the redundant copper plant. Without service, outside copper plant has a lifespan of eight to 12 years. AT&T and Verizon have taken the regulatory battle off of Capitol Hill and have Trojan-horsed their future success in the conduit under our feet and cables that run along our streets. These trends stand to severely hamper the future success of many of the competitive carriers for whom agents sell today unless major revisions in strategy are pursued.

It is likely that Verizon and AT&T eventually will launch agent programs for their fiber-based services, but, as of now, these services have been largely reserved for their direct sales force. It is also likely that the CLECs will find creative last-mile alternatives to copper loops that will include wireless media and, in certain cases, special access. I do, however, caution you on a “hope for something good” approach to your long-term business success. As an agent, you have the unique ability to mold end-user demand into more sustainable models. It is easier to steer a well-contemplated, long-term strategy than make hasty desperate decisions as a reaction to changing market conditions. The best, recent demonstration of this point is the survivability of the few non-facilities based CLECs that had the foresight to transition to facilities or to secure long-term wholesale agreements before the FCC ended the UNE-P competitive model versus the many who scrambled from a less favorable negotiating position after 2005. Now is the opportunity to vector access sales toward fixed wireless and alternatives to wireline copper. Now is the time to react before you find competitive carriers are unable to service your customer base.

Justin McLain is CEO and president of Endeavor Telecom Inc., a provider of private-label wholesale professional services, including field services, order fulfillment logistics, and operations support.

Author’s note: Endeavor is known as “The Telecom Truck Roll Company.” We do work for both the CLECs and the ILECs and we love them the same. Considering Endeavor’s position and as its CEO, I have a vested interest in the long-term success of our industry. I strongly feel the better informed all strata of our industry ecosystem are, the better our industry is overall. The opinions expressed herein are only intended to educate the agent community, not to disparage or pass judgment on any particular company. As a final note, my use of literary color is intended only to provide a more interesting read and not an actual historical accounting of events.

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