Tired of being bullied?
Originally published on February 2, 2010
Greg Taylor
Every day, I spend a considerable amount of time talking to people in the telecom industry across the country, including many telecom agents. During those conversations, I make it a point to ask about their business: what’s working, what’s broken, what they are they hearing from their colleagues and more. To be frank, much of the feedback I receive is difficult to hear. After all, many of our clients have also become our friends, and the problems they face are challenging, to say the least.
Stated simply, I think more agents are feeling like statues and the carriers are the pigeons. I’m trying not to be overly dramatic in my statement; I’m not sure it’s even possible in this context. If the stories I hear are a microcosm of what’s happening in the telecom agent industry, then, as the song goes, “we got trouble, right here in River City.”
For example, I am aware of at least three carriers, who in recent months have either terminated scores of agents or “deep sixed” their respective channel programs altogether. Worse yet, the same three carriers also determined that — right or wrong — their respective obligation to continue paying agent commissions was extinguished with their unilateral termination of the agreement with the agent.
I don’t know (yet) why carriers have undertaken this course of action. In fact, I’m willing to withhold judgment and give them the benefit of the doubt that their conduct was a necessary step in order to prevent some greater fiscal calamity to their own business (which still wouldn’t be adequate justification for their conduct). The most cynical theory would be that the carriers built their customer bases on the backs of the agent, promising commissions that could not be sustained long-term, and began terminating agents once the residual commissions together with the cost of supporting the channel program began to meet or exceed new sales. Regardless of the reason(s), the consensus from the agent community is that the bullying must come to an end, and that they want to make sure this doesn’t happen again. Simple enough, but how do you get there from here? This certainly doesn’t represent the universe of ideas, but I hear agents raise these three options more than any others: 1. become a subagent, 2. join an agent consortium or 3. become the service provider.
Become a Subagent. More than a few agents have mentioned moving their accounts to a master agent and the advantages are not immaterial. Presumably, a master agency is less likely to be bullied by service providers. In addition, the subagent likely would gain new service offerings and market territories as direct benefits of the carrier agreements with the master agency. It also is likely — though far from guaranteed — that the master agency will “go to bat” for the agent if there is a dispute with the carrier.
I don’t think this option is necessarily bad, but agents undertaking this option will be handing some portion of their compensation together with their risk to the master agency. Indeed, some portion of the commissions agents earn through their efforts will be retained by the master agency, and rightly so.
The objective for the stand-alone agent when choosing a master agency is to find one that keeps the interests of its subagents at the forefront. Specifically, my concern is that the master agency could sacrifice one of its subagents in order to appease the carrier and keep the revenue stream coming through the door. Choosing the “wrong” master agency could leave the subagent in a worse position in that, in the event of a dispute, the master agency could refuse to pay the subagent its earned commissions that were already reduced as a result of becoming a subagent. There are plenty of honest and reputable master agents; if you’re considering whether you should become a subagent, consult other agents as part of your diligence.
Join an Agent Consortium. Another option, agent consortia or alliances, allow stand-alone agents to retain their autonomy and current commission structure while obtaining the benefit and perceived strength of a group. One of the primary benefits of an alliance is the opportunity to share common costs among the members at a fraction of what their costs would be if they were acting alone. For example, one of the tasks of the alliance could be to negotiate standard agent agreements with multiple carriers. The members could then choose which of the standard agreements it wanted to sign without going through the negotiation process with the carrier with the end resulting in an agreement that is more balanced than what the agent would be able to negotiate on its own.
In the event of a dispute between a carrier and the alliance, the members can bring the full weight of the alliance to the table with the carrier; there is strength in numbers, after all. The significant distinction between an agent alliance and the master agency is that the commissions are not shared and the agent can avoid the risk of being bullied by the master agency. An alliance won’t alleviate all risk, however. In my opinion, the most obvious risk is that a dispute with a carrier might not affect the group, and instead, only affect a single agent. In that circumstance, the benefit of the “strength in numbers” approach simply doesn’t exist, but the agent remains in the same position it would have been under the pure stand-alone model.
Become a Service Provider. A third option is for the agent to transition toward becoming the service provider. Nearly all of the trends in the telecommunications sectors are in decline, with the exception of VoIP. I’ve heard the arguments about VoIP — it’s unreliable, the quality is poor, how do I sell a service that some companies give away for free, etc. I still think it’s worth considering.
How many people do you know who subscribe to digital phone service from their cable provider? More importantly, do you use digital phone service at your home? Is the service reliable? Can you tell any difference in the quality of your digital phone service from a POTS line? How many people have been using VoIP for their residential service and never knew it? You may even be one of those people.
The stigma surrounding VoIP likely comes from the free service providers and is tolerated by consumers who get what they paid for. However, clean, reliable VoIP is readily available in the market, just not for free.
VoIP is lightly regulated, compared to its communications counterparts. The costs associated with entering the market are substantially less than those necessary to become a local or long-distance provider. You don’t necessarily need to reinvent the wheel; there are plenty of companies with private branding services. Finally, your service footprint (think “territory”) is limited by that of your underlying carrier and your choice of target customer.
Residential customers spend less, but are easier to service. Residential customers only need broadband Internet service and a pre-configured analog telephone adapter (the latter of which is typically provided as part of the service) connected to their cordless phone base. Business customers spend more, but the equipment side can become complicated and you might be limited to your ability to “roll a truck” to the business location for installation and maintenance.
The option of becoming a VoIP service provider — admittedly outside the box — allows you to have more control over your own destiny, but presents new demands on your business that may not make the endeavor worthwhile to you.
We often tell our clients not to look like victims. Whether you are considering any of these options or have a different plan, you should take affirmative steps to position your business, including your relationships and agreements with your service providers in such a way that allows you to reduce the risk of becoming another victim.
