Don't Get Hung Up With Wrong Telecom Vendor

Agents and master agents say that's the lesson to be learned in the wake of last week's conviction of former WorldCom CEO Bernard Ebbers on fraud charges and a Securities and Exchange Commission lawsuit filed against Qwest Communications International and indictment of former Qwest CEO Joseph Nacchio.

"If the company you are out there recommending to the customer and staking your integrity on turns up in the press with all these fraud allegations, then it will definitely hurt your sales effort and by association your reputation," said Chris McGuigan, president of The Beacon Group, a Platinum agent for Verizon Communications. "That's why it's important to pick your vendors carefully."

Ebbers was found guilty on all counts in connection with an $11 billion fraud allegation after a federal jury deliberated in New York for eight days.

In the Qwest case, the SEC last week filed a civil complaint alleging that Nacchio and eight other executives engaged in a "multifaceted, fraudulent scheme designed to mislead the investing public about the company's revenue and growth."

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McGuigan, a 15-year veteran of the telecom agent market, said a number of agents have aligned themselves over the years with vendors engaged in questionable practices and ended up paying the price. Morganville, N.J.-based Beacon Group, a Verizon partner for the past nine years, made some bad bets on vendors early on, he said. McGuigan declined to name those vendors but said they did some "unethical things" and "didn't survive the test of time." However, McGuigan believes that there are still some safe bets in the telecom industry.

"We are very proud of our position in being able to represent Verizon's brand," McGuigan said. "It is a company that demonstrates the integrity and appropriate business practices necessary in today's environment."

Rick Sheldon, CEO and co-founder of Intelisys, a Petaluma, Calif.-based master agent, said the telecom industry was shaken up long before Ebbers' conviction.

"Our partners have told us time and time again that the single most important thing they are looking for from us is stability. Without a doubt, that trust has to be there. If they can't trust us to make a good decision, then why would they do business with us?"

Sheldon, who represents more than 25 vendors with some of the top-performing agent partners in the country, said that despite the changes, scandal and turmoil, Qwest remains a trusted partner.

"They have still managed to run a consistent program that has been partner-friendly," he said. "They are our leading provider. We have 25-plus providers, but Qwest gets the lion's share of the business. And that is based on their stability. They are not without fault, but they have consistently maintained a very strong program. They haven't wavered."

That can't be said of all vendors, Sheldon said. He cites as an example AT&T's termination of 500 agent contracts in an effort to restructure its channel program. "We were burned by AT&T," Sheldon said. "We don't feel like they did anything contractually wrong. But they broke trust with their partners, and that hurt a lot of my sales partners to the tune of tens of thousands of dollars monthly."

Sheldon said choosing partners wisely is even more important in the telecom market because of the brutal nature of the business. "You are dealing with massive change [and] technological disruption. And the entire industry four or five years ago got cut off at the knees by Wall Street," he said. "There is turmoil and volatility. These companies are not stable. Even the best companies—such as AT&T, a 125-year-old company—are now gone." AT&T is now being acquired by SBC Communications.

Sheldon said it's important not to let the telecom scandals cast a shadow over the well-run telecom agent and supplier businesses that support customers all over the country. "In the majority of cases, telecom agents and suppliers are really doing the right thing and succeeding together," he said.

The telecom channel is moving forward right now, said Quy "Q" Nguyen, CEO of Allyance, a master agent in Irvine, Calif.

"Consolidations are taking place with key companies to make more stable and more viable companies," Nguyen said. "With the verdicts and all the bankruptcies, a lot of carriers realize they can't mess around and need to get their act together."

Exciting technologies such as bundled VoIP solutions and a more robust multiprotocol label switching (MPLS) network are helping to reinvigorate the industry, Nyugen said. "Customers are always going to need telecom services no matter what happens," he said. "It is just a matter of players stepping up to the plate and taking advantage of the opportunity."