Verizon May Cut Up To 1,000 Resellers

Verizon notified partners on March 16 during two conference calls, one with its legacy agents and one with MCI agents acquired via the recently completed merger between the two carriers.

In an interview with CRN prior to the conference calls, Kathy Koelle, then senior vice president for business solutions sales and marketing at Verizon, New York, called the agents being dismissed “idle” when it comes to sales volume, and said the unproductive bunch were “absolutely [mostly former] MCI partners.”

CRN learned a few days later that Koelle had been removed from her channel role and replaced by Michael Hassett, senior vice president of voice and bundled solutions at Verizon.

A Verizon spokesman confirmed that Koelle had been reassigned to a regional sales and marketing position on the West Coast and given a new title—senior vice president and general manager of Verizon’s West Coast region. Solution providers said the job change stemmed from Koelle’s MCI partner-bashing, but the Verizon spokesman said the transfer was a strategic reassignment, and not a disciplinary action resulting from her comments about former MCI agents.

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One MCI master agent who requested anonymity said the March 16 conference call with partners was “disastrous” for Verizon, and said the carrier was “scrambling internally to put the pieces together” after the call.

John Costoulas, vice president of operations at ADCom Solutions, a Verizon master agent in Norcross, Ga., said he sensed from the conference call that agent reductions weren’t the only major change Verizon had in mind. “The more the questions came in [from participants in the call], the less confidence I heard from that [Verizon] team that there would not be some more changes,” he said.

Emmet Tydings, president of AB&T Telecom, a master agent in Gaithersburg, Md., whose business partner was on the Verizon call, said that from what he heard about the call, and what he has learned from Verizon, the carrier is about to put the squeeze on its agents. Empowered by reduced competition following the merger between itself and MCI—and the proposed merger between an already combined AT&T and SBC Communications and BellSouth—Verizon will likely raise its wholesale prices, cut agent margins, further reduce up-front commission payments and demand that agents represent Verizon exclusively, Tydings said. “This is not a good thing for the channel,” he said.

A Verizon spokesman said there is no simple yes or no answer to the question of whether or not the carrier will demand exclusivity from its agents.

On a typical deal, Verizon currently pays from 20 percent to 25 percent of the commission up front, with the balance paid out in monthly installments over the length of the deal’s contract, Koelle said.

Verizon did not comment on further reductions. No plans are in the works to reduce commissions next year, the spokesman said.

If the major carriers leverage their pricing power to push up the wholesale costs of voice and data services, the cost of using smaller, alternative, regional bandwidth providers may go up too, Tydings said.

For example, on August 5, the FCC reclassified DSL as an information service instead of a telecom service. This ruling deregulated DSL, freed carriers from having to share bandwidth with ISPs and opened the door for carriers to charge so much for DSL that ISPs will have no resale margin, said Mike Jackman, executive director of the California ISP Association, Sacramento, Calif. The FCC placed a one-year grace period on enforcement of the change.

With AT&T likely to lack the resources for another mega telecom merger if its bid for BellSouth goes through on the heels of its MCI acquisition, Verizon will likely take a run at buying carrier Qwest—the only remaining piece of the splintered Ma Bell—which will further reduce competition, Tydings said. Many telecom analysts agree with this scenario.