Verizon Discount Program May Undercut Solution Providers


The Verizon Client Advantage Program (VCAP) offers customers rock-bottom discounts on complete Verizon network solutions, according to VCAP participants and solution providers who have lost bids to VCAP. They said the solutions include the carrier's services plus products from vendors such as Cisco Systems, Juniper Networks, Nortel Networks, 3Com, Alcatel, EMC, Avaya, Tandberg and NEC. Outsourced IT solutions, managed network services, and call center and help desk services also can be bundled into the solutions under the program.

Verizon Business didn't publicly announce VCAP, and information about the program isn't available on its Web site. A Verizon spokesman declined to elaborate on VCAP, saying only that VCAP is "one of a number of large business incentive opportunities, the details of which are not published."

Pat Grillo, president of Atrion Communications Resources (ACR), a Branchburg, N.J.-based solution provider, said he learned of VCAP earlier this year when his company bid on a Juniper Networks router deal at Rutgers University, a current ACR client.

ACR was positioned to win the deal with a bid that was about $12,000 lower than other bids on the $300,000 to $400,000 project, Grillo said. ACR's bid included an extra discount on the Juniper products because it had registered the Rutgers opportunity in Juniper's deal registration program.

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"We thought we would win [the deal], and on the surface, it looked like we did," Grillo said.

Yet Verizon ended up winning the bid. Since Rutgers is a public university, Grillo was able to see information on all the bids. That's when he found out about VCAP.

Grillo said he discovered that Verizon's bid included an additional discount of about $22,000 in VCAP funds that Rutgers was eligible to apply to the deal, which ousted ACR as the lowest bidder. "[Verizon's VCAP discount] put us from being $12,000 low to roughly $12,000 too high," he said, adding that VCAP is the first formal deep-discount program from a service provider that he has encountered.

"This is the first time I've seen [a service provider] put it writing and let you know what they're doing," Grillo said.

After the bidding process the project was put on hold, so Verizon never finalized the sale, Grillo said. Verizon has extended the opportunity to apply for VCAP discounts to more than 40 New Jersey schools, including Rutgers, Seton Hall, Rider and Mercer, according to documents on, the Web site of New Jersey's Higher Education Network. describes VCAP as a "recent innovation at Verizon where financial incentives in the form of discounts are given to Verizon's most strategic clients. This incentive is applied to new purchases of approved Verizon products."

In addition, Verizon is exploring the possibility of allowing solution providers to resell its networking solutions with VCAP discounts, a Verizon partner approached by the carrier about the idea told CRN.

"They are looking for another access point into the marketplace, and they are trying to tap the channel," said the Verizon partner, who requested anonymity. "They are trying to determine if there is a big volume chunk of market they are missing. They are very motivated, and they will give hardware away because they are just looking for the long-term residual."

But the partner said a channel play with VCAP probably wouldn't work because Verizon ultimately might determine that it could perform field implementation and service without the assistance of a solution provider.

Deep discounts for equipment in solutions sold by carriers aren't new, according to Tony Ferrigno, vice president of sales and strategy at Ciber, an Edison, N.J.-based solution provider. "When Cisco did this with Sprint, MCI and others, they sold the equipment at ridiculous prices, even lower than we can buy," Ferrigno wrote in an e-mail.

AT&T offers several VCAP-like programs that allow certain customers to aggregate their total spending to receive discounts and rewards, an AT&T spokesman said in an e-mail.

With their hefty resources, carriers often are able to bid so low that they can take an initial loss on a deal and later recoup it through residual service payments, according to one master agent, who asked not to be named. "The deals keep getting tweaked until Verizon wins," the master agent said.

Though networking vendors like Cisco and Juniper have grappled with such solution provider/service provider conflict for some time, ACR's experience is that it's getting worse among carriers, Grillo said, adding that he's sure he has gone up against VCAP in other potential deals.

"We're seeing an increase in this kind of activity. Customers tell us that we're 'X' amount high, and there's just no way we could be without something else going on," Grillo said. "These are registered deals where we're selling below the cost of what everybody else should be selling at. So unless [service providers] are selling at a loss or break-even at best, they shouldn't be competing."