Verizon Delays MCI Partner Compensation Decision

MCI partners have been anxiously awaiting details on how they will be absorbed in the wake of Verizon's merger with MCI, a deal that closed in January.

Some of those details emerged during an Aug. 18 conference call to provide an update to MCI partners on Verizon's channel strategy.

During the conference call, which was attended by CRN, Verizon said former MCI partners no longer would be compensated for the contract renewals of their legacy customers if those customers are taken over by Verizon Business direct sales. The carrier also distributed a Q&A document to MCI partners that laid out its stance.

Several partners on the call expressed alarm over the plan.

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Three days later, Verizon's Business Solutions Group Channel Communications team sent an amended Q&A document to MCI partners saying it had not yet decided how legacy MCI contract renewals would be handled.

According to the amended document, "Compensation for Verizon Business contract renewals is under development. Additional details to follow."

Many MCI partners on the call—conducted by Kristen McCarthy, director of partner programs for Verizon's mid-Atlantic and Western regions—also were left fuming by Verizon's disclosure that it plans to immediately begin conducting interviews with MCI partners to determine if they will be allowed to stay on as Verizon agents. Many legacy MCI partners are concerned about their future because Verizon does not intend to retain all its former MCI partners.

"We don't have unlimited capacity" to accommodate former MCI partners, McCarthy said.

A new 2007 Verizon Solution Partner Program (VSPP) contract was expected in September but now is due after Verizon completes the interview process. This "recruitment phase" for the VSPP will last through November, McCarthy said.

As for the new VSPP contract, "the full-blown plan with all of the details will not be available for any of us until well into November, and by that time, our interviewing has to be completed," McCarthy said.

None of the former MCI partners who spoke to CRN agreed to be named because they did not want their opinions of Verizon's plans to effect their eligibility for the VSPP. All are worried they will make less money as Verizon partners—if they are allowed to be Verizon partners at all.

"It's going to be a tough transition period," one legacy MCI partner told CRN. "A lot of us were dealing with MCI as an alternative to Verizon, and now we're concerned about rules that will allow their direct sales people to poach our MCI accounts."

A Verizon spokesman said after the call that he did not immediately have numbers to quantify how many legacy MCI agents Verizon plans to retain in 2007. But in March, Kathy Koelle, Verizon's senior vice president for business solutions sales and marketing at the time, told CRN that hundreds of MCI partners were "idle agents" and could be terminated. Koelle was reassigned shortly after making the statement, a move that a Verizon spokesman said was a strategic reassignment, not a disciplinary action resulting from her comments.

Some legacy MCI partners now are talking about joining forces in order to wield more influence with Verizon, and thus defend themselves if the carrier moves to take their accounts direct or to cut residual compensation.

An example of this type of joining of forces is the Agent Alliance, a group of more than one dozen telecommunications companies and CLECs who banded together about a decade ago to optimize and share front-end costs and back-end support. As the carriers have consolidated their strengths over the past few years, via the mergers of Verizon and MCI, and AT&T and SBC Communications, the Agent Alliance has begun to flex more muscle to protect its profitability, a member of the Alliance told CRN.

"We have protections [against the carriers that] not everybody has," the Alliance member said. "Legally, [Verizon has] to be careful about what they do. We have certain evergreen provisions that give us some protections against ill intent."

What is known of the 2007 VSPP contract is that it will have two tiers, one exclusive and one non-exclusive. "The more exclusivity you give us the more compensation we will give you," McCarthy said. The exact commission levels for both tiers are not being disclosed yet, she said.

The 2007 VSPP contract raises the deal size required for an agent to get on-site assistance from Verizon Business' engineers to $50,000, up from $10,000, McCarthy said. This process, called "teaming," also could result in reduced compensation for a partner, according to a data sheet that was provided to participants of the conference call and viewed by CRN.

Commissions will be paid to partners in both tiers in the same way: 50 percent of the commission on a deal will be paid upfront, and the balance will be paid as a residual over either five years or the length of the contract if it is less than five years, McCarthy said.

Legacy MCI partners that are not selected for the VSPP can't renew their legacy MCI contracts, according to the data sheet. All legacy MCI contracts will become Verizon contracts in 2007, so if MCI partners do not make it into the VSPP, they lose their legacy accounts, according to the data sheets.

Verizon Business also will take direct—and bar VSPP agents froMandAmp;#8212;all "premier, federal, system integrator, government, education, wholesale and international" accounts, according to the data sheet.

"This just makes [Verizon] tougher to work with, if we even end up working with them at all," a legacy MCI agent said.