Telecom Legend Richard Jalkut On How TPx Benefits From Big Telco Strategy And How Partners Can Stop Being 'Quoting Engines'

Pulling No Punches

Telecom industry veteran Richard Jalkut, CEO of the recently rebranded TPx Communications, didn't mince words when he spoke at master agent PlanetOne's Tech Tour in Mashantucket, Conn. this week. Jalkut weighed in on the significant trends affecting the industry, including the seemingly complex strategies that the incumbent carriers have as they attempt to acquire new companies and enter new markets.

With more than 35 years of telecom experience, Jalkut was president and CEO of Pathnet Telecom before his appointment at TPx, then known as TelePacific Communications. Jalkut also served as president, CEO and chairman of NYNEX Telephone Companies, the regulated arm of NYNEX, including New York Telephone, New England Telephone, and the NYNEX Service and Technology companies.

Jalkut sat with CRN at the PlanetOne event to talk about TPx is going national with the help of its agent partners. He discussed the importance of moving into managed services and the challenges associated with going after the VAR channel. Here's what Jalkut had to say.

TelePacific Communications recently was rebranded to TPx Communications. Tell us about TPx's Channel strategy.

Fifty-five percent of our contracted revenue from the street comes from the direct channel, 45 [percent] comes from agent channel, but we don't call it the indirect channel -- there's nothing indirect about what we do with our agents. In California, Nevada, and Texas, we have 15 channel managers and then seven to eight channel managers on the East Coast. The channel is a huge part of our business. We also have a very large inside sales force of about 100, and about 45 to 50 of them are dedicated to the channel and exclusively work with their channel partners. We upsell and renew and service all those channel accounts for our partners, so they don't have to do it; we grow the base, and they get the credit for it.

How is TPx faring with the incumbent carriers making high-profile acquisitions in the digital media and entertainment space?

We benefit in a couple of ways. We are losing less of our base to carriers like AT&T and Verizon from a churn perspective than we ever have been, so that tells me they don't have sales people that are really focused on the midmarket and sub-enterprise space which is where we play. These carriers are very good at bandwidth solutions for their customers and lighting up a building, but there is more choice now than there ever was. In every building, there is a carrier, a cable TV company, and an alternate carrier, like a Level 3 or XO [Communications], so with price compression occurring for all bandwidth products, why would we need to light up buildings? We can pick and choose who has the most effective pricing and best service. I really think these carriers are not as much interested in the spaces they were before, and I think they are more distracted corporately around what their growth strategy is, and I don't see them as aggressive from a pricing point of view as they have been before – all that is good for us.

What is the biggest concern that you're hearing from your partners today?

Making that transition to where they are today, and where they are going to be.

Many of our partners want us to be a quoting engine, and that is not where we want to be. That's not where the margin is or where the opportunity is. But we still have a lot of partners that call us up and say; "I need a quote for 100 Megs of bandwidth." So, getting them off that bandwidth focus and getting them into the managed services space is really important. But it takes a much more entrepreneurial approach to dealing with clients. Most partners have been very successful saying to the end users: "I'm going to get you three quotes and then I'll give you’re a recommendation on who I think is the best to work with." To go on a customer's premise(s) and say "We don’t need to get a quote for you right now -- we need to help you solve your business problem" is a very different relationship with the client than a lot of agents have today.

What challenges do VARs have offering telecom services and recurring revenue?

It's frustrating. We are participating in all [VAR] conferences. We are trying to network and get to know them better, but we have this huge obstacle to overcome. Number one, there is tremendous fragmentation, and so you don’t have the consolidation as you have in agent channel. Secondly, VARs like to be paid upfront, so we are trying to break that habit and trying to convince them to sell network services and managed services, and assume an annuity is very challenging. The pricing structure is a little frustrating to try to break through.

What was interesting to us was ScanSource buying Intelisys. The jury is still out, but I think if they can come together in such a way where Intelisys is really able to use that model to their success, it's going to make a huge difference for the rest of the industry. I think they are going to be the poster child.

How are you helping partners make the transition to managed services and away from being "quoting engines?"

I would break channel partners into three segments. There's a third of partners that get it today, and they are very entrepreneurial and moving into managed IT services space. They tend to be younger partners, for the most part. Then you have a third that aren't there yet, but they are going to get there because they know the game has changed. And then you have a third that are never going to get there. We can train them to death, but they are really more focused on network services. It’s a product set that they know and love, they are very comfortable selling PRIs, and they will try to survive in a world of price compression as long as they can. So the challenge is really trying to get the middle third into top third space, and that's why we are doing trainings and seminars.

How big of an opportunity are next-gen networking services, like SD-WAN, for the channel?

I think SD-WAN is a real game changer because it allows the client to be agnostic about the network services, whereas before, our channel partners were working with a client that might have been under contract with an AT&T or XO for a network service – and all we were pitching was the network service – so you couldn't win that business. You'd just have to make a note to go back once the contract is up. Now along comes SD-WAN, and we can roll that network service into an SD-WAN box – we use VeloCloud – and then we can work with the customer for the UC sand IT services and give them a much better solution, with continuity, than they have today. SD-WAN is really going to become the technology that enables all of us in the channel community to become agnostic – or like Switzerland.

What i s your message to the channel? What can partners expect from TPx the rest of this year?

Our biggest focus is the rebrand, and we've gotten a lot of positive feedback on how well that went, so moving forward, our next focus is going national through the agent channel. That's why we just hired Jim Delis who ran the Time Warner Cable channel program on a national basis. He is going to be responsible for the national master agent relationships so that we can take our brand and product line national. And with SD-WAN technology, we don’t have to have anchored networks sitting underneath our feet anymore. We can use SD-WAN and use anyone's access to help sell the full service that the customer wants, like network and UC, or if the customer just wants one service, we can do that on a standalone basis.

The channel piece will grow faster than the direct channel because I'm not going to invest in direct sales teams in any of the new markets we opened. We just opened New York, Philadelphia, and Washington D.C. with no direct sales teams, and we are going to go to Chicago next. As that volume increase, that 45 percent is going to shift in favor of the agent side.