Agents: Choose Your Telecom Vendors Wisely

Telecom master agents and agents say that's the lesson to be learned in the wake of the conviction Tuesday of WorldCom CEO Bernie Ebbers on fraud charges and a Securities and Exchange Commission lawsuit alleging fraud by former Qwest Communications International CEO Joseph Nacchio and eight other former Qwest employees.

"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 after a federal jury deliberated in New York for eight days. In the Qwest case, the SEC 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."

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 in the life of the business, he said. McGuigan declined to name those vendors but said they did some "unethical things" and "didn't survive the test of time."

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

Rick Sheldon, CEO of Intelisys, a Petaluma, Calif., master agent, said the telecom industry was shaken up long before the conviction of Ebbers, illustrating the need to "choose your partners wisely based on good, sound relationships with people you can trust."

"The most important thing we do is choose our partners wisely," said Sheldon, who co-founded Intelisys 11 years ago. "Our partners have told us time and time again that the single most important thing they are looking 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 Qwest remains a trusted partner even with all the changes, scandal and turmoil at the company. "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 through regime changes maintained a very strong program. They haven't wavered."

That can't be said of all vendors, according to Sheldon. He pointed to AT&T as a vendor that wavered in its commitment to the channel. Last fall, AT&T terminated 500 agent contracts as part of a restructuring of 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, who worked with Ebbers at Long Distance Discount Service (LDDS) back in the early 1990s, said he would be surprised if Ebbers didn't know about the accounting issues at WorldCom. "As the CEO of a company, I can't believe that any CEO wouldn't know what was going on with the accounting," he said. "However, I run a multimillion-dollar company, not a multibillion-dollar company."

Sheldon said choosing partners wisely is even more important in the telecom market because of the brutal nature of the business. "The industry is sick. It is not a healthy industry," he said. "You are dealing with massive change, technological disruption, and the entire industry four or five years ago got cut off at the knees by Wall Street. This industry needs to get healthy. 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 in the process of being acquired by SBC Communications.

Sheldon said it's important not to let the telecom scandals put a cloud 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.

Jim Porter, general manager of Venicom, a master agent based in Scottsdale, Ariz., said many agents have repeatedly been burned by the telecom scandals at WorldCom, Global Crossing, Qwest and other vendors. He said the important lesson to be learned is not to "put all your eggs in one basket" as an agent or master agent.

"The key is to diversify," Porter said. "Anybody that gets stuck in a situation where they are relying on one carrier for all of their business is in a world of trouble. You have to be more careful about who you do business with in the telecom industry because no one is stable. Look at what just happened with AT&T. And now Qwest and Verizon are both bidding for MCI."

Porter added that customers should avoid long-term contracts because of the falling prices on phone and Internet services. "A T-1 line used to cost $1,500 a month five years ago. Now it is about $500 a month," he said.

Quy "Q" Nguyen, CEO of Allyance, a master agent based in Irvine, Calif., said he was heartened by the Ebbers verdict. "This is something that was long overdue. This needed to be resolved to bring confidence back into the telecommunications community," he said. "There are always going to be some bad apples in every industry. This makes a statement and sends a chilling message to any executives that want to put our hard-earned work in jeopardy."

The telecom channel is moving forward right now, Nguyen said. "Consolidations are taking place with key companies to make more stable and more viable companies. I think that, with the verdicts and all the bankruptcies, a lot of carriers realize they can't mess around and need to get their act together."

Nguyen pointed to new, exciting technologies such as bundled VoIP solutions and a more robust MPLS network, which are helping to reinvigorate the telecom industry. "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."

Sheldon said choosing partners wisely is even more important in the telecom market because of the brutal nature of the business. "The industry is sick. It is not a healthy industry," he said. "You are dealing with massive change, technological disruption, and the entire industry four or five years ago got cut off at the knees by Wall Street. This industry needs to get healthy. 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 in the process of being acquired by SBC Communications.

Sheldon said it's important not to let the telecom scandals put a cloud 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.

Jim Porter, the general manager of Venicom, a master agent based in Scottsdale, Ariz., said many agents have repeatedly been burned by the telecom scandals at WorldCom, Global Crossing, Qwest and other vendors. He said the important lesson to be learned is not to "put all your eggs in one basket" as an agent or master agent.

"The key is to diversify," Porter said. "Anybody that gets stuck in a situation where they are relying on one carrier for all of their business is in a world of trouble. You have to be more careful about who you do business with in the telecom industry, because no one is stable. Look at what just happened with AT&T. And now Qwest and Verizon are both bidding for MCI."

Porter added that customers should avoid long-term contracts because of the falling prices on phone and Internet services. "A T-1 line used to cost $1,500 a month five years ago. Now it is about $500 a month," he said.

Quy "Q" Nguyen, CEO of Allyance, a master agent based in Irvine, Calif., said he was heartened by the Ebbers verdict. "This is something that was long overdue. This needed to be resolved to bring confidence back into the telecommunications community," he said. "There are always going to be some bad apples in every industry. This makes a statement and sends a chilling message to any executives that want to put our hard-earned work in jeopardy."

The telecom channel is moving forward right now, Nguyen said. "Consolidations are taking place with key companies to make more stable and more viable companies. I think that, with the verdicts and all the bankruptcies, a lot of carriers realize they can't mess around and need to get their act together."

Nguyen pointed to new, exciting technologies such as bundled voice-over-IP solutions and a more robust MPLS network, which are helping to reinvigorate the telecom industry.

"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."