Verizon Cans Hundreds of MCI Agents and Squeezes the Rest

This is just one remarkable highlight of the much-anticipated 2007 Verizon Solution Provider Program (VSPP) contract which the New York-based carrier delivered right before Thanksgiving to a fraction of the MCI partners it won with this year's merger of the two Baby Bells, according to nearly a dozen legacy MCI agents and several others involved with the VSPP effort.

"It's absurd. [Verizon is] basically saying 'sign your life away and I'll give you a quota in the end,'" one large legacy MCI master agent said of the VSPP contract.

By offering only 80 or so legacy MCI agents the 2007 VSPP contract, Verizon is, in effect, saying to hundreds of other legacy MCI agents they are not welcome as official Verizon partners, sources said.

The large number of legacy MCI agents not offered contracts were weeded out during a recruitment phase that began in September with one-on-one interviews between Verizon management and legacy MCI agents.

Those not offered the 2007 VSPP contract now stand to lose the residual income from the customer bases they built under MCI, sources said. In the short term, this group will continue to earn residual income from their legacy MCI customer base. But the instant a Verizon agent, or Verizon's inside sales team, sells a legacy MCI customer any new service, renews an existing service, or alters the customer's contract in any way, the residual income agreement in place under MCI's old contract ends, sources said.

"Yes, we are in trouble. But let's just say we are looking at options," said a legacy MCI agent who did not get offered the contact and now stands to lose thousands of dollars a year in legacy residual commissions.

Verizon declined to comment on this story, and would not provide the exact number of legacy MCI agents who were not presented VSPP contracts.

All legacy MCI agents - even those offered VSPP contracts - risk losing the hard-won residual income from their legacy MCI customers, sources said.

Because of this, there is talk among legacy MCI agents offered the VSPP contract - many of whom transact millions of dollars worth of business a year - to unite and not sign the contract at all. The aim here is to perhaps force Verizon to take the choke-hold off their ability to earn money, sources said.

"Armageddon is coming and it's not too far away," a second legacy MCI master agent said of the confrontation building between Verizon and its MCI alumni. "We are hoping we can get a no-sign petition out that rallies all MCI solution partners not to sign in any form the current agreement."

Legacy MCI agents offered the VSPP contract know from experience that if Verizon gives itself the ability to end residual payments to legacy MCI agents by voiding existing MCI customer contract agreements once those customers renew with a Verizon representative or add new services with a Verizon representative, Verizon will do just that. "I know how this game works. What Verizon may be forgetting is that most of its large master agents were successful sales or executive people in the older Bells. If I was Verizon facing the renewals of the MCI guys, I'd just set up a telemarketing organization to start selling renewals five months ahead of time," the first legacy MCI agent said.

If a legacy MCI agent does manage to beat Verizon to a renewal, the win is worth less money that it was before, sources said.

MCI renewals once paid commissions as high as 15 percent and above. Under 2007 VSPP renewals pay less that 5 percent, sources said. This reduction in renewal commissions angers agents who argue it costs just as much money, or more, to maintain and renew a customer, as it does to land a new one.

"Their posture on contract renewals is absolutely bull. It almost takes as much to renew a customer as it does to acquire a customer, and Verizon is saying to us that our value diminishes as you add customers, and we will pay you less where we have to work just as hard to keep them. Verizon can maintain their profit but we have to diminish ours," the first MCI master agent said.

One legacy MCI agent compared Verizon' actions towards legacy MCI agents as similar to a college professor who, saddled with too large a class, gives a first test so difficult that it thins down the classes numbers to a level the professor can more easily manage.

Verizon has dragged its heels all year in the development of the 2007 VSPP, and at one point told legacy MCI agents the contract would arrive in the September timeframe. Then the carrier delayed delivery of the contract until the eve of a national holiday, giving legacy MCI agents just days until a Verizon executive meeting in Basking Ridge, N.J., on November 29, a meeting sources say marks the deadline to sign the contract, sources said.

"They are asking the agents to sign a contract without knowing what their quotas will be," a third legacy MCI master agent said. "You don't know whether you are going to be selling at a half a million dollars, a million, be given a $2 million quota, who knows? As far as we know it's a dart board right now. And what kind of time have they given us? It's Thanksgiving weekend, and I still haven't gotten a call back from my lawyer yet to look at this. When I do, I'll maybe have what, three days (before the deadline to sign)?"

During a Nov. 17 conference call between Verizon and legacy MCI agents offered the 2007 VSPP contract, Verizon officials gave no assurance that quotas would be attainable, sources said. Verizon's stance during that conference call was that legacy MCI agents who fail to hit their quota can be terminated from the program in 30 days, a penalty that includes forfeiture of all residuals.

Legacy MCI agents on the Nov. 17 call were outraged by Verizon's "take it or leave it" attitude, sources said.

"Verizon talked down to us like we were second-class citizens," a fourth legacy MCI agent, who was on the call, said. "We were screaming on the call 'wait a minute, this is our business we have built!' But [Verizon] just came back at us as said you need to trust us. They didn't give us any reassurance that the quotas we will be given would be fair. They just said we need to trust them."

Aware that CRN was on a story based on conversations with legacy MCI agents unhappy with the 2007 VSPP contract offer, Verizon sent legacy MCI agents offered the contract an e-mail the day before Thanksgiving, several sources confirmed.

That e-mail explained that even though Verizon would not change the wording of the contract, and that quotas would still be assigned only after contracts were signed, it would extend the length of time it would give legacy MCI agents to fall in line and hit their quotas. In other words, the 30 day termination-without-cause condition was to be lifted, a fifth legacy MCI agent said.

Verizon sill refuses to budge on a contract stipulation that raises the deal size required for an agent to get on-site assistance from Verizon Business' engineers to $50,000 from $10,000. This process, called "teaming," could result in reduced compensation for legacy MCI partners, sources said. But it could also cost Verizon money in the end, sources said.

"Raising the teaming number to $50,000 I think was a big loss for Verizon. What they are doing there is telling agents you can't team on large customers [for] one dollar south of $50,000, and that's real bread and butter business for master (agents)," a sixth legacy MCI agent said.

A much-feared exclusivity clause in the 2007 VSPP contract is an option, but choosing not to be exclusive to Verizon will cost an agent two commission points - a figure that appears small but can in practice be make-or-break for a volume dealer, this sixth legacy MCI agent said.

"A two percent increase in commission for going exclusive is really very significant for master agents," the sixth agent said. "For the big master agents who sell through the channel - through the VARs and systems integrators " two percent can be everything, as opposed to direct. If agents sell direct to customers without a channel in between, the two percent doesn't make or break them" because they don't need that two percent to help the commission of a channel partner.

One source, who would not identify himself other than to say he was working with the VSPP operation, contacted CRN to defend Verizon's offer to legacy MCI partners. The difference in the way pre-merger MCI and Verizon each tabulated their quotas was different, and this has caused unnecessary fear among legacy MCI agents facing the 2007 VSPP contract, he said.

Prior to the merger, MCI allowed agents to apply the full value of a customer contract to their annual quota. For example, under MCI, if a three-year contract was valued at $36,000, that entire total could be credited to a $750,000 quota. At Verizon prior to the merger, only the value of the first year of the same $36,000 three-year-contract, or $12,000, could be applied towards that agent's $750,000 contract, several sources confirmed.

This math shows that legacy MCI agents should look forward to comparatively lower quotas under the Verizon program, because they can only apply a year's worth of a contract's value to their year's quota, the source arguing in favor of Verizon said. Verizon was offered the opportunity to agree that this thinking should alleviate the concerns of legacy MCI agents, agents being asked by Verizon to be surprised by whatever quota is handed down to them from the carrier, but Verizon declined to comment.

None of the several legacy MCI agents told by CRN of this argument said it would guarantee that Verizon would deal out attainable quotas to legacy MCI agents who signed he contract. "Why hasn't Verizon given the same assurance to MCI partners directly? They want us to cut and run. They want us to get scared and quit. They are in for a surprise," said one.

The uncertainty surrounding the 2007 VSPP contract makes signing it dangerous, another source said, who added "If you are an MCI agent with a big base, say, half a million dollars to a million, you are probably going to think very hard about not signing the new contract."

Many of the legacy MCI agents recommended that none of their peers sign the 2007 VSPP pact. An effort is underway to organize agents who, by not signing, can force Verizon to stop treating MCI agents like "second class citizens," the second legacy MCI agent said.

An organized revolt by legacy MCI agents will teach Verizon what it needs to learn - That Verizon needs its legacy MCI agents more than it may realize, sources said. Legacy MCI agents have major customer ties outside the northeast where Verizon has built its core customer base, and these customer consume complex services beyond traditional voice - services that span IP-based voice and data products. Verizon interferes with these traditional MCI/customer relationships at its own risk, the second agent said.

Aggravating matters is Verizon's "pompous attitude" towards legacy MCI agents, the first former MCI agent said.

"Verizon, and (Verizon channel executive) Rose Kirk are acting like jerks. It's amazing to watch this group in action. I've been in this business thirty years and I've learned you don't make money by making enemies," a seventh legacy MCI agent said.

"I don't know if I'm going to sign (the 2007 VSPP contract) yet," the sixth legacy MCI agent said.

Some legacy MCI agents are considering working underneath uber-Verizon master agents such as Venture Group Enterprises (VGE) or Intelisys in order to survive. VGE and Intellisys are extremely large master agents who many sources say have been given "sweetheart deals" by Verizon that allow them to do business more independently than the legacy MCI agents being offered the 2007 VSPP contract will ever be.

Working as a sub-agent under VSPP 2007 means accepting exclusivity if the master agent is exclusive. But accepting the trappings of exclusivity as a sub-agent below a mega-Verizon master agent like a VGE or Intelisys in exchange for the commissions level of volume sales is a survival tactic in the face of the current VSPP contract offering, sources said. But the trade off is humiliating, sources said. "Working under someone else is something I never thought I would ever consider doing," the first legacy MCI agent said.

With the contracts out there waiting to be signed, or not signed, by the chosen legacy MCI agents, only one thing is certain - a confrontation between Verizon and the MCI agents it won with its purchase of the carrier is practically inevitable.

"By signing the (2007 VSPP) agreement you are forfeiting all your rights," the first agent said.

"This is not over yet," the forth legacy MCI agent said, reading the VSPP contract as he spoke to CRN. "Verizon is crazy of they think this contract will fly