Channel Partners

SEP-OCT 2013

For 25 years, Channel Partners has been a resource for indirect sales channels, such as agents, VARs and dealers, that provide network-based communications and computing services, associated CPE and applications, and managed and professional services

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FEATURE The SwiTchleSS reSellerS' plighT Once high-fliers in the telecom industry and within the channel, the switchless reseller model has taken a dive in recent years. Many resellers' margins have shrunk due to: • Lack of revenue growth on traditional services such as POTS lines • Number of competitors • The recent recession • Federal backtracking on uNE-P and special access mandates that helped foster the competitive telecom industry resulting in carriers such as AT&T and Verizon being allowed to charge higher prices whAT now? exPeCT reseller consolidation to continue, albeit at a slower pace. "Most of the attractive resellers have been taken," said Mark Del Bianco, head of Law Office of Mark C. Del Bianco. Nonetheless, sources said, reseller M&A promises to remain a trend due to eroding margins, high competition and concentration on next-generation technologies. the buyers probably will be those aiming to consolidate markets and increase scale, said Washburn. Meantime, the resellers that remain independent will have to keep diversifying, said Clausen. this may mean they snap up companies outside of their traditional domains. to that point, reselling, on its own, "is probably not a long-term profitable growth strategy, but it is a way to build a customer base that can be converted to higher margin bundled and facilities-based services if you have the financing to acquire the necessary facilities," Del Bianco said. Along those lines, resellers that responded to a Channel Partners interview request by press time noted, without exception, and despite the opportunity for anonymous attribution, that they are flourishing. • Access One. "Our new sales are mostly on-net, but we still provide legacy resale telecom services to a large number of customers throughout the U.S.," said Larry Levy, senior vice president and COO of Access One, which went facilities-based in 2006. "We recognize that it is tough to succeed and even tougher to grow using a straight reseller model, so we don't." Access One said its on-net products include integrated voice and data with bandwidth allocation, along with DiAs and MPLS. Because of that, "We mitigate the issue of being a reseller even further," said Levy. 36 ChaNNel paRTNeRs SEPt/OCt 2013 • AireSpring. the death of the pure, switchless reseller was apparent to AireSpring years ago; therefore, it moved to the facilities-based option and installed its own iP voice network and MPLS mesh product, said COO Daniel Lonstein. the company soon will offer cloud services as well. "if anything, our experience in this industry has shown us that you have to constantly evolve and pivot your business model," Lonstein said. "You have to always think like a startup." • American Telesis. Like many of its peers, American telesis has its own network in addition to its resale agreements. And it, too, keeps the new products coming. At press time, the company was on the verge of releasing WAN aggregation and optimization, as well as network reporting tools and managed security. "We want to step away from the traditional carrier mindset of 'bigger bandwidth is better' and instead take the stance that it's not just how much bandwidth you have, it's how you use it," said heather Selbert, vice president of operations. • BullsEye Telecom. BullsEye says it avoids the deep discounting approach, instead providing services including POtS consolidation, hosted application and managed network services that come with guarantees. Plus, said tony Waltherhouse, director of partner relations, "We're making substantial investments in both technology and human resources to support the exponential growth in our channel program." • Fidelity Voice and Data. fidelity is another reseller that has enlarged with its own facilities. "We do not focus 100 percent of our revenue on traditional reseller business," said CEO Robert Marks. for instance, fidelity has built is own cloud network that gives it control of the product and the overall margin. "We work alongside our channel partners to be the first to deploy new technologies that customers want," Marks added. • Granite Telecommunications. the 11-year-old reseller is growing as it sticks to its mission of serving multisite businesses and augments its portfolio with MPLS and cloud computing, said Charles Pagliazzo, director of channels. "We have continued to share with our partners that our goals include continued growth through existing and emerging solutions, while maintaining the all important level of support we offer both partners and clients," he said. • Momentum. the constant addition of new services has led to 500 percent business-sales growth so far this year, said Jamie Minner, vice president of sales. the increase allowed Momentum to raise additional equity for "growth-only" use, Minner

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