Once the industry’s dynamic duo of distribution, the relationship between paging carriers and paging resellers is no longer the love fest it once was.
In paging’s early days, resellers were the cheapest and most effective way to cultivate the market. Once the market grew to its potential, however, resellers began asking for lower rates from carriers so they could sell services at lower prices to customers, carriers contend. One carrier likened the relationship between carriers and resellers as the “tail wagging the dog.”
Having seen their revenues plummet and investors balk, paging carriers these days are focusing their efforts more on increasing profits with greater revenue per unit, as opposed to furthering market growth through units in service. They are finding that other methods of distribution are more profitable than reselling and, quite frankly, they don’t need resellers any more, at least not at the same level as in the past. Industry analysts IDC/Link Resources of Austin, Texas, last year predicted that reseller channels will decrease during the next five years.
According to Rodney Peters, director of retail operations for Metrocall Inc., mobile carriers are trying to “straighten the mix out” between reseller distribution and other distribution outlets. “It’s not that we won’t do business with resellers,” he said. “We just have to look at it differently.” This means lowering the distribution percentage resellers once enjoyed in favor of direct-side distribution.
“It’s scary,” said Alexander Ott, president of Affordable Message Center, a national reselling company based in Islandia, N.Y. “I think existing resellers have to be very careful.
“I think [resellers] need to diversify their products,” he explained. “They need to be able to sell everything … They should not be just a paging reseller, they should be a wireless reseller. The ones that don’t are going to have problems competing.”
Resellers also should strive to become as large as possible, Ott continued, covering more territory with more contracts. Smaller resellers should only resell for other resellers or from smaller carriers.
In an effort to generate more profits from fewer units, some resellers are pushing more expensive pagers that offer greater services. Selling more enhanced and more expensive services increases the revenue per unit. The idea is to compete in a services-based game rather than a price-based one.
Many carriers prefer this, but not all. Alphanumeric paging consumes more spectrum than numeric paging, so many carriers don’t like the drain on the system, despite the better price per unit. With the advent of FLEX technology, this drain has been lessened.
Also, the price of alpha units and service has dropped, making it more affordable to the end user, but still profitable for the carrier. The strategy to replace numeric with alphanumeric “is working,” Ott said. “Our big focus is basically in alphanumeric, not in the numeric paging business.”
Still, even with an enhanced services focus, resellers are seeing direct competition from carriers, many of whom are setting up shop right across the street from their resellers. This has several resellers upset, and rethinking their continued relationship with carriers that engage in such practices.
The Federal Communications Commission issued an order last July detailing resale obligations of carriers, in which it stated that an explicit ban and “practices that effectively restrict resale” are unlawful. However, these obligations did not extend to paging resellers, at the urging of the Personal Communications Industry Association.
Because of this, National Wireless Resellers Association Executive Director David Gusky said, “Some would argue that paging carriers feel somewhat emboldened to treat resellers not as nicely as they have in the past,” and said there is “no question” that the FCC resellers order should have extended to paging carriers as well.
Conxus filed a reconsideration petition on that resale order. If accepted, the order would extend to all paging carriers as well.
The NWRA mostly represents resellers that provide both paging and cellular services and as such are not experiencing the same issues as paging-only carriers. “We would welcome paging resellers into our [organization],” said Gusky. “We’d love to bring them into the fold and protect what’s rightfully theirs … My heart goes out to these smaller resellers.”
