Verizon Discount Program May Undercut VARs

Verizon Business has put a new twist on an old tactic, one that can undercut network data and voice solution providers.

The recently developed Verizon Client Advantage Program (VCAP) gives customers credits that can be applied as rock-bottom discounts on complete Verizon network solutions that include the carrier's services, a plethora of hardware products to choose from and options such as managed network services and call-center and help-desk services, according to VCAP participants and solution providers who have lost bids to VCAP.

Verizon Business hasn't publicly announced VCAP, and information about the program isn't available on its Web site. A Verizon spokesman declined to elaborate, saying only that VCAP is "one of a number of large business incentive opportunities, the details of which are not published."

Pat Grillo, president of Atrion Communications Resources (ACR), a Branchburg, N.J.-based solution provider, said he learned of VCAP earlier this year when his company bid on a Juniper Networks router deal at Rutgers University, a current ACR client.

ACR was positioned to win the deal with a bid that was about $12,000 lower than other bids on the $300,000 to $400,000 project, Grillo said. ACR's bid included an extra discount on the Juniper products because it had registered the Rutgers opportunity in Juniper's deal-registration program, he said."We thought we would win [the deal], and on the surface, it looked like we did," Grillo said.

Yet Verizon ended up winning the bid because the carrier included an additional discount of about $22,000 in VCAP funds, Grillo said. In the end, the project was put on hold, but Grillo said the experience left a bad taste in his mouth.

Verizon has extended the opportunity to apply for VCAP discounts to more than 40 New Jersey schools, according to documents on NJEDge.net, the Web site of New Jersey's Higher Education Network. NJEDge.net describes VCAP as a "recent innovation at Verizon where financial incentives in the form of discounts are given to Verizon's most strategic clients. This incentive is applied to new purchases of approved Verizon products."

Verizon also is exploring the possibility of allowing solution providers to resell its networking solutions with VCAP discounts, according to a Verizon partner approached by the carrier about the idea.

"They are very motivated, and they will give hardware away because they are just looking for the long-term residual," said the Verizon partner, who requested anonymity.But the partner added that a channel play with VCAP probably wouldn't work because Verizon ultimately might determine that it could perform field implementation and service without the assistance of a solution provider.

Deep discounts for equipment in solutions sold by carriers aren't new, according to Tony Ferrigno, vice president of sales and strategy at Ciber, an Edison, N.J.-based solution provider. "When Cisco [Systems] did this with Sprint, MCI and others, [service providers] sold the equipment at ridiculous prices, even lower than we can buy," he said.

AT&T offers several VCAP-like programs that allow certain customers to aggregate their total spending to receive discounts and rewards, an AT&T spokesman said in an e-mail.

Though networking vendors such as Cisco and Juniper have grappled with such solution provider/service provider conflict for some time, ACR's experience is that it's getting worse among carriers, Grillo said, adding that he's sure he has gone up against VCAP in other potential deals.

"We're seeing an increase in this kind of activity. Customers tell us that we're 'X' amount [higher on a bid], and there's just no way we could be without something else going on," Grillo said. "These are registered deals where we're selling below the cost of what everybody else should be selling at. So unless [service providers] are selling at a loss or break-even at best, they shouldn't be competing."0