PBX Maintenance Providers Continue Legal Battles
Judge: Avaya Will Face Monopoly Claims Published on Sept. 11, 2008 (Vol. 29, No. 18) Encouraging news for enterprises using Avaya equipment: A federal judge issued opinions Aug. 29 that will help two PBX maintenance providers in their ongoing lawsuits aiming to change the manufacturing behemoth’s maintenance practices. Black Box and Continuant – both former Avaya BusinessPartners – sued Avaya because it restricts access to the passwords necessary to maintain its systems. These credentials only are available to Avaya’s authorized BusinessPartners. It won’t provide passwords to unauthorized maintenance providers or to enterprises that rely on them. Avaya locks down systems when it learns enterprises have engaged the services of unauthorized providers, preventing enterprise telecom pros from performing the most basic maintenance tasks [VR 1/3/08]. Split Ruling for Black Box and Continuant Judge Garrett Brown, of the U.S. District Court for the District of New Jersey, ruled that Black Box and Continuant could argue that Avaya’s approach to preventing unauthorized maintenance companies from providing PBX maintenance is monopolistic. “Obviously we’re excited about that, because it’s the first step in having a jury decide whether our monopolization claims have merit,” says Bruce Shelby, Continuant’s VP of sales, on the most recent episode of Telecom Junkies (www.telecomjunkies.com). “We’re confident that a jury would rule in our favor on that.” The judge also ruled in favor of Avaya: He dismissed Continuant’s and Black Box’s “conspiracy to monopolize” claims, as well as allegations that Avaya “ties” the receipt of patches and upgrades for its PBXs and predictive dialing systems to the purchase of service and maintenance. Black Box and Continuant came out of the ruling in a better position, says Martha Buyer, of the Law Offices of Martha Buyer, in East Aurora, N.Y., who doesn’t represent either party in these cases. Tony Mensah, partner at antitrust law firm Mensah, Shoemaker and Dzubow, in Washington, D.C., agrees. It’s a common litigation strategy for a complainant to make as many claims as possible at the outset, then hope they survive a motion for dismissal like Avaya’s. The judge in these cases dismissed the most inconsequential of the claims, leaving Black Box and Continuant to argue for monetary damages and a change in Avaya’s policy, adds Mensah, who also doesn’t represent a party in these cases. Despite the judge’s ruling, the case is far from over. 46% of Avaya Revenue Came from Maintenance How PBX manufacturers allow their channel partners to provide maintenance services differs, but “it’s no secret that Avaya’s traditionally kept a great share of the PBX maintenance for itself,” says Christine Tenneson, an analyst at Stamford, Conn.-based Gartner whose research focuses on voice and IT network services. She characterizes PBX maintenance as “a great bread-and-butter business for the company.” Rightfully so: Avaya Global Services, the company’s name for its maintenance arm, generated $590 million in revenue (46% of its sales) during the quarter ended June 30, 2007, the last period Avaya filed public records before going private. How can Avaya continue to hang on to so much business, especially among enterprise complaints that it’s overpriced [VR 10/16/06]? Easy: There really isn’t any other game in town. Most of Avaya’s BusinessPartners can only resell Avaya Global Services support, instead of providing their own brand of support backed by Avaya, Tenneson notes. Only 40 of Avaya’s roughly 1,200 U.S. BusinessPartners can sell their own brand of support – providing Level 1 and 2 support directly to customers, and contracting with Avaya to provide Level 3 services – and most are smaller companies with less than $50 million in revenue, Tenneson estimates. Orange Business Services is the only company authorized by Avaya to provide its own brand of support on a global basis. Avaya’s tight grip on the maintenance market also has led to a lack of competitive pricing, Tenneson says. Avaya’s Maintenance Stick and Carrot If you buy services from an unauthorized provider promising lower prices and faster service, beware that the manufacturer wields a pretty powerful stick: If it finds out, you’ll receive a series of letters, and then lose access to your maintenance functions. The first is an “informational letter,” sent when the sales rep becomes aware that a customer is considering an unauthorized provider; next comes a “notification letter” for when a customer cancels an Avaya maintenance agreement in lieu of signing with an unauthorized provider; and finally, there’s a “cancellation letter” that informs the customer that their maintenance service permissions are being deactivated. Avaya describes these letters in an 18-page PowerPoint presentation named “Judo Against TLI,” which was included in the public documents filed in Avaya’s suit against Continuant (TLI’s affiliate). Another 27-page Avaya PowerPoint sends an even more powerful message. In “Judo Strategy Beat United Asset Coverage,” Avaya sales reps are instructed to “create fear/uncertainty/doubt regarding UAC promises.” The document is included as evidence in an antitrust lawsuit brought against Avaya by UAC, a Naperville, Ill.-based maintenance provider also not certified by Avaya, on July 28, 2005, in an Illinois federal court. (UAC sold its assets to Shared Technologies in February 2007 and voluntarily withdrew its suit against Avaya.) But it’s not all threat and no reward. Enterprises who state that they have not and will not contract with unauthorized providers qualify for a “loyalty discount,” which halves the cost of critical maintenance passwords through Avaya’s Maintenance Assist offers, Brown recaps in his opinion. Case Will Decide Maintenance Future for Avaya Customers If Black Box and Continuant argue successfully that Avaya cannot control who uses maintenance passwords, enterprises will be able to buy maintenance services from unauthorized third parties, or from BusinessPartners and Avaya directly, Tenneson reasons. Increased competition would lead to more aggressive pricing and higher levels of service – even from Avaya, because it would have to work harder to keep its customers, Continuant’s Shelby says. But if Avaya wins, it will continue to mete out maintenance business to its Global Services division and BusinessPartners. The court’s ruling could even discourage third-party maintenance providers from trying to enter the market, Tenneson speculates. Avaya’s spokespeople could not be reached for comment for this article. ( | 
