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Sales leaders defend revenue-based commissions. Finance leaders push margin-based. Both sides think the compensation lever moves the margin number. It does not. The margin is set somewhere else.
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In this issue:
Sales defends revenue-based comp. Finance pushes margin-based. Both are wrong.
Commissions move behavior, not margin.
The actual margin lever sits in how finance sets constraints against the market.
Constraint Pricing explains why every operator argues about the wrong thing.
In case you missed it:
Inside every Latin American telecom operator's B2B and wholesale unit, the same debate gets re-fought every annual planning cycle.
Sales leaders defend revenue-based commissions because closing the deal is the discipline that matters at their end. Finance leaders push for margin-based commissions because profitability is the longer-term discipline.
Both sides think the disagreement is fundamentally about margin: which structure produces better numbers in the consolidated P&L. It is not.
Compensation moves behavior. Margin moves on a different mechanism, and the gap between the lever both sides assume and the mechanism that actually drives margin explains the puzzle of why B2B telecom operators in the region keep promising margin defense and reporting margin erosion in the same earnings cycles.
The word 'margin' is doing two jobs.
The annual debate runs the same way each year. The sales head argues that comp is the engine of revenue growth, that switching to margin-based will slow deal velocity, and that lost deal velocity costs more than the margin gain recovers.
The finance head argues that revenue-based comp pushes the team to close at any price within the finance floor, and that this builds up over time into structural margin erosion.
Both arguments are internally consistent. The reason they talk past each other is that they use the word "margin" to mean two different things.
The sales head means deal-level contribution: how much profit sits inside the specific contracts being signed this quarter. The finance head means structural margin: the long-run trajectory of consolidated profitability. Comp structure has a real effect on the first. It has almost no effect on the second.
This is uncomfortable. Each side has built authority on the assumption that comp is the lever. If comp does not actually move structural margin, both authority claims weaken.
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Finance does not set the price.
The standard view assumes finance sets the price the customer pays. Finance does not. The market does. Finance sets the constraints inside which a price can be agreed.
The mechanism is straightforward. When an operator quotes a B2B service (e.g. a 1 Gbps internet port, an MPLS link, a wavelength between two cities), three forces meet inside the company:
Finance defines profitability rules: a minimum payback period, an EBITDA margin floor, an NPV hurdle.
Sales discovers what the customer is willing to pay, through mystery shopping competitor prices, watching public tender outcomes, and learning from deals lost.
Engineering knows the cost to deliver: lower if the circuit runs on existing network, higher if new last-mile is needed or third-party lease costs apply.
The price on the signed contract is what is left after these three forces meet. Sales negotiates down toward the customer's budget. Finance defends the profitability rule. The engineering cost number sets a floor below which finance will not approve the deal. The number that signs is the leftover of that process. It is not chosen. It emerges.
TeleGeography's 2026 Brazil outlook, published November 2025, shows this mechanism running. The weighted-median price for a 10 GigE IP transit port in Sao Paulo stood at US$0.30 per Mbps in Q2 2025, down from US$1.04 five years earlier (a 22% compound annual decline), with aggressive quotes now reported as low as US$0.10 per Mbps across the Sao Paulo, Rio de Janeiro, and Fortaleza hubs.
On the Miami to Sao Paulo route, 100 Gbps wavelengths fell to US$10,400 weighted-median monthly in Q2 2025 (down from over US$35,000 in 2020), with some carriers quoting as low as US$5,000.
Neither operator nor regulator chose those declines. They emerged as customer budgets compressed against finance constraints that loosened as engineering cost fell with hyperscaler-driven backbone investment.
Constraint Pricing is the operational reality that B2B telecom prices are not set by finance. They emerge as the number that clears the operator's profitability rule, the customer's discovered budget, and the engineering cost floor.
How B2B telecom price emerges between the cost floor and the customer ceiling. Allow images to display.
Inside this picture, comp structure has very little to do with where the price lands. Sales commissions at a typical Latin American operator are a few percent of revenue at most. They are real money for the salesperson but they do not move EBITDA on their own. What moves EBITDA is the price the customer pays, the cost to deliver it, and the product mix. Compensation is not in that equation.
Comp moves behavior, not the EBITDA line.
What comp does is move behavior, and that is not nothing. Revenue-based comp keeps the sales team aggressive. They will discount harder, accept thinner deals, push to close at the bottom of the finance-approved range, because every dollar of revenue counts the same in their payout.
Margin-based comp slows them down. They will hesitate to discount, walk away from deals at the floor, trade volume for profit per deal. Two different sales cultures, two different deal mixes.
This is why both sides are right at their own end. The sales head is right that revenue-based comp is the more aggressive structure and the better match for a market where deals close on price. The finance head is right that margin-based comp produces a more disciplined long-term sales culture.
They are arguing about culture and behavior. The actual margin number is shaped by something else: how tightly finance sets the constraints, how the catalog gets refreshed against the market (most LatAm operators run a quarterly or semi-annual price review), and how disciplined the operator is at saying no to deals that miss the approval floor.
Watch the constraints, not the comp plan.
The comp debate will come up again in the next planning cycle. The reframe to bring into that meeting is that commissions are a behavior question, not a margin question.
Whichever side wins the comp argument, it will not fix the margin problem on its own. The margin problem is solved by the constraint side: how tightly finance writes the approval rules, how often the catalog is refreshed against the market, and how willing the operator is to walk away from deals that do not clear.
Watch the wholesale benchmark trajectories as the leading indicator of how much room the market is leaving constraints to hold. Watch the catalog refresh discipline at any operator publicly explaining margin pressure: a refresh that always moves down is a signal that finance is loosening constraints in response to revenue pressure, not holding them.
The question for the next compensation meeting: if the goal is to defend margin, what is the actual lever, and is comp structure on the list at all?
Keep the signal going.
If this issue changes how you frame the comp debate, it will sharpen the same conversation for someone close to you who runs sales, owns the P&L, or sits on the comp committee.
Forward this email to the colleague who will be in that room next quarter.
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