News: Analysis & Commentary: TELECOMMUNICATIONS
HOLD THE PHONE--IT'S A TELECOM MARKETING FREE-FOR-ALL
The opening of local service will bring a flood of sales pitches
Brace yourself. If you're fed up with phone company ads, never want to hear another pin drop, think you'll yank the thing out of the wall if you get one more call from a long-distance telemarketer during dinner--you ain't seen nothing yet. Congress' Feb. 1 passage of the Telecommunications Act of 1996 is about to unleash a torrent of marketing campaigns importuning you to change something you probably never thought much about before: local phone service.
The landmark legislation, scheduled to be signed into law by President Clinton on Feb. 8, will open up local calling to competition for the first time in decades. It will take six months or so for federal rules to be worked out, but by the end of 1996, consumers across the U.S. should be able to ditch their local monopoly in favor of AT&T, MCI, Sprint, a cable company, or an out-of-state local phone company.
NEW TERRAIN. The pitch? Bundling. Phone companies figure that customers really want a single source for all their communications needs, be they local, long-distance, international, wireless, online, cable TV, or other services. The idea, though, is unproven. In a recent survey by Mercer Management Consulting Inc., just 6% of respondents said they would consider buying all of their services from one company.
Then again, nobody has had the option before. "We believe that if each service in and of itself is of high value, then single-stop shopping is a strategy that can work," says Joseph P. Naccio, executive vice-president for AT&T's consumer business. And carriers may offer some steep discounts on parts of the package. "When I look into the future, I see local service in some cases given away for free," predicts Sprint Corp. policy chief John R. Hoffman.
For now, companies such as AT&T and MCI Communications Corp. will have to lease calling lines from the local phone company in order to provide service. But most plan to switch to an alternative network quickly. That's when life will get confusing for consumers. Choosing a long-distance carrier mainly involves price comparisons. But with local service, consumers could opt to plug the phone into the cable-TV outlet, now that major cable operators are upgrading their networks to offer phone service.
WIRELESS WORLD. If that's not appealing, there's wireless. Sprint's first wireless network using new personal communications service (PCS) technology is up and running in Washington. The carrier expects to be offering the service in 15 states by yearend--for a basic fee of $15 a month. AT&T also plans a national PCS service by mid-1997 and has strongly hinted that it is prepared to build its own local wired lines in some areas. MCI has built local fiber-optic networks in 25 cities.
The Baby Bells have their own strategies. Once new rivals enter their local markets, the new regs allow the Bells to offer long-distance services, which--you guessed it--they plan to bundle with other options such as cellular calling. They may also improve their images. "No more putting customers on hold when they call," pledges Brian R. Lane, marketing vice-president for Nynex Corp. "Our service quality should improve dramatically, and that's the best marketing strategy."
Phone company executives routinely say they don't want to inundate consumers with ads and telemarketing calls. But let's face it: Brand awareness will become crucial in a market where some 30% of consumers still think they get local phone service from AT&T. (No one does.) Notes Thomas Elliott, a managing partner with Arthur Andersen & Co.: "For the first time, this industry is going to have to communicate."
Groan. Get ready to take your phone off the hook during dinnertime.BY CATHERINE ARNST IN NEW YORK, WITH MARK LEWYN IN WASHINGTONReturn to top
ASSAULT ON THE BABY BELLS
Long-distance companies' marketing plans
AT&T Will initially resell local service purchased from local phone companies.
By mid-1997, it will market mobile-phone service, too. Other services:
satellite TV, Internet connections.
MCI Has built local calling networks in 25 cities, but it still needs a link to
individual homes. To get that, it also will start to resell local phone
service. Other services: paging, satellite TV.
SPRINT Has partnerships with three cable-TV operators and Teleport, an
alternative local phone company that by yearend will offer consumers phone
service over their cable lines. Other services include digital wireless calling.
Return to top