Long-Distance Phone Firms in Race for Area Customers
Until two summers ago, no one had ever witnessed such a spectacle--the hawking of long-distance telephone services as if they were so many brands of toilet paper, toothpaste or soap.
Since that pioneer campaign in the isolated West Virginia capital of Charleston, this strange marketing phenomenon has spread across the nation at a quickening pace as local phone companies upgrade the switches that enable customers of long-distance carriers to originate and complete their calls.
Once converted, these switches provide all carriers the same quality of connection and ease of access to their customers as was previously enjoyed only by American Telephone & Telegraph, builder of the nation’s basic phone network.
This summer, the competing long-distance carriers are focusing their biggest sales efforts on Southern California, where by Sept. 1 about two-thirds of all phone lines will be hooked to the computer-controlled switches, which allow customers to reach whichever carrier they wish to designate merely by dialing 1.
Until this “equal-access” programing is installed, only AT&T; customers are so favored. In contrast, customers of MCI, GTE Sprint, Allnet, US Telecom and ITT Longer Distance, among others, must use push-button phones--not rotary-dial phones--and must enter a finger-daunting string of digits to reach their carrier.
In June, July and August alone, Pacific Bell will convert 1,193,581 phone lines in the Los Angeles area, prefix by prefix, to equal-access service. Communities affected include some or all of Pacific’s customers in Agoura, Arcadia, Bell, Calabasas, Canoga Park, Compton, Culver City, El Monte, Hawthorne, Hollywood, Huntington Park, Inglewood, La Crescenta, North Hollywood, Northridge, Pasadena, Reseda, San Gabriel, San Pedro, South Gate, West Los Angeles, Wilmington and 75 prefixes in Los Angeles.
General Telephone of California, which converted only 12.8% of its 2.8 million lines last year, will boost that to 63.7% this year and to 91.8% by the end of next year.
“With equal access, customers can use any one of a number of long-distance companies without having to dial any more digits than they do now with AT&T;,” said Carolyn Webb de Macias, a Pacific Bell area vice president, “and they can use either a Touch-Tone or a rotary-dial telephone.”
Under equal access, other long-distance carriers can still be used, besides the designated primary carrier, by dialing 10 and a three-digit code to identify the company--288 for AT&T;, 222 for MCI, 777 for GTE Sprint, 444 for Allnet, 488 for ITT, and 333 for US Telecom (which on July 1 will merge with GTE into US Sprint, retaining Sprint’s code).
The equal-access phenomenon resulted from the breakup of the Bell System on Jan. 1, 1984, when AT&T; was divested of its local phone companies in settlement of a long-standing antitrust suit. In exchange, AT&T; kept the long-distance service, which it entrusted to a new subsidiary, AT&T; Communications, and won the right to enter the unregulated information market from which it had been barred by the Federal Communications Commission.
The Bell System, operating as a fully regulated monopoly, was designed to work only with AT&T; equipment--not with that of MCI, whose entrepreneurial zeal opened up long-distance service to increasing competition, or with that of any of the other “alternative” carriers that followed MCI’s lead.
Ordered Equal Access
Consequently, in order to enhance competition, the settlement judgment specified that the former Bell operating companies begin offering all carriers who want it equal access to their customers by Sept. 1, 1984, and complete conversion of at least two-thirds of their lines by this September.
Pacific Bell converted 36.6% of its lines last year, expects to have about 75% converted by September and 99% by 1992. Consequently, a sizable number of Californians already have made their choice of a preferred carrier.
In the months since Charleston pioneered equal-access service--a distinction it obtained by the fact that the Chesapeake & Potomac Telephone Co. of West Virginia happened to have a converted switch ready to go in July, 1984--the rules of the game have changed significantly.
These changes have put more pressure on the phone customer to designate a primary long-distance carrier. As of May 31, 1985, the FCC decided that local customers who fail to designate a preferred carrier could no longer simply be left, by default, with AT&T.; The so-called default plan had been justified as reducing confusion, but AT&T;’s competitors roundly criticized it from the outset as unfair to them.
Now, under FCC order, customers who fail to designate a primary carrier are assigned to one at random by their local phone company. Before the rule change, only about one-quarter of the customers designated a “dial 1” carrier--AT&T; or another--and the remaining three-quarters who made no choice remained with AT&T.;
Most Make Own Choice
Under the pressure of the allocation plan, however, up to 92% are making their own choice now, according to Whitey Bluestein, director of external affairs for MCI’s Pacific division. “Had this system been in place sooner, we would have done better,” said Robert Breen, MCI’s divisional vice president for sales and marketing.
That sentiment is echoed by AT&T;’s other competitors, but it came nearly halfway through the crucial and unique two-year equal-access marketing opportunity, which was to make the long-distance market truly competitive.
“There is competition,” said Anne Rice, associate product manager for equal-access service at GTE Sprint, “but there has not been an equal ability to compete.”
As the conversion process has shaken down, telephone customers now receive ballots and an “Easy Access Shoppers Guide” from their local carrier about 90 days before the changeover. The package includes answers to such basic questions as: “What if I change my mind about my choice?” (Answer: “Contact the new long-distance company or the Pacific Bell business office. After the easy-access introduction date in your community, a Pacific Bell charge of $5.26 per line will apply.” Incidentally, customers who made no choice and were allocated to a carrier have six months after conversion to pick another, if they wish, without paying a charge.)
The guide was assembled by the state Department of Consumer Affairs and the following consumer-oriented organizations: American Assn. of Retired Persons, California Coalition of Hispanic Organizations, Consumer Action, Consumer’s Checkbook, Consumer Federation of America and Telecommunications Research and Action Committee.
Guide Compares Features
The guide compares features of 24 competing long-distance carriers active in California’s equal-access market. Not all of the carriers offer residential service, however, and rarely do more than nine compete for dial-1 subscribers in any given area. (In the Northern California city of Chico, there were no equal-access challengers to AT&T; when conversion took place last year.)
To make an informed choice, consumers have only to obtain the key data on rates, which vary considerably and change frequently. Pacific Bell’s recommendation, included in its equal-access package: “Consider your own calling needs and habits in choosing. For questions about services or specific rates on calls you commonly make, call the companies at the numbers listed in the guide.”
One method suggested by Consumer’s Checkbook is to review several past bills, extract typical long-distance calls and request rate quotes for them from each of the carriers being considered.
Meanwhile, phone customers whose prefixes are about to convert to equal-access service often find themselves flooded with mailed sales pitches from the competitors. All competitors seem to favor direct-mail advertising to approach residential and small-business customers, often backed up by a telephone-marketing campaign.
“Realistically, it has been the only way to reach people,” said Anne Rice of GTE Sprint.
Competitors Stress Price
The sales packages have been modified from time to time, but the basic message from AT&T;’s competitors has remained the same--”pounding away at price,” said Rich Burk, AT&T;’s equal-access director for the Western states. “That’s been the biggest thing that we’ve had to deal with.”
That will begin to change, however, after AT&T; lowers its interstate tolls by nearly $2 billion on June 1 and as its competitors begin paying the same rate as AT&T; for their local connections.
Nor will equal-access competition abate much come September, predicted MCI’s Bluestein. One-third of the nation’s telephone lines will continue to favor AT&T; over its competitors, he noted, and many secondary urban and suburban markets are not scheduled for conversion until later in the decade, and some rural areas may never get equal-access service.
Nonetheless, a new market will likely emerge in equal-access areas--a continuing quest to replace competitors as designated dial-1 carriers. Another new marketing opportunity will involve seeking to persuade customers to bypass their dial-1 carrier by dialing 10 and the alternative carrier’s three-digit identification number.
“That’s a new market,” AT&T;’s Burk acknowledged. “It appears to be certainly something more people are aware of; a lot of calls are being placed with other companies, for various reasons, using the three-digit identification codes. The volumes are higher than expected.
“We’re still evaluating how to utilize that code,” he said.
So is MCI, said Breen. One approach would be to advertise the company’s code, 222, as a way to compare its service to that of the dial-1 carrier, he said. Another might be to market 222 dialing to customers who may want to use MCI for most long-distance calls but, for whatever reason, want to retain AT&T; as their dial-1 service.
At GTE Sprint, where the impending July 1 merger with US Telecom is consuming much management energy, the company is just beginning to focus on this emerging new competitive era, or what Anne Rice dubbed “Life After Equal Access.”
