AT&T;’s Rivals ‘Anxious to Get Even’ : Baby Bells Plan Toll-Free Network

American Telephone and Telegraph Co., the giant telecommunications concern, is facing the first challenge to its 20-year monopoly in providing toll-free long-distance service to commercial customers.

The local Bell telephone companies, entering their fourth year of independence from AT&T;, say they have already spent more than $500 million to develop jointly a complex computer database and network of telephone exchanges that will rival the revolutionary system AT&T; launched in 1967.

AT&T; spun off the seven “Baby Bells” in January, 1984, after a court ordered the breakup of the Bell Telephone System on antitrust grounds.

AT&T;’s system, which established the first toll-free “800 numbers,” changed the way thousands of companies did business as they learned they could boost profits by paying AT&T; to give customers a free connection to their sales representatives, maintenance departments and reservation desks.

Toll-free traffic has grown phenomenally, reaching more than 4 billion calls this year, compared to only 7 million in the first year of the service, according to Ralph Dobriner, a spokesman for the company.

Despite the rapid deregulation of the U.S. telecommunications industry since its divestiture in 1984, AT&T; is the only carrier capable of supplying toll-free service.

Wall Street and industry analysts value this monopoly at $4.5 billion to $5 billion a year--more than the combined revenues of AT&T;’s two largest competitors, MCI Communications Corp. and US Sprint Communications Co.

But AT&T;’s rivals plan to use the Baby Bells’ new network to chip away at this lucrative market. The Baby Bells, restricted from carrying long-distance traffic, will charge the companies a fee for each toll-free call they pass on to long-distance carriers.

“The Bells are really anxious to get even with AT&T; on this one,” said Bruce Hyman, a telecommunications analyst with Fitch Investors Service, noting that they lost a court battle last year in which they sought to force their former parent to share its 800 technology.

So are AT&T;’s rivals. They see 800 service as a chance to get a foot in the door at accounts currently controlled by AT&T; and gain a larger share of the lucrative corporate market.

“Companies that use 800 service often want to buy other services from the same vendor,” said Amanda Weathersby, director of product management for US Sprint, the Kansas City, Mo.-based joint venture of GTE Corp. and United Telecommunciations Inc.

Growing Market

Moreover, the toll-free market is growing at about 20% a year, compared to 10% a year for standard long-distance services, according to analysts, carriers and the Baby Bells.

To get an early jump, several Bell companies, including Denver-based US West Inc. and Atlanta-based BellSouth Corp., have already announced a limited 800 offering for the early part of next year.

But this service will not be as sophisticated as AT&T;’s, with a major drawback being that customers will have to change their 800 number if they switch from AT&T;’s network. This is an important obstacle for any company with a specialized toll-free number that spells out an easily remembered word or phrase.

However, this limited offering will be phased out for most customers as an AT&T-equivalent; 800 system is deployed, said Gloria Everett, division manager of network planning for Bell Communications Research (Bellcore), the research and develop arm of the Baby Bells. This network will allow companies to use the same 800 number regardless of which carrier handles their long-distance traffic, she said.

Bellcore is overseeing the development and deployment of the 800 network for the Baby Bells, the most ambitious project the unit has undertaken since its formation in 1984.

Everett said the first regular Bell-provided toll-free service will be available in Chattanooga, Tenn., in late 1987. By the end of 1988, she added, it will be offered throughout most of the country.

Analysts estimate that the Baby Bells’ total cost of implementing 800 service could approach $1 billion. They note, however, that the companies will use the same technology to offer other new revenue-generating services.

For their part, MCI and US Sprint say the Bellcore-designed network will let them offer services as good as or better than AT&T;’s but priced at a discount.

“We’ll initially find the cards stacked against us,” said John Hauser, a spokesman for Washington-based MCI. “But we believe we’ll have a good product that should be priced about 10% less than AT&T.;”

Some analysts, however, question whether long-distance companies will succeed in courting 800 customers away from AT&T.;

“Most companies are happy with their toll-free service,” said Glenn Pafumi of Dean Witter Reynolds. “If MCI is a little cheaper, then AT&T; will lose some customers. But I don’t think the numbers will be too significant.”