800-Number Customers Free to Switch Carriers : Communications: Loosening of rules sets off a scramble for business. It should stimulate demand, spawn more uses and lower prices.

One of the last vestiges of the old Bell telephone system will crumble today when businesses--for the first time--will be allowed to switch long-distance carriers without losing their toll-free 800 numbers.

With that in mind, long-distance carriers have stepped up efforts to compete for a greater share of the estimated $7-billion market in 800-prefix telephone lines, which have become a convenient marketing tool for industry and government.

The loosening of federal restrictions on moving 800 numbers is expected to further stimulate demand for toll-free service, spawn more uses for it and result in competition that could lower prices. Competition in telecommunications has been growing for more than a decade, when a federal judge ordered the breakup of the Bell telephone monopoly.

“The way society is moving, there will be more and more applications for 800 numbers, like people using them to order computer games for television or placing orders for food at the supermarket,” said Steve Martin, a partner in the Washington office of the consulting firm Deloitte & Touche.

The debut of 800-number portability was delayed for months while the Federal Communications Commission studied the potential impact of massive toll-free service switching on the telephone system.

Several groups, including the California Bankers Clearing House Assn., told the FCC they feared that abruptly freeing companies to switch carriers without extensive pretesting of such activity could compromise the reliability of the nation’s telephone system.

The phone system has been hit by more than 90 major outages in the last year, including the disruption of telephone lines serving airports, nuclear facilities and military sites because of telephone computer glitches, power losses and other maladies, according to the FCC.

“Whenever you have massive change on this scale, there is always the likelihood that there will be some disruption,” said Richard Nespola, president of Management Network Group Inc., a Leawood, Kan., telephone consulting firm.

But companies appeared eager to capitalize on their newfound freedom.

MCI Communications Corp., which has been touting its 800 service and criticizing competitors in a series of newspaper and television ads, announced this week that 50 companies are switching their toll-free phone traffic to MCI. The newcomers represent a total of $170 million in new revenue for MCI, which says it has captured about 17% of the 800-number market.

Meanwhile, Sprint Corp. officials bragged that they have received more than 1,000 calls from competitors’ customers inquiring about switching to their 800 service.

AT&T;, which claims about 75% of the market, has fought back by attacking the reliability of its long-distance rivals in TV and print ads. It boasts that 10,000 small-business customers have recently agreed to convert $140 million worth of toll-free service to AT&T.;

Toll-free numbers encourage more incoming calls because the sponsoring companies, rather than their customers, pay the charges. Before the FCC passed rules last year allowing them to change carriers without penalty, businesses risked losing “signature” 800 numbers if they switched.

Paris Chocolates Inc., a 5-year-old Montclair, N.J., candy distributor, says it decided to switch to AT&T; from a smaller long-distance carrier after AT&T; offered a joint marketing agreement to help promote the company’s toll-free line: 1-800-CANDYBAR.

“800-number portability is going to level the playing field and create more competition in service features, functions and costs,” said consultant Martin. He noted that many carriers are already bundling sophisticated automatic call-answering or routing features with their toll-free service.

Diebold Inc., a Canton, Ohio-based maker of electronic security products, says it is switching its toll-free business to MCI.

But the San Francisco-based financial services firm Charles Schwab Inc. plans to keep its 60 toll-free lines divided among two long-distance carriers. Kimberly Quality Care, a Kansas City, Mo.-based provider of home health care services, said it will parcel out its 175 toll-free lines among a number of carriers.

Dialing Toll-Free

Since it was launched in the mid-60’s, toll-free telephone service has exploded as businesses and other concerns have promoted 800 numbers as an effective marketing tool.

Calls placed to 800 numbers (in millions)

1967: 7 million

1992: 11,720 million

1992 toll-free long-distance market share (based on revenue)

Sprint: 7%

MCI: 17%

AT&T;: 73%

AT&T; holds the lion’s share of the 800 market, but an easing of federal rules is expected to spur heated competition.

Source: AT&T;, industry estimates