Bundle of Discounts for Small Businesses
One of the promises of deregulation was that a competitive marketplace would allow telecom carriers to offer a range of services at lower prices.
Packages containing myriad services have yet to become a reality for residential users. But long-distance providers are using these packages--known as bundles--to aggressively court small and medium-sized businesses. Bundled services appear on the same bill and often come at hefty discounts.
Sprint and MCI WorldCom and wireless start-ups WinStar and Teligent have introduced plans they hope will ease the Bells’ stranglehold on the local market and reduce prices for long-distance and Internet access services.
Behind this effort is the realization that small and medium-sized businesses--those that have two to 500 workers--will play a crucial role when the local market becomes more competitive.
“The growth rate of small businesses is high, and they are generating a lot of revenue,” said Mike Lauricella, an analyst with Yankee Group, a Boston-based market research firm. “The economy dictates that these people will become more and more dependent on telecom services.”
To entice small businesses, long-distance providers have cut rates and simplified pricing plans. Depending on the length of their contract and the volume of calls they make each month, firms can save from 6% to 42% a month on their long-distance calls, according to a recent survey by the Washington-based Telecommunications Research and Action Center.
Several carriers are moving away from strict monthly minimums and long-term contracts.
This month, Sprint unveiled a calling plan that allows small businesses to change their mix of services whenever they like. The service also has a flat rate for national and international calls that varies depending on which plan a business chooses and the business’ call volume.
The plan has a monthly minimum of $50. Based on the amount they spend each month, businesses receive bonuses that are automatically deducted from their bills.
The plan does not include local service but will add Internet access and wireless service next year, said Todd Townsend, director of marketing for small business at Sprint.
AT&T; offers a plan that includes long-distance, toll-free, Internet access and wireless services on the same bill--without monthly minimums. AT&T; plans to add local service next year in some areas, including Los Angeles, said Joseph Ronan, AT&T; marketing director for metro markets.
MCI and WorldCom, which this year completed their merger, offers bundles with both local and long-distance service. Monthly minimums for this plan vary, and businesses can sign monthly or long-term contracts.
Customers also get volume discounts based on their use of the services in the bundle.
“The key is bundling local and long-distance services together,” said Cardi Prinzi, a regional vice president at MCI WorldCom. “Bundling other products and services without local service doesn’t give bang for buck, because most small businesses bill as much for local as they do for long-distance.”
Wireless providers WinStar and Teligent have moved to take advantage of the absence of competition for local service. Wireless service is provided through antennas attached to the roof of a building that send a signal to a base station hub and joins a local providers’ network, which completes the call.
Vienna, Va.-based Teligent recently began offering service to small and medium-sized businesses in Los Angeles and 14 other markets. The company, which is headed by former AT&T; President and Chief Operating Officer Alex Mandl, plans to introduce service in 25 additional markets by the end of next year.
Because it’s cheaper to build a wireless network, these carriers can offer services at a reduced cost.
To determine rates, Teligent averages two months of telephone bills and then slashes the total by 30%. Companies agree to this monthly limit for local, long-distance and Internet access services.
They can sign a one- or two-year contract for the 30% rate reduction or a month-by-month contract for a 20% rate reduction, said Rick Hanna, Teligent division president of domestic sales and operations.
WinStar also offers several plans that provide local, long-distance and Internet access service, including one that provides a free year of local service to customers who sign a three-year contract. But that plan is available only in specific buildings.
Although it does little advertising, WinStar has signed on 12,000 customers nationwide since it rolled out its service three years ago. WinStar Chairman and Chief Executive Bill Rouhana attributes this growth to a hands-on marketing approach that includes offering free bagels to tenants in the 3,500 buildings it serves nationwide.
Rouhana says pent-up demand for competition in local markets has helped his company surpass his original growth projections. Although WinStar had planned to be in 30 markets by the end of next year, it has already achieved that goal. It hopes to provide service in about 8,000 buildings by next year.
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Times staff writer Jennifer Oldham can be reached via e-mail at jennifer.oldham@latimes.com.
