Phone companies campaign for customers
It is an oddly familiar scenario complete with a gaggle of candidates, a front-runner - and a host of unknowns. But these candidates are not running for president. AT&T, MCI, and GTE-Sprint are stumping for their share of the huge $45 billion long-distance telephone market.
Campaigning in selected spots around the country according to a preset schedule, the contest began in earnest Labor Day weekend. By Sept. 1, some 30 communities around the country had begun converting to equal-access service.
Equal access allows long-distance companies to compete on an even basis. It also means customers who chose one of AT&T's competitors will no longer have to dial extra digits. They simply pick the long-distance service they want and the local phone company does the rest.
For the minuscule number of consumers so far affected, equal access has been one of the most visible signs of the divestiture of the once-monolithic Bell system.
Many consumers have been bombarded by everything from expensive TV advertising to door-to-door salesman. For the long-distance phone companies, the battle is heated.
The first skirmish took place in mid-July, when a part of Charleston, W. Va., switched over to equal access. The largest competitors - AT&T Communications, MCI Communications Corporation, and GTE-Sprint - put on a media blitz to lure customers. MCI claims it got 17 percent of the market. Sprint says it got 6 percent. AT&T says that of the 60 percent of Charleston consumers who selected a phone company, nearly two-thirds picked AT&T.
Perhaps the most significant figure, however, is the 40 percent of potential customers who did not choose a company - despite the heavy advertising. This could be a windfall for AT&T since in many cases nonchoosers will be assigned to it.
''Inertia and confusion are on AT&T's side,'' says Linda Haase, spokeswoman for Allnet Communication Services Inc. ''We are fighting inertia and confusion.''
Allnet did not formally participate in the Charleston showdown, but it did make a concerted effort in Minneapolis - an area Allnet's Haase and others have called the ''New Hampshire primary of equal access.''
When the first part of the city switched over to equal access in mid-August, Allnet grabbed a 5 percent share. MCI topped the list of AT&T competitors with 20 percent of the market; Sprint got 9 percent. AT&T claims to have retained 76 percent of those who chose a company - or half of the total.
Beyond these two cities, however, figures are hard to come by. MCI claims it has increased its market share in all the equal-access cities, although the results are not uniform.
Donald Campbell, senior manager of MCI public relations, says the company is doing well in Detroit (21 percent of the potential customers), Cleveland (19 percent), and New York City (15 percent). But the company has not fared as well in Mobile, Ala., or Norfolk, Va., gaining about 5 percent of potential customers in each.
''I think we will end up between 10 and 15 percent by Sept. '86,'' says Mr. Campbell. Before equal access, MCI had a 3.5 to 4 percent share of the domestic long-distance market.
''So far we have been tremendously pleased with the response we've been getting,'' says Haase of Allnet. The company, which had about 0.5 percent of the domestic long-distance market before equal access, currently has enough capacity to accommodate four to five times that amount, she adds.
But such customer counts are misleading, analysts say.
''It's really too early to say much about anything,'' says Glenn Parfumi, first vice-president and telecommunications analyst with Dean Witter Reynolds Inc. The number of customers reveals nothing about their volume of long-distance calling. Nor does a higher market share necessarily mean higher profits in this intensely competitive industry, he says.
Then too, the small areas of cities thrown open to equal access may not be representative of the city as a whole, telephone officials say. Here in Chicago, for example, only two switching centers have been converted so far, serving only about 5,000 customers.
The real struggle for the companies is not to capture a larger share of the market, but to make a successful transition from rules-driven to market-driven competition, says Alice Bradie, senior telecommunications analyst with E. F. Hutton.
AT&T's position is assured, she says, since it is already competing on that basis. As its much smaller competitors become increasingly involved in equal-access competition, they will no longer have the cushion of federally mandated discounts on the cost of hooking into local telephone networks, she says. Profits for MCI and Sprint are going to be squeezed at least through 1985, she adds.
For most of the other 400 or so interstate long-distance companies, analysts say they believe the future is even bleaker. A long and difficult shakeout of the industry is beginning that will leave only AT&T, MCI, Sprint, and at most two other nationwide long-distance companies, they say.