Companies line up to be your long-distance telephone service
This is the year that consumers choose which long distance phone service they would like. And now is the time these companies are going all out to catch, and keep, their attention.
* Sprint, the discount phone service from GTE, recently simplified its pricing structure.
* The American Telephone & Telegraph Company (AT&T) told the Federal Communications Commission last Friday that it could reduce long-distance charges by more than a previously announced 10.5 percent if pending access charges take effect as planned on April 3.
* MCI Communications Inc., another long-distance company, has been moving full speed ahead on various services including electronic mail, mobile telephone service, overseas calling, and now credit-card phones.
Right now, price is the competitive factor in the long-distance market. But as September draws closer - the month when divestiture will begin to affect long-distance users - service will come to the forefront.
In September, the local phone companies will start to ask customers to choose a long-distance carrier. In some cities there may be as many as 20 choices. The local companies will also start giving all long-distance companies ''equal access'' to local lines. That will mean that customers will no longer have to push 23 digits on their phone to use an alternative to AT&T. And they won't need a push-button phone to get an AT&T competitor. Customers using an alternative will notice improvements in the quality of their connections, because all long-distance companies will be able to use the same kind of switching at the local companies that AT&T uses now.
''As the world gets equal, . . . (companies') attitude, services, and quality'' will play a bigger role, says Gary Tobin, spokesman for MCI Communications Corporation, which has 3 percent of the long-distance market.
''The reason people look at and purchase an alternative is because of the price advantage,'' says Read Clarke, product manager at Sprint, the No. 3 company in the long-distance business.
Sprint had that attitude in mind when it announced a simplification of its pricing structure at the end of December. It has eliminated a start-up fee and monthly service fee; made rates to all cities the same; combined its business and residential services into just one service; and is now basing all charges for calls on volume - the more calls rung, the bigger the discount. These methods will stay in place, but actual charges are likely to change if access fees become a reality.
Right now, access fees are the most hotly debated topic in this business. There are two kinds of access fees in the works - one that all long-distance carriers have to pay local companies and one that customers would pay local companies for access to long-distance companies. The two kinds of fees were supposed to take effect in January, but the FCC has postponed them until April 3 . Two bills in Congress would either postpone them further, or eliminate them altogether. The concern is that all consumers won't be able to afford the fees.
AT&T is highly interested in getting the fees in place. AT&T has kept long-distance rates high to cover the more expensive cost of local phone use. If consumers paid that artificially high cost in an access fee to local phone companies instead of in long-distance bills, AT&T would be able to lower its long-distance rates.
But, AT&T would also like that second access fee, the one long-distance carriers have to pay, to take place. Right now, AT&T competitors don't pay as much in access fees, giving them a price advantage. The new access fees would close that gap. Understandably, companies like MCI and Sprint aren't wild about this access charge, and argue that they shouldn't have to pay it until they are on equal footing with AT&T, a process that begins in September and will take two years to work out.
Access fees or not, ''AT&T does not plan on being the cut-rate carrier,'' says John Smart, vice-president of market management for AT&T Communications, the new name for the long-distance company. ''We got where we are by being the high-quality, reliable carrier.'' AT&T is experimenting with a few discount plans, but intends to keep its customers with services - operators, overseas calls, and communications planning for businesses.
The aim of the alternative carriers is to continue to undercut AT&T in price - whether by a little or a lot. They say they can do it because they operate more efficiently than the telecommunications giant and have the latest equipment. They will also try to match the AT&T services as closely as possible and come up with innovations of their own.
The fight for customers may seem intense now, but wait until this summer. ''The nearest analogy is a political campaign,'' says Andrew Margeson, vice-president of marketing for a new entrant in this business, Lexitel of Birmingham, Mich. He sees long-distance business shaping up like the airlines, with national, high-quality companies, regional companies, and discounters.