Magazine article Insight on the News

Local Telcos Toss First Stone at Long-Distance Goliaths

Magazine article Insight on the News

Local Telcos Toss First Stone at Long-Distance Goliaths

Article excerpt

The days of phone companies spending billions on research and development are over. Telecommunications companies are taking a marketing-oriented approach to business.

Ameritech Corp. has no long-distance customers, no revenues from that service and no idea when the Federal Communications Commission, or FCC, will answer its petition to offer long-distance phone service from its Chicago base of operations. But it does have 500 employees working for its long-distance business, putting together marketing strategies and planning operations.

Not many people know it, but the $13 billion phone company has been planning its entry into the long-distance market for more than two years. "We're ready to go to market as soon as the FCC gives us permission," says Doug Whitley, president of Ameritech, in an exclusive interview with Insight. Companies such as Pacific Bell say they will follow Ameritech's lead this spring.

Ameritech does not necessarily want to go head-to-head with giants such as AT&T, MCI, Sprint and other established carriers. Rather, it will use its entry into the long-distance market as a wedge against long-distance companies entering its local market, which spans Indiana, Michigan, Wisconsin, Ohio and Illinois. The company, Whitley says, will offer Internet, local telephone, long-distance and cellular services in one package for a set price.

Whitley is a realist, however, acknowledging that FCC approval is by no means assured. The stakes are high -- and the lobbying has been fierce. "Until Ameritech feels the stick of real, operational, local competition, they should not be offered the carrot of long distance," says Heather Gold, president of a Washington-based group lobbying against the company. Opponents filed a complaint with the FCC in February that forced Ameritech to resubmit part of its proposal, a costly procedural delay.

Whitley, of course, disagrees. "Those people who would choose to try to keep us out of the long-distance market keep clinging to the fact that we still have the dominant share of the market in the states in which we operate," Whitley says. "But what is an appropriate level of competition? How many customers do we have to bleed before they are satisfied? Our theme is let the marketplace rule. Regulators should get out of the way."

Competitors such as MFS Communications offer local phone service in Ameritech's operating market, as Whitley likes to point out. The FCC wants to ensure competition in local markets before allowing Baby Bells to offer long-distance services.

In addition to the FCC, however, Ameritech must secure approval from commerce commissions appointed by governors in all 50 states -- a bone of contention for the company. "I don't think of them as commerce commissions," says Whitley. "They are more like anticommerce commissions." Those are strong words from the former politico and Cabinet adviser to Illinois Gov. James Edgar, a Republican.

Strong words and bluster aside, some market analysts believe it will be difficult for Ameritech to make money in the long-distance business and see the venture as a marketing sinkhole that will suck down millions of dollars. But Whitley is convinced telcos must offer a full range of services to survive.

"Sophisticated, international companies -- what do you think drives their phone bill?" Whitley asks. "It's not their local phone bill. The things they are going to be concerned about is the long-distance component, their data-transmission components, their networks and their Internet component."

The company probably will not compete aggressively in all 50 states. …

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