AT&T; Fighting to Retain Its Share of Long-Distance Market

A Pasadena resident answered the phone one recent Saturday evening to hear a sales pitch on behalf of AT&T; Communications’ long-distance service. “As you know,” he was told, “you are going to have to make a choice soon.”

Nearly half a million Southern Californians have already been asked to pick from among several long-distance companies that are moving into the once-exclusive domain of the late Ma Bell. In certain areas, these companies can for the first time make dialing long-distance as easy as it has been for AT&T; customers, who need only dial 1, an area code and a local number.

Consequently, AT&T; Communications, which inherited the Bell long-distance network, is fighting hard to hang on to its huge share of the market--and that explains its new marketing aggressiveness and the Pasadena phone call.

Though the Federal Communications Commissions opened the long-distance market to competition seven years ago, the monopolistic Bell System was never designed to accommodate outside carriers. As a result, their customers have had to endure cumbersome dialing and often tinny connections.

These disadvantages will largely disappear by September, 1986, as the government-imposed doctrine of “equal access” spreads across the nation, neighborhood by neighborhood, in the wake of the Bell System breakup. Pacific Bell and General Telephone of California began implementing equal access last August in Alameda and in Southern California only last Dec. 28. But the conversion pace is quickening.

“It’s a rolling ball picking up speed,” observed Carol Crane, director of sales for MCI’s Pacific division in Irvine.

While Pacific Bell estimates that just 5% of its Southern California telephone lines now enjoy “easy access,” the company’s term for equal access, it figures that by September more than one-third of its lines will have been converted. Both Pacific and General expect to have more than two-thirds of their lines converted by the end of 1986.

Still, the fragmentation of the equal-access market is hampering the marketing efforts of AT&T;’s competitors. While all competitors know which prefixes are to be converted on what dates, only AT&T; knows who the actual customers are and where they live, these companies complain.

“It’s very difficult and very hit-or-miss,” said Lisa Cramer, Los Angeles branch manager for Republic Telcom, a company offering communications services to businesses.

The FCC has agreed to hear complaints relating to equal access and could order modifications if it concludes that AT&T; Communications still has too marked an advantage.

The equal-access marketing effort begins 90 days before dial-1 service is to start in a particular area. Pacific and General alert customers and furnish them with lists of competing long-distance services. Those companies can then seek to “pre-subscribe” customers before dial-1 service starts.

In California and most other states, customers who do not make a choice retain AT&T; Communications as their dial-1 carrier. However, in Minneapolis and Omaha, both served by Northwestern Bell, such “default” customers are allocated among competitors according to the percentage of customers that did choose their service. In other words, if 5% of the customers selected Company X for dial-1 service, Company X would receive 5% of all the “default” customers.

AT&T; competitors are pressing the FCC to impose such an allocation system nationwide, while trying to persuade local phone companies to adopt it voluntarily. But AT&T; is just as adamant that the default system is fair. That debate is continuing before the FCC.

Meanwhile, under terms of a settlement of an antitrust suit with US West, Northwestern Bell’s parent, the company’s other two local telephone companies, Pacific Northwest Bell and Mountain Bell, will switch to an allocation system for areas converting to equal access after Aug. 1.

In any case, even after equal-access service begins, consumers have another 90 days in which to designate a preferred carrier at no charge, even if they “defaulted” to AT&T; Communications. Changes can be made later for a fee of $5.26 to compensate the local companies for reprogramming their computer-controlled switches to route the customer’s calls over the new carrier’s networks.

Consumers can continue to use more than one long-distance carrier, reaching those by dialing a five-digit company identification code.

AT&T; Communications’ present challengers for “dial 1” service in the Southern California market include: MCI Communications, GTE Sprint, ITT Longer Distance, SBS Skyline Service, Com Systems, Allnet Communications Services, Republic Telcom, TDX Systems and U.S. Telephone.

The best known, starting with the largest, are MCI, the company that pioneered long-distance competition; GTE Sprint; Allnet, and SBS Skyline, which is owned by IBM and Aetna Life & Casualty. All operate their own networks and offer service nationwide.

Microwave Network

U.S. Telephone became a major player last June 20, when it was acquired by United Telecommunications, which operates nine local telephone companies in the Southeast and Midwest. ITT Longer Distance has offered long-distance service since 1979, using mainly a microwave network.

Privately held Republic, which had sales of $100 million last year, and TDX Systems, a subsidiary of a recently denationalized British telecommunications giant, Cable & Wireless, which runs a number of public telephone companies abroad, specialize in providing communications services to business customers.

Com Systems, the only regional company in the group, offers nationwide service mainly to business customers in Los Angeles and Orange counties, parts of Ventura County and in Phoenix and Tucson.

Because equal access is progressing in such piecemeal fashion, these companies have found their marketing efforts hampered. Allnet, for example, offers service to both residential and business customers but is now marketing only to business customers. “We don’t have AT&T;’s advertising budget,” a spokesman said.

Focus Shifting North

AT&T;’s telemarketing effort, said Rich Burk, who manages the equal-access program in the Western region, uses the company’s corps of operators to contact business customers and solicitors to telephone residential prospects like the Pasadena man. But, Burk said, AT&T;’s focus is shifting north to US West territory, where the allocation system is replacing the default system, and this is diluting the marketing effort in Los Angeles somewhat.

Also, he acknowledged, the less AT&T;’s competitors seek to woo residential customers, the less AT&T; needs to do to protect its turf, since consumers who don’t choose a long-distance carrier will remain with it.

“What we’re doing, basically,” said Roger Holz, Los Angeles branch manager for SBS Skyline, “is asking our potential customers to compare services. One company is not right for everyone.”

2 Guides Published

Holz’s advice finds an echo among consumer groups, which recommend reviewing one’s own calling patterns and obtaining specific price quotations from the competing services. Two of these groups have published guides to equal access:

- California Public Interest Research Group, or CalPIRG, offers a 12-page pamphlet, “Equal Access for All: A Citizen’s Guide to Equal Access for the Los Angeles Area,” for $2 (1660 Corinth Ave., West Los Angeles 90025).

- Consumers’ Checkbook published the most thorough survey so far, a 70-page booklet, “The Complete Guide to Lower Phone Costs,” for $6.95 (222 Agriculture Building, 101 The Embarcadero, San Francisco 94105).