Regional Bells slow to enter long-distance market

Dec. 1, 1997

3 min read

Interexchange carriers such as Sprint and mci have taken a competitive lead over regional Bell operating companies when it comes to grabbing long-distance market share, according to The rbocs and Long Distance, a new market analysis report from The Insight Research Corp. of Parsippany, NJ.

The report indicates that interexchange carriers have had time to devise long- distance service strategies as many Bell companies face delays at the Federal Communications Commission (fcc) level related to local competitive pricing. The Telecommunications Act of 1996 requires that all of the Bell companies open their networks to competitors before the fcc grants approval for the companies to enter the long- distance market.

Forecasts made in the report are based on a long-distance market that includes inter-lata (local access and transport area) calling, intra-lata toll calling, and international revenues received by U.S. carriers on international calls. The report claims that, had the Telecommunications Act not passed, the total U.S. market for long-distance services would have grown from $92 billion in 1997 to $103 billion by 2002.

As a result of the act and Access Charge Reform Order 97-158 issued earlier this year, the fcc expects to see domestic long-distance revenues fall off by at least $20.5 billion over the same period. However, the market analysis comes to a different conclusion by taking into account the effects that lower access charges and long-distance calling prices will have on revenue. The market analysis also includes the international revenues billed to U.S.-based end-users, rather than in revenues retained by U.S.-based carriers.

As a result, the report estimates the total long-distance market in 1997 will reach $90.7 billion, with $11.2 billion making up the Bell companies` share of domestic service. The report estimates that in 2002, the market will reach $101.5 billion, with $19.5 billion of that amount made up by the Bells` long-distance domestic business.

International calling is expected to show the strongest long-distance market growth, with double-digit revenue growth slowing to single digits by late in the forecast period. In terms of services offered, toll-free calling is predicted to lead in market growth, followed by dedicated services, business outbound calling, and residential calling.

While long-distance opportunities look good for the Bell companies, the report predicts that their $11 billion in toll revenue will be halved by 2002. As a result, the Bell companies will have to emphasize price, simplicity, trust, and positive customer identification in their long-distance strategies, and target marketing at under-served small business and residential segments, the report says.

As the Bell companies try to enter the long-distance market, interexchange carriers are using the time gap to define the market and take a competitive lead, according to the report.

"They are preemptively beginning to bundle services for a one-stop shop, simplifying and lowering their prices. In addition, they are gradually taking their end-user billing business back from the lecs [local exchange carriers], and skirting prohibitions found in the [Telecom Act] against joint marketing of resold local and long-distance services," according to the report.

In the face of the early advantage, the Bell companies will have to consider substantial price cuts to make buyers shift to their brand, according to the report. Those telephone companies that get into long-distance quickly will have advantages, the report concludes.

The report is available for $3495 from Insight Research. For more information, contact Tara Mahon at The Insight Research Corp., Gatehall I, One Gatehall Drive, Parsippany, NJ, 07054; tel: (973) 605-1400; fax: (973) 605-1440; e-mail: tara@tm. insight-corp.com.u