Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Fri, May 8 1992 Date: Fri, 8 May 92 05:31:37 EDT Message-ID: 05-08 0000 BONUS: Phone fight gets fierce USA TODAY Update May 8-10, 1992 Source: USA TODAY:Gannett National Information Network About a decade has passed since the federal government opened the long-distance phone industry to competition. But you wouldn't know it the way the industry's Big Three are fighting for a fatter slice of the $55 billion-a-year market. HOW HAVE THEY ATTACKED EACH OTHER? Just look at recent finger-pointing advertisements from behemoth AT&T and rivals MCI Communications and Sprint: AT&T increased its sniping at MCI's ingenious Friends & Family 20%-discount-calling plan, comparing MCI to a foreboding corporate Big Brother who requires customers to disclose friends' names to qualify. MCI - which has lured 5 million new customers with the 14-month-old program - retaliated with a tongue-in-cheek ad portraying AT&T as HT&T, or Humongous Telephone & Telegraph. Sprint ran counter ads against both. WHERE IS THE LATEST BATTLE? The Big Three have opened fire on another front, the growing small-business market. MCI launched Friends of the Firm, an offshoot of Friends & Family, on April 7. AT&T countered April 13 with Partners In Business, and Sprint responded April 28 with Business Clout. Confusing? You bet. Cutthroat? Undoubtedly. About to end any time soon? No way. HOW DO THE FIRMS FEEL ABOUT THE COMPETITION? "This thing is never going to be over," says Merrill Tutton, president of AT&T Consumer Communications Services. "It's a marathon. At some point, you may pause to catch your breath. But you have to keep running. You don't quit," he says. Hundreds of competitors already have. In 1987, there were 1,500 providers of long-distance service. Now, there are only about 475. HOW BIG HAVE THE AD BUDGETS BEEN? The fight has MCI, with 16% of the market, and Sprint, with 9.5%, taking on AT&T and its huge 63% share. The Big Three's costs for television commercials, billboards and magazine and newspaper ads could balloon to a combined $750 million this year - 35% more than the $553 million advertising tracker LNA:Arbitron Multi Media Service says they spent last year. WHAT WILL THE EFFECT OF THE FIGHT BE? The Big Three's escalating marketing war could backfire. They've bombarded consumers with so many plans and offers that many consumers are too shellshocked to do anything but stick with their current long-distance carrier. AT&T offers more than 70 consumer and business long-distance telephone programs and 25 discount offers, MCI has 70 long-distance plans and 35 discount offers, and Sprint had 70 services and 23 discount offers HOW DO CONSUMERS REACT TO CHOICES? "I thought things were going to get more simpler. Instead, it's getting more confusing," says Robert Self, author of Long Distance for Less. "If you offer too many choices and prices, it freezes people from making a choice." Mark Langner of industry consultant TeleChoice says consumers have grown frustrated by the mixed messages. "There's still a great amount of misunderstanding among consumers. ... Many are saying it's not worth the hassle to switch carriers," he says. HOW IS MCI DOING? MCI was able to boost market share last year. Most of the growth came from Friends & Family, a hugely successful program in which customers recruit other customers in networks that give discounts to all. But Friends & Family's fast growth may be over, analysts say. That would play well for AT&T, which benefits from consumer inertia simply because it has such a large share of the market. ARE RESIDENTIAL CUSTOMERS CHANGING CARRIERS? Most residential customers - 45% of the long-distance market - don't change carriers unless forced to think about their phone service, such as when they move. Since 20% of U.S. residents move each year, that's still a sizable niche. So is the market for the nation's 10 million small businesses, which account for 15% of overall long-distance calls and are more likely to change to improve service or reduce costs. (Medium-size and large companies make up the rest of the business.) HOW HAS AT&T KEPT CUSTOMERS? AT&T knows how to fight. In 1989, it was the world's biggest ad spender, shelling out $796 million to bolster market share that had fallen to 64% from 84% in 1984, the year the long-distance market was deregulated. Says John Bain, securities analyst for Raymond James: "AT&T has shown an ability to slam the door on market-share loss. The warning shot it fired at MCI and Sprint that they better not get too aggressive - at least on pricing - seemed to work." ARE THINGS GETTING UGLY? But that was then, and this is now, notes marketing consultant Allen McCusker of Canaan Parish Group. "All three are into guerrilla marketing warfare right now over price and service," says McCusker. "And it's a phenomenal battle." If that is guerrilla marketing, the tactics are more like three-way chess. One company makes a move announcing something new, the others counter with something similar. Ads contain plenty of backbiting. WHAT IS MCI'S STRATEGY: Says Sprint consumer-marketing chief Tom Wiegman: "I've seen more than a few marketing game boards over the years before I joined MCI, but this (the long-distance phone war) is one of the most intriguing." MCI's Price says his company has to be aggressive on all fronts - including the market for big corporate clients. "We've learned that if we focus on one segment of the market, AT&T leverages its efforts there," he says. "So we need to be everywhere so AT&T doesn't have a safe harbor." WHERE IS THE FOCUS? The three carriers have also unveiled increasingly sophisticated services - user-friendly revenue generators such as calling cards that feature everything from three-way teleconferences to soap-opera updates. But cheap calling rates remain a prominent focus: MCI gave its Friends & Family customers a 40% discount this month. AT&T then weighed in with a 40% June discount for its Reach Out America customers. WHAT TYPE OF CUSTOMERS ARE THEY AFTER? The real battle is for heavy long-distance users. Fifty percent of consumers make less than $5 in monthly long-distance calls - not enough to warrant switching carriers. Unless you make more than $10 in monthly calls, most carriers don't even want your business, says author Self. Even for those consumers, the savings gained by switching companies may be only pennies, says Gene Kimmelman of Consumer Federation, a consumer-advocacy group. Bonus Editor: Ed Kelleher. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM