Fight over, Pacific Bell parent set to dial into long distance. (Up Front).

SBC Corp. would appear well armed for a marketing battle among long distance phone companies in Los Angeles.

Parent of local phone company Pacific Bell, SBC overcame its largest and longest-running hurdle on Sept. 19 when the California Public Utilities Commission approved its application to offer the state's consumers out-of-state long distance services. (It is still precluded from offering intra-state long distance.)

Unlike its already-established competitors, San Antonio, Texas-based SBC has a customer list of almost every phone user in the area.

But competitors already have launched preemptive marketing programs, and SBC still has to convince customers to switch. Additionally, L.A.'s geographic spread and multiple ethnic groups are barriers for companies launching a major marketing campaign citywide.

"SBC has a huge leg up... because it has an instant database of everyone in L.A.," said Lee Kovel, chief creative officer of Kovel/Fuller LLC, a Culver City ad agency. "On the other hand, to build customer brand awareness is difficult."

The state PUC determined that SBC, which has been trying to enter the long distance market since passage of the Telecommunications Act of 1996, had met a "check list" of 14 federal requirements - key among them that the company relinquish its monopoly of local phone service.

Final approval pending

SBC still awaits approval of the Federal Communications Commission before it begins offering services, though most industry sources expect the company to be in the California market by the end of the year, competing with long distance carriers WorldCom Inc., Sprint Corp. and AT&T Corp.

"They've got a marketing advantage, using their monopoly power to talk to every customer who uses a dial tone," said Gary Morgenstern, an AT&T spokesman.

But SBC will have challenges in L.A.

"You have ethnic neighborhoods and affluent neighborhoods. You have a different hook for each group all in one city," said Rohit Shukla, president and chief executive of LARTA, a technology think tank in L.A. "It's not like New York, where everything is compact and you can mix messages and get away with it."

Hispanics, which make up one-third of the market in L.A., may be drawn to a campaign that focuses on family members, especially if they make international calls back home, Kovel said. Anglos may need a different appeal, he said.

SBC also faces customers who have a negative perception of the company.

"I don't know that I would switch to them," said Debora Mendoza, office services manager of Roland Corp. USA in City of Commerce. "It would take a lot for them to prove themselves. They've been known as a local phone company for so long. How reliable is their network? How big is it?"

Mendoza said she has had problems with SBC, such as keeping phone numbers unlisted or preventing long distance carriers from switching the company's service without its permission, a practice known as "slamming."

SBC's Pacific Bell has struggled to retain its local service customers, as well.

Earlier this spring, the PUC ordered SBC, which owns and operates the phone lines needed to provide local service, to lower its access rates, allowing more competition into the market. In August, AT&T began offering local phone service in California.

Competitors nevertheless think SBC's rates are still excessive.

"We encourage the commission to create safeguards," said Carolyn Berthelette, spokeswoman for WorldCom. "One of the key issues for us was the access rates that Pacific Bell charges competitors. They've been twice what they should be. This is a problem because it allows Pacific Bell to maintain a monopoly by driving up costs." Chet Misner, network manager at Americantours International Inc., a tour operator at Los Angeles International Airport, said his company switched to a smaller local phone company because it had lower rates.

"This is a difficult game," Shukla said. "Customer loyalty is something you cannot guarantee anymore."

Competitors bracing

Competing carriers have already come out with new marketing plans and special deals.

AT&T recently introduced a program in which a caller gets unlimited calls to any of AT&T's 50 million subscriber households for a flat rate of $20 a month.

"The reason we came out with that was to retain our current subscribers and also acquire new customers," Morgenstern said. "It wasn't specifically against SBC, but in anticipation of all the regional Bell companies getting into long distance."

Although WorldCom has had an L.A. presence for years, the company didn't hit California with full force until April 2002. said Carolyn Berthelette, a spokeswoman for WorldCom. At that time, WorldCom launched "The Neighborhood," a package of unlimited local, instate and out-of-state phone service for a flat rate of $50 a month, Berthelette said.

Despite WorldCom's recent bankruptcy filing and accounting issues, Berthelette said the response among California consumers to "The Neighborhood" has been huge.