Integrated network alliances look to be next big trend.

As rules ease, service providers search for new hookups

With regulatory restrictions easing, telephone companies are stepping up their efforts to form alliances with local vendors of multimedia information systems.

The phone companies are hoping to cash in on the exploding demand for integrated networks. Such networks allow businesses to transmit voice, data and images to various locations through state-of-the-art phone lines.

Integrated networks are being targeted by the telephone companies as an important source of new revenue.

Local carriers such as Pacific Bell and GTE California are already competing with smaller phone companies for network customers. Both Pacific Bell and GTE will also soon be vying for market share with large long-distance carriers such as Sprint Corp. and AT&T Corp. And with additional regulatory rules easing, industry observers expect the competition to heat up further in the months ahead.

In August of this year, Pacific Bell, a subsidiary of San Francisco-based Pacific Telesis Group, quietly launched a program to court Los Angeles-area firms that design and install integrated networks.

So far, Pacific Bell has held two focus groups with firms, primarily from within the computer software and peripherals industry, to gauge the feasibility of creating formal provider partnerships.

Gaining insight

"We were interested in learning what was on their minds, how Pacific Bell could help their clients and their own businesses and what they thought of partnerships," said Scott Tracy, a Pacific Bell project manager.

By forming such partnerships, Pacific Bell would be able to capture part of the vast market for providing service to small corporate and retail firms with far-flung employees and office locations. Many of these firms need to transmit and receive enormous amounts of data and other information via phone lines.

A partnership between Pacific Bell and vendors makes good business sense, according to Byron Wagner, president of Genius Inc., a Sherman Oaks-based computer engineering firm.

"Vendors would benefit from the carrier's reputation and breadth of services, and the phone company stands to win new business referrals," Wagner said.

Under Pacific Bell's partnership plan, vendor firms would provide the technical and hardware support involved in creating the networks. Pacific Bell, as its contribution, would carry the information through its existing phone lines.

Wagner and about 30 other computer industry executives attended a vendor focus group sponsored by Pacific Bell last summer. He walked away interested in the company's proposal and said he expects to sign a partnership agreement with the carrier soon.

Seeking an edge

With more than 1,000 firms involved in the burgeoning computer software and multimedia networking industry in the Los Angeles area, Pacific Bell hopes to take an early lead in cornering the market for integrated networks.

Pacific Bell expects the program to enhance its services to the 400,000 business subscribers in the L.A. area that already use the carrier's basic services. By working with vendors, the company expects to gain access to thousands of new customers, some that are presently served by other carriers.

Pacific Bell is far from the only company pursuing opportunities related to integrated networks.

Since 1982, GTE California has invested in the development of 11 large business parks throughout Southern California. The parks, called GTE SmartParks, are equipped with the state-of-the-art telephone equipment to meet tenants' multimedia business needs, according to GTE spokesman Larry Cox.

Thousand Oaks-based GTE also operates an 800 information line and provides sales and consulting services to help businesses create multimedia networks and telecommuting plans.

Though GTE and Pacific Bell don't compete directly for local phone customers, they are potential rivals for business network clients, as the market for phone services undergoes change.

More than 20 small regional phone companies and several of the nation's 200 long-distance carriers are threatening local phone companies' dominance of the California market.

Loosening up

Recent policy changes proposed by the Federal Communications Commission have relaxed existing regulations to foster greater competition. In California, rule revisions enacted by the Public Utilities Commission last September will enable long-distance firms to vie with local carriers for local toll call customers.

The PUC changes take effect Jan. 1, at which time local carriers will face competition from some 93 long-distance companies that plan to enter the local toll-call market. As a result of that new competition, local toll rates are expected to drop by 39 percent.

AT&T is one of those long-distance carriers. According to Marge Boberschmidt, an AT&T spokeswoman, "there is no direct connection between the emerging competition for toll call customers and the market for business network users."

But the threat to local companies from long-distance carriers is real.

Next year, Basking Ridge, N.J.-based AT&T plans to unveil a business networking service that uses software developed by Lotus Development Corp. of Cambridge, Mass. Novell Inc., another prominent computer company, based in Provo, Utah, plans to help AT&T customers with network planning and design.

AT&T plans to market its networking service through a sales force of AT&T and Lotus sales professionals. According to Boberschmidt, the carrier also plans to deal directly with small vendors in a fashion similar to Pacific Bell's vendor partnership plan.

Sprint, a long-distance carrier based in Kansas City, Mo., recently struck a multi-billion-dollar deal with three national cable television concerns to enter local phone markets. The venture with Tele-Communications Inc., Cox Enterprises Inc. and Comcast Corp. allows Sprint to enter local markets through each of those cable operators' existing lines.

Teleport Communications Group, a New York-based phone company partly owned by the cable firms, is to be primary carrier into several markets, including Los Angeles. According to spokesman Bernard Walker, Teleport specializes in the design of integrated business networks.