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WATS the difference?

There are more long-distance options these days. How do you make a choice?

It wasn't so very long ago that the small-business consumer had limited choices for his or her long-distance telephone needs.

Prior to Judge Harold Greene's breakup of the American Telephone and Telegraph empire about a decade ago, the long-distance choices were just about the same for everybody: message-toll service (MTS), wide-area telephone service (WATS), and 800 service for incoming long-distance calls.

Today, small-business consumers in Indiana have a mind-boggling choice of outbound and inbound long-distance programs. They're offered by full-service carriers such as AT&T, MCI and Sprint, plus a host of resellers and aggregators, which are smaller companies that lease lines from the major carriers and resell them to business and residential clients.

"This is the only utility that small business has a choice in," says Melissa Cooper, sales representative for Allnet Communication Services Inc., which has offices at Keystone at the Crossing in Indianapolis.

"You don't have that choice with light, heat and water. If the electric company said we're going to save you 15 percent on your monthly bill and you're still going to turn the light switch on the same way, wouldn't you want to save that?" she continues. "The whole point of divestiture was choice."

The original choice--MTS and WATS--was pretty much limited by the volume of calls a business planned to make. AT&T introduced WATS service just over 30 years ago, and up until the judge's decision to break up the Bell system in 1982, only larger companies with a substantial volume of business could afford to install WATS lines. Although users got significant discounts with WATS, there were monthly charges for access to the special leased WATS lines.

Small businesses and residential customers were basically captive to MTS. MTS is what most people know as basic direct-dial calling, where long-distance service is charged on the basis of duration of calls, distance and time of day or week. If most businesses wanted to get cheaper rates 10 years ago, they made the bulk of their long-distance calls after 5 p.m., at night or on weekends--just like homeowners.

The explosion of services following deregulation of the telecommunications industry inevitably led to some amount of chaos in the way long-distance services were marketed and priced.

"Deregulation has caused some confusion in the marketplace," says Tim Shindeldecker, president of CTI Telecommunications in Mishawaka. "There's been a problem of sorting it out."

Carriers like CTI--which serves customers in the northern third of Indiana and the western half of the lower peninsula of Michigan--have instituted so-called "flat-rate" programs in an attempt to get away from confusing the customer. "We've come up with a very simple product," Shindeldecker says. "We charge a flat rate per minute."

Called "The Great Lakes Connection," the small-business program costs subscribers 16 cents a minute for calls to Indiana, Illinois, Ohio, Michigan and Wisconsin, plus a $5 monthly service charge. Since 80 percent of the calls its roughly 9,000 customers make go to those states, the program is a recognition of the regional base of CTI's network. "We've taken that approach," Shindeldecker says. "Our customer knows what that's going to cost."

CTI sweetens the pot with discounts for calls made between 8-10 a.m. and 3-5 p.m. Customers are encouraged to send the bulk of their fax messages during those two time periods.

Greg Wallach, marketing manager of Consolidated Network Inc., says his company also has answered the call for simpler calling services. "Customers are fed up with long-distance plans that you have to have a consultant to figure out." CNI recently responded with its own flat-rate calling plan, which has one per-minute rate for in-state calls and one for out-of-state calls. The rate is the same no matter how far the call reaches. "We call it a postal rate, like buying a stamp."

Indiana Bell also has a simple flat-rate plan for long-distance calls within a customer's calling zone. The "Value Calling Plan Super" is for businesses that make at least 55 hours worth of long-distance calls within their calling zone per month. The rate is $25 per month plus 13 cents per minute, or the monthly fee plus 10.5 cents per minute for customers that sign a two-year contract. There's a 55-hour-per-month minimum charge. Bell also offers a couple of other discount services as well as a WATS plan.

Some of the outbound programs offered to small business have begun to filter down to the residential market. In full-page advertisements in the state's metropolitan newspapers, LCI International's Indianapolis office is offering Hoosier residential customers a flat-rate program that bills 12 cents a minute from 6 p.m. to 6 a.m. and 17 cents a minute from 6 a.m. to 6 p.m.

Modeled after a program already offered to LCI's small-business customers in the state (through which calls are billed at 15 cents a minute, around the clock, regardless of destination), the new program is "easier for us," says Allen Sims, general manager and regional vice president of LCI. Sims explains that computers can keep track of different rates, destinations and discounts, but it's just simpler to add up the minutes and multiply by a flat rate.

LCI, formerly Litel Telecommunications, has 20 employees in Indianapolis. It has offices in Indianapolis, Fort Wayne and South Bend, and has been operating in the state for five years. The company is headquartered in Columbus, Ohio, and has offices all across the Midwest.

"People are calling from all over in response to our advertisement," Sims says. "We ran that advertisement in Cleveland and Columbus before we ran it in Indianapolis. We're getting a better response from Indiana than we did from Ohio."

Cincinnati Bell Long Distance is a firm believer in the regional approach. "Nobody in the industry uses WATS-type programs," says Barbara Pinszka, manager of advertising for Cincinnati Bell Long Distance. "All of our products compete against WATS."

One of the few Baby Bells not owned by AT&T at the time of the breakup, Cincinnati Bell was not subject to the restrictions placed on the Baby Bells when the courts got around to deregulating telecommunications in 1984.

Cincinnati Bell was in long distance prior to deregulation and remains so. Its niche, Pinszka explained, is small- and medium-sized businesses in the Indiana-Ohio-Kentucky region. The company has about 50,000 customers in the three states and has recently moved into the Western Pennsylvania market.

"Some 60-65 percent of our customers have a majority of their calls going within a 300-mile radius," Pinszka observes. "The Indiana area has high traffic volume to Chicago."

Some of the players in the Indiana long-distance market are what the industry call resellers or aggregators. Tri-Tel Communications buys bulk fiber-optic services from the major carriers and then repackages those services for the public.

Jim Fishel, Tri-Tel's territorial manager in the Munster office, says Tri-Tel was founded in 1981 as Telemarketing Communication and changed its name in 1985. The company has services available in all 50 states but primarily serves the Midwest, Southeast and Southwest.

"We're in constant negotiation with all of the major carriers in the U.S.," Fishel says. "Some are large, some are small, and there are a host of fiber-optics providers. We buy from them, but also often compete with them."

LDDS Communications--with offices in Indianapolis, Evansville and Bloomington--packages long-distance services it purchases in bulk from 22 vendors. The company originates traffic in 31 states and was listed as the 30th-fastest-growing company in the United States in a recent issue of Fortune magazine.

"We derive our success from our customer-service philosophy," says Krystal Shaffer, sales manager in the Indianapolis office. "We keep our customers on a program best suited for their needs."

LDDS services all of the AAA Hoosier Motor Clubs, and the firm has a major presence in downtown Chicago, providing service to the Chicago Board of Trade and the Chicago Mercantile Exchange. "We were the last operating switch in the city of Chicago when they had the flood," Shaffer boasts.

One niche market that resellers are moving into is the association business. One Call Communications, Carmel, has aggressively marketed outbound long-distance services to members of organizations like the Indiana Farm Bureau and the Ball State University Federal Credit Union.

It's a big market. Indiana Farm Bureau has 240,000 members statewide, and 10,000 Hoosiers are members of the Ball State Federal Credit Union. One Call, an Indiana-owned company, estimates it can save members of organizations as much as 25 percent on their monthly long-distance bills.

United Telephone Long Distance, which is affiliated with local-service provider United Telephone Co., is marketing group plans as well, but in a different way, says Ron Adams, marketing and sales director. Companies in its service area are encouraged to offer discounted long-distance service to their employees as a benefit. The company also is promoting business-discount plans through the chambers of commerce in its service areas.

With the profusion of resellers in the marketplace, one might be tempted to think that AT&T, which dominated the business for decades, might have just rolled over and died.

That's not at all the case. Nationwide, AT&T accounts for the lion's share of toll service revenues--65 percent in 1991. MCI and Sprint, the other two major carriers, account for 14 percent and 10 percent, respectively, of toll service revenues.

In Marion County, a recent survey indicated that 54 percent of small- and medium-sized businesses choose AT&T outbound long-distance programs. Allnet ranks second in the Indianapolis market, with 11 percent of small businesses signed up, while Sprint reports in at 9 percent.

AT&T's flagship offering for small businesses is PRO-WATS, introduced in 1986. The program provides volume discounts on regular daytime long-distance rates--without requiring special lines or equipment. AT&T pitches PRO-WATS to business customers spending between $90 and $5,000 per month on long-distance services.

"We have a lot of plans that go beyond simple WATS," says AT&T spokesperson Thomas J. Hopkins from the company's Chicago office. "Technology is the basis of a whole laundry list of programs."

AT&T boasts "70 different products, just for business customers," Hopkins says. "It really has changed the way that people do work. It's an unbelievable revolution in technology."

Dan Lawler, a spokesperson for the Network Services Division of AT&T in New Jersey, points out that in 1948, the Bell System was advertising that improving long-distance service meant that calls went through on the average in 1.6 minutes.

Just 45 years later, the high-speed data networks that serve MTS, WATS-type service and 800 service put through calls in 4 to 6 seconds. The redundancy in digital switching systems means that there are approximately 120 ways to get a call from Point A to Point B.

Lawler points out that fiber-optics technology--using spun glass fibers that are capable of carrying far more data than traditional copper cables--"lends itself very naturally to digital transmission. The whole science of photonics has advanced," Lawler says. "We've got greater speed and greater capacity. It's really a burgeoning science right now, and it holds an awful lot of promise for the future."

That speed and capacity is often cited by the major carriers as a reason for small businesses to consider choosing outbound service from them.

Cable & Wireless Communications is one of the "big four" long-distance companies serving the Indiana market. Not generally well-known in the Indianapolis market, the British company is one of the major communications players in Europe and operates its own system in the U.S.

Jeffrey Stapleton, marketing representative for Cable & Wireless in the firm's Indianapolis office, notes that there are several differences between full-facilities carriers, like Cable & Wireless, and resellers and aggregators.

"You're really not dealing with the company you're using" when you purchase from a reseller or aggregator, Stapleton claims. "They're typically priced a little lower, but the quality of the service is not that good."

Stapleton cites slower connection times and slower call set-up times as reasons not to choose resellers. "You get a lot of system problems," he believes.

Still, the major full-facilities carriers are more likely to see their competition coming from their fellow major carriers than from resellers or aggregators. A good example of that is MCI's Election Day advertising campaign themed to change--from AT&T.

"WATS is just a myth," says Greg Moheban, MCI's state manager for territory sales representatives. "People can have WATS on all their lines."

Moheban claims that MCI's tariffs are "as competitive a rate as anybody out there. We can provide the kind of cost savings people want."

MCI typifies the upheaval in rates and programs that have characterized the outbound long-distance market in recent years. The second-largest long-distance company in the country offers a host of programs including flat rates, volume discounts, billing in six-second increments, discounts for most-frequently called numbers, discounts for members of the local chamber of commerce, and two-month's free long-distance service for new customers.

So how does the small-business person wade through the profusion of services and programs available? The best advice is probably just to pick up the telephone, call several carriers and ask what they can do for your business.

"If you're a $100 a month customer, it's fairly easy to eyeball your bill" and come up with a program, says Valerie Stacy, spokesperson for CTI Telecommunications in Mishawaka. Although it gets more complicated the more calls a customer makes, "in 15 minutes, we could tell you what product you need."
COPYRIGHT 1992 Curtis Magazine Group, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Communications; wide-area telephone services
Author:Beck, Bill
Publication:Indiana Business Magazine
Date:Dec 1, 1992
Previous Article:A phone with smarts.
Next Article:Indiana winter getaways.

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