In 1984, the court-ordered breakup of AT&T established eight companies where there had been one. AT&T and seven regional "Baby Bell" companies now handled local service. The breakup also opened the way for other companies to compete with AT&T for long-distance customers.
"Big Three" competition
Competition among the "Big Three" long-distance providers—AT&T, MCI Corp. and U.S. Sprint emerged dominant—resulted in an escalating battle of ad campaigns. One particularly sharp jab was AT&T's "Put It in Writing" effort (from Ayer), a thinly veiled attack on MCI's telemarketing program that implied most MCI's claims were false.
MCI, in turn, boosted its marketing spending from $12 million in 1989 to $100 million in 1992, launching its "Friends and Family" 20% discount calling program via a TV campaign supported by heavy direct mail.
With "Friends and Family," via Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York, MCI improved its share of the core long-distance business to 15%. It countered rivals' special offers with deals such as an hour of free long-distance for consumers who traded in calling cards from rivals for an MCI cards.
In the first in a long line of sentimental ads from all the telephone companies, "MCI. Newer. Different. Better . . . Let Us Show You" featured children giving their grandparents personal 800-service as a gift, while members of an Irish-American family indulged in a New Year's Eve telephone conference call with relatives around the globe.
As the services being offered grew more complicated and diversified, and the number of companies offering those services multiplied, it became increasingly difficult for advertisers to differentiate themselves.
As the marketplace became cluttered and chaotic, celebrity spokespersons were one strategy telephone companies used to differentiate themselves during the 1990s. Starting in 1990, Candice Bergen, star of the then-popular CBS TV series "Murphy Brown," appeared in dozens of spots from J. Walter Thompson USA, San Francisco, for Sprint. In one TV spot, Ms. Bergen explained that by using Sprint and pocketing the savings, "you can get to be one of those rich companies that everybody resents," a reference to AT&T.
In 1993, MCI and Sprint unveiled new calling programs backed by heavy TV and print campaigns and promotions. AT&T scrambled to follow their lead, which at the time included MCI's 1-800-COLLECT discount calling card service, "Christmas in July" offering and "Friends and Family," as well as Sprint's "The Most Worldwide" international discount calling program.
AT&T responded with a corporate campaign (from Ayer) themed "You Will," which promoted the company's new wireless and broadband technology. AT&T simultaneously rolled out its $100 million campaign for the "I" plan, a residential discount calling program.
By 1994, telecommunications advertising and marketing spending had risen 8% to $3.5 billion, 75% of which was comprised of the Big Three long-distance companies and the so-called Baby Bells. By comparison, cellular phone ad budgets totaled about $153 million.
AT&T claimed about 60% of the $77 billion long-distance market, while MCI had about 20% and Sprint, 10%, with hundreds of smaller companies making up the difference.
By 1995, AT&T turned to "True"-themed ad campaigns created by FCB/Leber Katz. While AT&T was by far the leader, it had seen a drop in customers. With the new campaign, this situation changed; the company began to regain customers. A year after launching the $500 million "True" effort, AT&T said it attracted an estimated 200,000 new customers, most former MCI customers.
Boosting MCI was its spokeswoman, actress Whoopi Goldberg, who by 1996 emerged as the most recognized of the phone company presenters. She helped give a new identity to MCI in ads created by Messner Vetere.
The Telecommunications Reform Act
With the passage of the Telecommunications Reform Act of 1996, the industry opened to a group of new participants, while established companies were allowed into other areas as well. For consumers, choosing a telephone company became a complex process, as confusing to many as reading a legal document. Telecommunications providers found themselves having to educate consumers before they could sell complex service and pricing packages amid fierce price competition.
In 1996, Sprint entered into a wireless, long-distance and cable joint venture with Comcast Corp., Cox Communications and Tele-Communications Inc. called Sprint Spectrum. Later renamed Sprint PCS, the venture originally was supported by its own $30 million ad budget. At the time it was lauded as the wave of the future, but it fell short in all areas but wireless.
Also that year, WorldCom, the No. 4 long-distance company after being formed only a year earlier, leaped to No. 2 after buying MCI. Within a year, WorldCom nearly doubled the size of its ad budget, beginning with an $8 million ad campaign featuring and basketball superstar Michael Jordan under the tagline, "One company, a world of solutions," created by Earle Palmer Brown, Bethesda, Md.
The telecoms then embarked on a battle to take market share from each other through heavy-handed marketing and aggressive pricing strategies. The complex offerings with which they bombarded consumers included 5¢ Sundays, 10-10-321, 10-10-220 and 1-800-COLLECT products.
While the dominant telephone service players wrestled with each other, the Baby Bells encountered their own challenges, merging and repositioning themselves. SBC Communications Corp., parent of Southwestern Bell, acquired Pacific Telesis Group, parent of Pacific Bell, in 1996 and Ameritech Corp. in 1999. Bell Atlantic Corp. acquired Nynex Corp. in 1996 and, in June 2000, merged with GTE Corp., forming Verizon Communications.
Bell Atlantic became the first Baby Bell to go head to head with the Big Three in the long-distance area in 1996 with ads created by Saatchi & Saatchi. In one TV spot, actor James Earl Jones doing voice-over said, "For your life that lives in other places."
As the Baby Bells began spending more, AT&T and MCI each curtailed ad spending, relying instead on promotions, contests and sweepstakes. In 1997, for instance, AT&T reduced its ad spending more than 9% to $547 million, while MCI scaled back 5% to $300 million.
By 1998, the telephone companies also had moved some of their ad dollars to the Internet, where they were spurred on not only by each other but also by America Online, which was rapidly converting Internet surfers into long-distance phone customers.
Working with long-distance reseller Tel-Save Holdings, AOL signed up 200,000 subscribers in just two months. Sprint countered with Sense AnyTime, a long-distance calling plan via its Web site, and AT&T unveiled One Rate Online—a flat dime-a-minute calling plan—and the Internet telephony plan WorldNet Voice.
In what was perhaps the ultimate telecom diversification move, AT&T began transforming itself into the largest cable TV operator in the U.S. Its efforts were anchored by its acquisition of TCI Communications in 1999 and MediaOne Group in 2000.
But AT&T found itself burdened by debt and the problems of upgrading cable systems. The company used the 2000 Sydney Olympic Games as a platform to launch a new image-building campaign, casting itself as a cutting-edge provider of digital broadband services.
In 2000, Sprint pulled its consumer account from Grey Advertising, which continued to handle its corporate ads. Two years earlier, Sprint had fired JWT, its longtime agency of record, following conflicts over creative strategy. It moved its $150 million account to AT&T's former ad agency, McCann-Erickson Worldwide, reflecting the company's determination to build its image as a service provider rather than as a long-distance telephone company.
With declining stock prices and massive restructurings, the telecommunications industry was also looking over its shoulder at AOL Time Warner. AOL had premiered a new wireless telephone service and started testing cable telephony. Time Warner was contemplating, but not committed to, digital cable telephony for its nearly 13 million cable subscribers.
In fall 2000, months before its merger was finalized, AOL Time Warner launched a corporate image campaign, "Boundless," with Y&R Advertising handling TV spots and FCB Worldwide print.
At the same time, AT&T shifted its emphasis from direct-response TV and direct marketing to TV advertising of wireless, high-speed and digital cable. AT&T also stunned the telecommunications industry in October 2000 by announcing a restructuring in which it broke itself up. The $1.95 billion AT&T spent annually as of 1999 marketing its businesses was divided among four separate entities—broadband, business, consumer and wireless-serviced by even more ad agencies.
The impact on its agencies was swift, but ad spending rose along with the competitive stakes. The competition now included not only the Big Three and the Baby Bells but also a number of other nontelephone company marketers offering local, Internet and other communications services.
Late in 2001, AT&T agreed to merge its broadband unit with Comcast Corp., creating the dominant cable service provider in the U.S. and advancing its three-pronged digital video, high-speed data and telephony offerings. Its wireless business pushed forward as a separately traded public entity, while its long-distance business, like those of some competitors, came under pressure on the stock market and with regulators.
The new century brought other major changes in telecommunications marketing, with a $1 billion-plus-a-year battle raging as the big six wireless carriers—Sprint PCS, AT&T Wireless, Verizon Wireless, Cingular, Nextel and T-Mobile—fought to sign up new cell phone users. The battle hit its peak in fall 2003 when federal rules required cell phone users to be able to take their numbers with them if they switched to a new service. By 2004, the industry was beginning to contract, with Cingular having made a $41 billion bid for AT&T Wireless.
Meanwhile, a second battle broke out. AT&T Corp. and the regional bell companies began to push bundled offerings of DSL, by then in almost half of American homes, along with local, long distance, wireless and even the new Voice over Internet Protocol, or VoIP, services, all in the hopes that the packages, wrapped with a tidy discount, would aid consumer loyalty.