BABY BELLS HEAT UP FIGHT WITH LONG-DISTANCE FOES

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Local and long-distance telecommunications players are edging closer and closer to head-to-head com-petition.

Four of the seven Baby Bells last week took the unprecedented step of joining forces for a new, urgent approach to entering the long-distance industry.

Bell Atlantic Corp., BellSouth Corp., Nynex Corp. and Southwestern Bell Corp. filed a motion with U.S. District Court in Washington, seeking to eliminate the 1984 consent decree that broke up AT&T and carved the U.S. into seven local Baby Bell territories.

The remaining three Baby Bells, Ameritech, Pacific Telesis and U S West, have the option of joining the legal fight.

The White House has supported opening the telecommunications and cable TV market to competition. On Capitol Hill, Rep. Ed Markey (D., Mass.), chairman of the House Subcommittee on Telecommunications & Finance, has said: "I believe open systems are the best way to achieve economic growth and to guarantee access for everyone to our nation's digital highways."

The action comes as the Baby Bells are watching portions of their local telephone traffic being nibbled away by long-distance marketers through pay phones. Industry insiders say the long-distance companies have siphoned off an estimated $150 million in local business in the past 18 months.

Predictably, the long-distance carriers say the battle is already hot enough.

"Long-distance competition is intense today, whereas competition in local phone service is minimal," AT&T responded in a statement last week. "Consumers know ... that when ordering pizza by telephone from home, they have but one choice to make that call, and that choice is over the local telephone company's network."

What's infuriating the Baby Bells is that AT&T and MCI Communications Corp. are effortlessly pulling in local calls along with long-distance calls through the easy-access pay phone channels backed by multimillion-dollar network TV campaigns. Baby Bells have no such national marketing muscle.

"The long-distance carriers are increasingly getting into the local areas and what's ostensibly our market, and it's very threatening," said Connie Brown, director of market development of coin phones for Denver-based U S West.

The culprits are heavily advertised and successful long-distance calling programs such as MCI's 1-800-COLLECT and AT&T's 1-800-CALL-ATT.

"AT&T and MCI have been so effective at getting their message across that you can call anywhere, any time using their services, that even our own employees don't understand that when they do so, they're cutting us out of the loop and the revenue stream," said Steve Ford, media spokesman for Chicago-based Ameritech.

An example of the marketing tactics: In a 30-second network TV spot by Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York, for 1-800-COLLECT, comedian David Spade chides his sidekick that it's cheaper to call Seattle using the service-even in Seattle.

AT&T is also heavily advertising its 1-800-CALL-ATT option for collect calls or calls billed to AT&T's calling cards, backed by market-specific print and TV campaigns through FCB/Leber Katz Partners aimed directly at the Baby Bells.

Marketing tactics that the Baby Bells are using to hold onto their local traffic through pay phones include promotions and brand-building campaigns plus the fast proliferation of prepaid pay phone calling cards.

Ameritech recently hired the Hadley Group to head up pay phone promotions. U S West is contemplating a short-term promotion "later this year." Other Baby Bells are rumored to be cooking up new campaigns.

Nynex this year began installing 1,000 unique pay telephones in Manhattan that accept only Nynex prepaid calling cards. Although long-distance calls are carried by alternative carriers, the move brings Nynex business through use of its credit card.

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