"We'll certainly spend more on marketing as a function of bringing more products and services to the marketplace," says Tim Kelly, ad director at Sprint Corp.
Media spending alone runs high. The top 10 brands in the telecommunications arena spent about $1.6 billion in 1995, up more than 5% from the previous year, according to Competitive Media Reporting.
A new competitive landscape has emerged since enactment in February of the Telecommunications Act of 1996. The bill essentially erased restrictions that kept local phone and long-distance providers and local phone and cable operators from competing in each others markets.
ENTIRELY NEW WORLD
This broad range of companies entering the field is making a hybrid industry out of long distance. Some analysts see this market approaching $500 billion, a far cry from the traditional three-company dominated $72.8 billion long-distance market recorded at yearend 1995, or the $90 billion for the Baby Bells.
"Regional Bell companies will have to match long-distance companies' spending dollar for dollar to maintain customers," says Brian Adamik, analyst at Boston-based Yankee Group. "Spending will increase exponentially."
AT&T, laying out an estimated $1.06 billion in total advertising last year, 57% of it in media, last month awarded an estimated $100 million-plus corporate branding account to Young & Rubicam, New York, one of its core agencies.
The giant carrier will also maintain its other core agencies that include McCann-Erickson Worldwide, FCB/Leber Katz Partners and BBDO Worldwide, all New York.
AT&T has formed seven regional divisions, each to handle its own marketing and advertising. However, the giant marketer already is experiencing internal power struggles between marketing executives at the regional and the national levels.
Nationally, AT&T has split into three companies: AT&T Corp., focusing on phone services; Lucent Technologies, concerned with telephone and networking equipment, and NCR Corp., for computers.
The companies also are "bundling" communications services like Internet access, paging, wireless, local service and direct broadcast satellite service. MCI last year spent about $50 million launching MCI One, a product that includes Internet access, wireless paging, cellular and long-distance service.
"Providing turnkey services to our customers will be crucial," says Gretchen Gehrett, executive director of advertising and marketing communications at MCI. "Each marketing dollar will have to do double duty," she says.
Deregulation has created an onslaught of mergers and alliances, including SBC Communications acquiring Pacific Telesis and Bell Atlantic Corp. merging with Nynex Corp.
WorldCom, the fourth-largest long-distance provider, is acquiring MFS Communications, a telecommunications provider which had just recently bought UUNet Corp., an Internet access provider. The merger, expected to be completed by April 1997, will create a powerhouse in long-distance, local and Internet services.
INVESTMENT OF $2 BILLION
Conversely, MCI has spent more than $2 billion to build its own local network, circumventing the Bell systems (and their access fees) in about 20 U.S. markets, and currently offers local service to business customers in 35 markets.
Sprint has partnered with Cox Enterprises, Comcast Corp. and Tele-Communications Inc. for a wireless communications system called Sprint Spectrum.
AT&T Wireless-formerly McCaw Cellular-will compete directly with Sprint Spectrum; both companies offer a nationwide footprint for wireless communications.