PHONE MARKETERS RETHINK '98 PLANS: FCC DELAYS FORCE LOCAL, LONG-DISTANCE PROVIDERS TO STUDY AD ALTERNATIVES

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Local and long-distance phone companies, stymied by regulatory roadblocks in their attempts to expand services, are drawing up alternative marketing plans for 1998.

The Telecommunications Act of 1996 was supposed to open up the phone market but hasn't because the phone companies haven't been able to work out deals to offer crossover service.

This month, BellSouth's long-distance service application was rejected by the Federal Communications Commission; SBC Communications and Ameritech Corp. were turned down earlier in the year.

FRUSTRATING WAIT

"The Baby Bells have set up long-distance arms but they're not really marketing yet. They have small, skeleton crews inside the organization that are really frustrated. I see them moving next year to begin selling outside of their regions as a second choice, like Ameritech is doing in St. Louis," said telecom analyst Jeffrey Kagan.

He noted that when local companies are finally able to work out deals, ad budgets could rise up to 50%.

Ameritech had thought it would be able to offer long-distance service this past fall. However, now the company is looking at a realistic start date of late '98, said a spokeswoman, who added Ameritech will refile an application with the FCC next year.

In the meantime, Ameritech will begin offering long-distance outside its region -- in St. Louis -- in the first quarter. Ammirati Puris Lintas, Chicago, is the agency but marketing plans have not been determined.

Long-distance companies, meanwhile, are beginning to set up ways to market and sell local phone service. AT&T Corp., MCI Communications Corp. and Sprint Corp. are building local networks but also striking reseller deals with non-traditional local carriers, such as Teleport Communications Group, Qwest Communications and Frontier Corp.

AT&T SCALES BACK

"We've scaled back actively marketing our local service," an AT&T spokeswoman said. "We're not going to resume active marketing of local service until we resolve some more regulatory issues."

"We can't afford a bad customer experience, so we're not advertising the product," said an MCI spokesman. "We're marketing, but more on a telemarketing and direct-marketing basis; not on an advertising basis."

While both sides try other options, they also continue to focus on brand-building messages.

STUDYING BRAND PERCEPTIONS

AT&T has been querying industry experts about its brand perception and strength, leading some to believe the former Ma Bell will kick up ad spending next year.

AT&T's spending is estimated to be down about 40% this year from 1996, as the company tried to cut excess and increase efficiency. Y&R Advertising, New York, and Foote, Cone & Belding, New York, handle.

"AT&T is really concerned that the marketplace is getting crowded," Mr. Kagan

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