Telecom players relax strict conflict policies

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When Ameritech Corp. put its nearly $100 million in media buying into review last fall, the company shocked agencies by saying the winner would be allowed to have a sister shop handling another telecom's business. It was the first such move in an industry increasingly crowded by $100 million-plus ad accounts.

"If you take a purist view, there's nobody left," said Karen Sheriff, director of corporate marketing and branding at Ameritech. "The reality is if you want someone who can handle your account, you have to loosen your restrictions."

When even some insiders at Ameritech questioned the decision, Ms. Sheriff pointed to the relationships of corporate America with consulting companies, noting that "companies actively seek out consulting firms that have conflicts, and you tell them all your secrets."

Ameritech eventually chose Carat ICG, Chicago, whose sister shop, Carat MBS, New York, does spot TV buying for MCI Communications Corp. through MCI agency Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York.

HOPING FOR A TREND

Ad agency executives are watching the telecom situation and hoping the loosening of conflict policy there will rub off on other competitive categories, such as package goods and automotive.

"We are very respectful and mindful of the fact that some companies can't work with us, but there may be more flexibility with a sister organization or holding company that can work with us," said Glen Gilbert, GTE Corp. VP-advertising and social responsibility. "We're just all going to have to become more flexible."

It was in telecommunications where one of the more unusual conflict situations occurred. About 15 years ago, Hallmark Cards pulled out of Young & Rubicam because that agency won an international assignment from AT&T Corp.

At the time, a Hallmark executive said that both long-distance phone advertising and greeting cards advertising are "motivational through sentimental and heartfelt emotions." Both promote themselves as "the best way to share love and affection," he added.

"Maybe that wasn't even the best move back then," said one AT&T executive. "But there's no way it would happen today."

`THE LOOSER THE BETTER'

While it's the regional telecom companies such as Ameritech and GTE taking the lead in revising conflict policies, even MCI said Carat's new Ameritech assignment would not be a problem.

"In general, conflicts have been difficult situations and, in many ways, idiosyncratic from industry to industry and client to client," said Brad Brinegar, president-CEO of Ammirati Puris Lintas, Chicago, which handles creative for Ameritech. "I personally believe that the looser the definition of conflict, the better. It puts a premium on an agency to do good work to keep the account. Good agencies are capable of handling what has traditionally been called conflict."

AT&T, the largest spender in the category with $476 million measured media spending in 1997, remains the proverbial 800-pound gorilla when it comes to agency relationships.

The company gives its agencies--pared down to Y&R Advertising and Foote, Cone & Belding, both New York, earlier this year--a list of companies it considers too directly competitive. And it believes that half an estimated $600 million budget should be enough to deter any agency from pitching for pieces from those rivals.

At different times, of course, dozens of ad agencies have handled the AT&T business. In the 1970s, there were more than two dozen shops working for AT&T; even in the late '80s there were more than a dozen--a number slowly whittled down to the current two.

"The fewer agencies you have, the less chance you have for spillover," an AT&T spokesman said. "And we give them enough money and enough free rein so we are considered to be a valuable client."

But even old Ma Bell is evolving its attitude, said Stephen Block, brand advertising and identity director. "If there was ever a country club atmosphere, it's gone. What has to evolve now is everyone's definition of competition," he said. "It's been an issue in the telecom arena for the past five or six years. Sometimes it's very conceptual and sometimes it's very practical. It's the conceptual ones that are always changing."

So while AT&T wouldn't welcome an agency whose East Coast office handled its account allowing its West Coast office to pitch competitors, the marketer does recognize what the agency holding company shopping spree of recent years has wrought.

Its solution: fire walls and other safeguards to prevent information leaks and personnel crossovers. Lord Group, New York, for instance, a unit of Young & Rubicam and Dentsu, handles the Bell Atlantic Corp. account while Y&R has AT&T.

PLAYING IT SAFE

For all the talk about more open attitudes, some telecom companies are themselves playing it safe and sticking to agencies already in the family when shifting or consolidating business.

SBC Communications Corp. chose GSD&M, Austin, Texas, which already had SBC's wireless and Yellow Pages creative, for its consolidated $195 million media buying duties last year.

In the current review for Bell Atlantic's media buying consolidation, the four finalists already have either creative or media assignments for the marketer.

Other telecom companies seem to be following AT&T's lead in whittling down the number of agencies to minimize confusion and conflict. In the last year, SBC cut to three shops; Ameritech settled on two; and GTE parked all its business at Ogilvy & Mather Worldwide, New York.

But consolidating isn't the total answer, especially when Internet companies and wireless providers are tossed into the client mix. While most of those companies are still regional, they're beginning to create more local conflicts because of regional competition.

Ameritech, for example, wouldn't share an ad agency with Cellular One, one of its toughest wireless competitors.

Agencies, of course, also are having to make tough decisions because of still-rigid rules. Saatchi & Saatchi, New York, resigned its Bell Atlantic assignments last summer because it wanted the chance to handle a full-service telecom account. Leo Burnett USA, Chicago, dropped the Ameritech media buying assignment so it could solicit a full account.

"Ameritech's move--I say, God bless 'em," said one consultant who did not wish to be named. "But I'm scratching my head a little bit now. Does this mean [media buying] is now an unbundled function? . . . We could be setting up for turf battles within companies."

Agencies aren't preparing for that extreme, but are watching the developing telecom market. Both agencies and telecom companies are now turning their attention to the question of why isn't the loosening of conflicts happening faster?

"It's all about a level of comfort [with the current system] and history, and a world that just doesn't exist anymore," Ms. Sheriff said.

"We'll see it take a while longer before the really major conflicts are dealt with," said industry consultant Jeffrey Kagan, president of Kagan Telecom Associates. "At this point, it's the low-level conflicts on the fringes where companies are learning to live with it.

"But out of necessity, it'll spread upward--because no executive wants a limited pool of talent to choose from, especially when the market is getting noisy and complex. If you only get to choose from the ones who don't already have an account, well, maybe there's a reason they don't have an account."

Copyright May 1998, Crain Communications Inc.

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