NEW RULES EXPECTED TO CAUSE SOME SWITCHING IN 800 LINES

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, April 11, 1993                   TAG: 9304090026
SECTION: BUSINESS                    PAGE: F-4   EDITION: METRO 
SOURCE: By HIAWATHA BRAY KNIGHT-RIDDER/TRIBUNE
DATELINE: DETROIT                                LENGTH: Long
NEW RULES EXPECTED TO CAUSE SOME SWITCHING IN 800 LINES
If your business uses toll-free 800 lines, you've got a ringside seat for the latest slugfest in the long-distance telephone business.
On May 3, new federal rules will make it as easy to select an 800 service provider as it has been to choose a long-distance carrier. The new system, called "800 portability," is forcing AT&T, MCI, LCI and other telephone companies to fight for the customers they have and to try and win even more.
One likely outcome: Falling prices for 800 service as competition heats up. "It gives the customers a lot more flexibility than they currently have, and hopefully a bargaining chip when they deal with the 800 carriers," said Paul Rogers, a telecommunications consultant in Howell, Mich.
Already, the major long-distance firms have spent millions on TV and print ads touting their 800 services and offering sizable savings to businesses that sign up. For example, MCI, Sprint and AT&T have offered new customers 100 free days of long-distance calls spread over two years.
It's an intense battle for an immense prize - Americans spent $7.2 billion on 800 calls last year.
Bradley Cross, owner of the Harmony Hollow Bell Works in Ann Arbor, Mich., which makes bells, spends $300 to $400 a month for his firm's two 800 lines.
Both customer order lines are supplied by AT&T, but maybe not for long. "I'll probably go to LCI, which is my long-distance carrier," Cross said, "because they have the best rates, and I've had fine service with them."
On the other hand, Broder Bros. Co., a clothing distributor in Oak Park, Mich., spends $25,000 a month on AT&T 800 service, and will go right on doing so. "I believe they offer the best service, quite frankly," said marketing vice president Tod Turkin. "I believe the commercials I see on TV about `best in the business.' "
AT&T invented 800 service in 1967, and for 18 years, it was the only provider. Then came the 1984 breakup of the Bell System. The next year, the Federal Communications Commission allowed AT&T's competitors to enter the 800 business.
Today, MCI and Sprint are significant players, with 15 and 7 percent of the market, respectively, according to the Yankee Group, a telephone research firm. But that's a far smaller share than AT&T's 75 percent.
AT&T spokesman Gary Morgenstern disputes the Yankee Group's figures. He says AT&T's share of the 800 market is in the low 60-percent range, but he declined to be more specific.
Still, AT&T has stayed in the lead, partly because today's phone technology makes it difficult for companies to change carriers.
Many companies choose 800 numbers that spell out words related to their products. They spend large sums of money on advertising to get people to remember those numbers. The floral service 1-800-FLOWERS is a good example. But right now, any company with such a phone number can't switch to a different 800 service. If it did, it would have to change its 800 number.
That's because, in the current system, all phone companies that provide 800 service are assigned a set of three-digit exchanges. If you want the number 800-GET-THIS, you'll have to get your 800 service from whichever company was assigned the exchange GET, or 438.
But with 800 portability, local telephone companies throughout the United States have installed new computers that will be able to route any 800 call through any long-distance company. Soon, 800 users will be able to pick any carrier without changing the old number.
Also, a user will be able to sign up with two, three or more long-distance companies, and use the same number on each. With this "number splitting" system, calls can be switched to the MCI network if AT&T's 800 service goes down.
In addition, the FCC has decreed that many large users of 800 services can break long-term contracts with their phone companies during a 90-day grace period to shop for lower prices. Industry analyst Peter Bernstein of Probe Research says this is especially important, because 40 percent of all revenue from 800 services is generated by just 300 large companies, such as airlines, hotels and catalog retailers.
Last week, MCI accused AT&T of intimidating customers who We're not concerned about losing customers at all. We're excited about the opportunities that are before us to gain additional customers. AT&T's Gary Morgenstern might want to switch by jacking up their rates after the grace period. MCI asked the Federal Communications Commission to prevent AT&T from imposing any penalties on customers who choose another carrier. AT&T said as those companies reduce their calling volume, it was justified in increasing rates charged.
So it's open season, with long-distance companies trying to swipe each other's customers. On paper, AT&T may have the most to lose, but Morgenstern doesn't think so. "We're not concerned about losing customers at all," he said. "We're excited about the opportunities that are before us to gain additional customers."
Rival MCI thinks AT&T's biggest advantage is inertia. They figure many 800 users don't know the possible benefits of switching carriers. So they've been distributing brochures to clients and holding seminars to teach them the meaning of 800 portability.
"We did some preliminary surveys on portability," said MCI spokeswoman Melissa Robinson, "and we found that the more customers knew, the more likely they were to consider either switching or splitting traffic."
Robinson declined to say how much additional market share MCI might win. "We are aggressively pursuing all that we can get," she said.

by Bhavesh Jinadra by CNB