THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, January 21, 1996 TAG: 9601200387
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Long : 137 lines
At some point, just about anybody who's watched the fevered ad pitches of AT&T, MCI and Sprint has probably wished they'd just cool it for awhile. Having choices is fine. But why do these companies make the selection process so darned annoying?
Well, phone customer, you ain't seen nothing yet.
In the next year or so, the options for phone users will multiply.
A bevy of new cellular-like phone networks is being planned or built. And soon, plain old local telephone service - you calling me across town via a traditional ``landline'' connection - will become a competitive battlefront, too.
This explosion of choices may leave some customers hankering for the day when Ma Bell was all one needed to know about phones.
But phone-service providers say there's no going back. They're busily gearing up for more competition.
Hampton Roads is shaping up to become one of the nation's toughest telephone battlefronts. That's because the region's largest cable-TV provider, Cox Communications Inc., has invested tens of millions of dollars to upgrade its network for a major launch into the local-exchange phone business.
What about movies on demand, games and all that other high-tech, interactive stuff cable companies could eventually provide?
Forget it - at least for now, said Dana Coltrin, a Cox manager who's spearheading the cable company's Hampton Roads phone drive. There are greener pastures to chase in the phone business.
``When we do the numbers for interactive video,'' he said, ``the margins become pretty thin compared to telephony.''
Cox's success is unassured. In Hampton Roads, it will be going up against two of the nation's largest telecommunications companies: Bell Atlantic Corp. and GTE Corp.
In terms of local customers, Bell Atlantic is by far the larger of those two. And it says it hasn't exactly been asleep at the phone switch.
``Cox is one of the more ready competitors nationwide. We know that, and we have a high regard for what they're doing,'' said Norman Neal, general manager-network services for Bell Atlantic's eastern Virginia region. ``But we think we'll be ready for them.''
Cox will have some heavy-duty allies in its effort. Along with two other big cable operators, Tele-Communications Inc. and Comcast Corp., it's partners with Sprint in a nationwide phone venture.
Coltrin said it's likely that Cox's local phone services will eventually be marketed under the Sprint brand name and packaged with that company's long-distance services.
Cox won't be alone in challenging Bell Atlantic and GTE locally.
MCI has already filed an application to offer local-exchange phone services throughout Virginia. AT&T is expected to do the same. Both will likely purchase network capacity from the incumbent local carriers, then resell the local service as part of a package that also includes long-distance and wireless services. Several niche contenders that seek to provide specialized business services may also join the fray.
And there's no stopping Bell Atlantic and GTE from expanding into each other's territories.
``It's going to be a free-for-all,'' Coltrin predicts.
However, it could be several years before there's full-fledged competition for local phone services.
A number of key issues must be negotiated between upstart providers like Cox and incumbents like Bell Atlantic, said Kathleen Cummings, a senior telecommunications specialist for Virginia's State Corporation Commission. The commission recently adopted broad guidelines for fostering local phone competition, joining commissions in about 15 other states in doing so.
In Virginia, the carriers will need to figure out how to exchange calls and agree on whether any money changes hands in that process, Cummings said. They'll have to resolve whether the upstarts have to pay to have their customers listed in the incumbent's phone book, she said.
Perhaps most importantly, they'll need to agree on a formula for making phone numbers portable from one carrier to another. If customers can't take their numbers with them, they will be less inclined to switch service providers.
``People need to understand that a lot of these little things could turn into big ones quite quickly,'' Cummings said. ``I suspect that negotiations will not succeed on all issues.''
In that case the commission will try to arbitrate the differences. But how long that process takes is anybody's guess.
For this and other reasons, both Coltrin and Bell Atlantic's Neal say they don't expect anything more than limited competition in local phone services before year's end.
Coltrin said it could take up to two years for Cox to extend local exchange service to residential customers. He said his company still has to upgrade its network to improve reliability and to guarantee such basic services as emergency 911 before it can make a full-fledged push into neighborhoods.
To expand beyond its cable-service territory into cities like Suffolk or Hampton, for example, Cox will likely try to form an alliance with other cable companies, Coltrin said.
Initially, Cox plans to focus on expanding its existing relationships with business and government customers. Cox, through a subsidiary called Fibernet, provides more than 100 such customers with a limited range of phone services. It sets up internal communications networks and offers connections to long-distance carriers.
Coltrin said that with the corporation commission's go-ahead, Cox could quickly connect the networks of two separate customers, like the Virginia Beach and Norfolk school systems. He said Cox could also more easily offer long-distance access services to a larger number of business clients.
Bell Atlantic's Neal said he doesn't blame Cox for focusing first on business customers. That's where the most profit is, he said. Whether Cox intends to be a provider to all people in its territory will be a key issue, however.
``We don't want to be left in a situation where all the cherry stuff's gone to them,'' Neal said, ``and we're left having to serve all the secondary.''
Fortunately for Bell Atlantic, Cox couldn't have picked a tougher place to try to wrest away customers. Neal said that in several key productivity and cost-of-service measures, Bell Atlantic's eastern Virginia region ranks no lower than fourth among 20 regions in its territory.
``In most cases, if I'm not No. 1, I'm No. 2,'' he adds. ``We've been getting prepared for competition for quite a while.''
Bell Atlantic's local work force is divided into numerous ``turfs,'' the employees of which have a ``ton of measurements'' for comparing to one another, Neal said. That has helped foster a cost-cutting and service-enhancing mind-set.
Also in Bell Atlantic's favor, he said, is the company's success in selling special services like Caller ID and call forwarding. He said that has built customer loyalty.
``That telephone line is more valuable to you if you've got different features and functions,'' Neal said.
Perhaps the clearest advantage for Bell Atlantic is that most customers think it's reliable. Cable operators are widely regarded by their customers as offering poor service.
Cox's Coltrin said the reputation, at least for Cox, is undeserved. He said the average Cox customer in Hampton Roads was without service 53 minutes last year. That's down from an average down time of 5 hours a year in the early '90s, Coltrin said.
``We've been trying to educate people that we've come a long way,'' he said. ``But we've got our work cut out. Bell Atlantic is a good company. We're going to have to do better than they do; otherwise, people aren't going to switch.'' by CNB