RBOCs gain ground on long-distance

Impact on big business accounts might not be immediate.

A flurry of activity by the Federal Communications Commission and regional Bell operating companies has pushed the RBOCs significantly closer to offering business customers long-distance services throughout the U.S.

All four RBOCs have made recent progress in their long-distance treks, which began when the Telecommunications Act of 1996 let RBOCs enter long-distance markets in their home states if the RBOCs first opened their networks to competitors.

BellSouth has won FCC approval for the final two of its nine home states, meaning the RBOC can offer long-distance anywhere in the U.S.

Qwest has gained permission to offer long-distance in nine of its 14 local states – the carrier’s first long-distance success.

SBC Communications now can offer long-distance in California, its most populous local state.

And Verizon filed an application seeking long-distance approval in West Virginia, Maryland and Washington, D.C. – the only three regions where Verizon can’t yet offer long-distance services.

Three RBOCs – Verizon, BellSouth and SBC – have unveiled national long-distance strategies. Qwest already offers long-distance to businesses outside its local service states.

Despite the RBOCs’ success in winning regulatory relief, they might not be quick to go after national enterprise accounts, says David Rohde, an analyst at TechCaliber.

“Provided you keep your expectations low as to the result, it’s not a bad idea to start distributing [requests for proposal] to the RBOCs, probably in their home territory,” Rohde says.

TechCaliber has submitted some long-distance RFPs to the RBOCs, Rohde says, but more often than not the RBOCs have made no bid. The likely reason for the lack of response is that the RBOCs can’t fill the more complex needs of some TechCaliber clients, he says.

“They can do outbound [long-distance] and inbound [long-distance], provided there are no complex call center requirements and simple data networking,” he says. “What I would strongly recommend is not to bother with the RBOCs at the moment if a network either now or will soon require something like [Multi-protocol Label Switching].”

The RBOCs aren’t committing the kind of capital required to build out complex national networks, Rohde says. Instead, they might lease network capacity from third-party providers. When Verizon unveiled its national data strategy in November, the company said it would lease out-of-region networks, rather than build its own.

Leasing, rather than building capacity might save money, but it’s unlikely the RBOCs will have a significant effect on telecom pricing, says Thomas Nolle, president of CIMI and a Network World columnist.

“All of the carriers are financially stressed at the current price levels,” he says.

Also, Nolle notes, the RBOCs haven’t tried to compete on price in states where they have launched consumer long-distance voice services. Instead, he expects the RBOCs to flaunt their financial stability.

BellSouth uses a combination of pricing, stability and service to attract businesses to its long-distance services, says Rex Adams of BellSouth Long Distance.

“Our value proposition is we save them money through strong pricing as well as service and taking responsibilities off their hands,” he says.

Adams says BellSouth has several long-distance business customers, most of which are in the commercial banking industry.

BellSouth’s offerings are ideal for companies that are clustered around a metropolitan area in BellSouth territory, Adams says. A company with one location in Miami (in BellSouth territory), another in New York, another in Frankfurt and another in Tokyo likely would be better off going with a traditional long-distance provider, he adds.

Nolle says the RBOCs will expand their long-distance footprints gradually. They’ll start by offering intrastate services, then offer services in neighboring states before expanding to national coverage, he says. Nolle doesn’t expect the RBOCs to be truly national players until the second half of this year.

However, once they enter the national market, he says they will provide serious competition to interexchange carriers (IXC) such as AT&T, Sprint and WorldCom.

The RBOCs certainly have had success in taking market share from the IXCs in the consumer long-distance market. Verizon has gained almost 10 million long-distance customers since it won approval in its first state – New York- in 1999 and has nearly a 30% long-distance market share in New York and Massachusetts.

Now that the RBOCs are close to gaining approval to offer long-distance throughout the U.S., it’s also possible that there might be some RBOC/IXC mergers, Nolle says. With WorldCom’s well-documented problems, regulatory bodies will be less likely to block potential mergers on anticompetitive grounds, he says.