BUSINESS

Dialling for dollars

The battle for long-distance business heats up

JOHN DALY July 18 1994
BUSINESS

Dialling for dollars

The battle for long-distance business heats up

JOHN DALY July 18 1994

Dialling for dollars

The battle for long-distance business heats up

There is no escape. None. Over the next several months, few, if any, Canadians will be able to open their mail, turn on a television, leaf through a newspaper, or answer the telephone or the front door without being approached at least once by an aggressive sales pitch to switch to another long-distance telephone company. Almost every one of the competing carriers—including Bell Canada in Ontario and Quebec, as well as seven of the eight other former provincial phone monopolies in the so-called Stentor alliance and dozens of new, private long-distance carriers—is offering savings of 15 per cent or more off regular longdistance rates. Each company also claims that the discounts that it offers are “for real,” unlike those of its rivals. But that is not all. For signing up immediately, customers are being offered special bonuses, ranging from a cheque for $15 to a free month of phone calls or department store discount points. By using an affinity credit card to pay for calls, others can earn frequent-flyer miles or points towards the purchase of a new car.

The marketing deluge has been triggered by so-called equal access, which took effect on July 1 in Ontario, Quebec, Atlantic Canada and parts of British Columbia, and will be in place in every province except Saskatchewan by next June. Under a June, 1992, Canadian Radio-television and Telecommunications Commission (CRTC) decision, Canadians can

now designate any company as the principal carrier for their long-distance calls. In the past, all calls made by dialling the digit 1’ plus the relevant area code and number were routed through the Stentor phone companies’ systems. Customers wishing to realize discounts provided by Unitel Communications Inc., or resellers (the term stems from the fact that almost all of them lease lines from the phone companies), had to dial an extra sevento 17-digit code before the number to access the service. That has helped Bell Canada and the other Stentor telephone companies to maintain a 90-per-cent share of the $6.4-billion Canadian long-distance market. But with equal access, Unitel and the resellers are predicting that they will soon grab up to one-third of that business. Mindful that such a shift is exactly what happened in the United States in 1984 when MCI, Sprint and other new long-distance companies were allowed to take on the giant American Telephone & Telegraph Co. (AT&T), Canada’s Stentor group is fighting back with discounts and advertising campaigns of its own. “Our goal is to minimize erosion,” says Una MacNeil, associate director of consumer market management for Bell Ontario. Angling for the phone companies’ business are half a dozen large competitors—Unitel, Sprint Canada Inc. and ACC TelEnterprises Ltd., all of Toronto; the Markham, Ont.-based Smart Talk Network; Lonorola Inc. of Montreal; and Vancouverbased CAM-NET Communications Inc.—as well as dozens of other smaller upstarts.

The marketing strategies that those companies are employing vary widely. Unitel and Sprint are banking heavily on advertising. Unitel reportedly spent more than $20 million on advertising last year. Carleen Carroll, Unitel’s manager of public affairs, declines to confirm or deny that figure, but she adds that the company doubled its TV advertising starting in April. Sprint Canada is to unveil new TV commercials this week featuring Candice Bergen, the successful star of Sprint’s U.S. TV ads. Being bilingual, she will pitch the company’s services in both Quebec and in English Canada.

The Smart Talk Network, by contrast, relies almost exclusively on its aggressive door-to-door sales force of 1,500 agents, which has won it 500,000 subscribers over the past three years. “People lying in bed watching TV aren’t likely to get up and go to the phone and order long distance just because they’ve seen a commercial,” says Smart Talk Network chief executive Mark Silver. But Sprint Canada chairman Juri Koor counters that his company is trying to project “a high-class image.”

Despite the blizzard of promotional material, it appears that many consumers are simply confused. “I’ve used five services, but I’m not sure which one I chose for the 1-plus service,” says Mark Lawrence, who admits that he ought to know better—he is the technology-and-telecommunications-industry analyst for the Toronto-based brokerage firm Loewen Ondaatje McCutcheon Ltd.

Whatever company consumers choose, most industry analysts say that price differences will disappear as competition intensifies. But after the cuts in long-distance rates take effect, many consumers may eventually be forced to reach deeper into their pockets due to increased competition. Traditionally, Bell and the other phone companies have cross-subsidized the cost of local residential service with profits from long distance. But as they move to market pricing for all services, phone company executives say they will have to ask the CRTC to let them bring other rates in line with costs. In Bell Ontario’s case, MacNeil says the company charges an average of $11 a month for basic local service, but the true cost is close to $40. In the post-equal-access universe, promises of less may well mean payments of more.

JOHN DALY