SBC Launches Into Long Distance

October 6, 2003
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The launching of long distance in Michigan enabled SBC Communications Inc. to roll out additional communications services and product packages that the company was previously unable to provide in the state.

SBC is now coupling long-distance service with national voice data transmission and management products for larger businesses that it’s offering in Michigan for the first time. SBC sees long-distance voice and data services as a major market in which to compete.

“We’re looking to become a major force in that particular product line,” said Joe Taylor, vice president for sales and operations for SBC in Chicago.

SBC’s long-distance entry puts it in even greater competition with fellow telecom giants AT&T and MCI in offering national long-distance data services in Michigan.

Companies that use national data services can expect to see firms compete aggressively for their business.

AT&T, spokesman Mike Pruyn said, is “not shaking in our boots” over SBC’s entry into the Michigan market.

“We’re certainly not going to roll over and play dead, I can assure you that,” Pruyn said. “We welcome them into the pool, the water’s fine and it has been very, very competitive.”

AT&T “considers itself the market leader” in long-distance telephone and national data services, with 54,000 miles of high-speed fiber-optic lines in the United States.

National data services account for about $9.9 billion in annual revenues for AT&T, compared to $13.4 billion for voice services, and is the growing rapidly. Data now accounts for 70 percent to 80 percent of the traffic on AT&T’s network and some industry executives and observers believe data traffic will soon surpass voice traffic, Pruyn said.

“Data is just growing by leaps and bounds,” he said. “The gap is closing quickly.”

The network service SBC now offers in Michigan link businesses with multiple locations around the nation. A manufacturer, for example, would use the service to connect its facilities and suppliers around the country via a private network, and a large retailer would use the real-time, high-speed connection with the corporate headquarters to report sales volume and inventory data.

The entry into the long-distance market in Michigan allows SBC, for the first time, to craft national networks for firms based in the state.

“Now we can handle all of those customer locations, no matter where they are located across the nation,” Taylor said. “From an application (standpoint), it’s really about bringing customers together and tying them together.”

SBC launched the new services in Michigan on Sept. 26, the first day it was eligible to enter the long-distance market in the state under a Federal Communications Commission ruling issued nine days earlier.

The San Antonio, Texas-based firm came out with numerous product packages that bundle long distance with local and wireless telephone and Internet services for both residential and business customers, as well as voice and data services for larger businesses.

“We’ve said it before — we could give customers more choice and services, and we think these products prove it,” said Steve Balasia, SBC’s vice president for government affairs in Michigan.

SBC pegs the market for long distance at $647 million in Michigan, $2.5 billion in the Midwest and $13.5 billion nationally.

The national data market is $30 billion, according to SBC estimates. In Michigan, the business voice market is worth $1.5 billion and the data market is estimated at more than $500 million.

As the newest long-distance competitor in Michigan, SBC plans to vigorously pursue those markets.

“We plan to be very, very aggressive in the market,” spokeswoman Jody Lau said.

SBC offers long distance throughout the entire state. Package prices offered now are good for only 12 months after a customer signs up, and competitors are questioning what will happen to prices afterwards.

Market forces and customers’ demands for predictability in pricing will work to keep SBC’s rate competitive, Balasia said.

“This is one of the most competitive markets in the United States, and that’s not going to change,” he said.

But it could change, local phone service competitors say, if SBC secures an increase in the wholesale rate it charges competing local telephone service to lease space on its network.

The competing local service providers fear that SBC’s request to state regulators to more than double the wholesale rate in Michigan would drive them out of business, eliminating the competitive market that has emerged in recent years for local phone service.

SBC contends that the present wholesale rate is too low and below its costs of providing network space.

SBC now offers long distance in nine of the 13 states in which it operates. Requests are pending in Illinois, Indiana, Ohio and Wisconsin, with an FCC decision for those states due by Oct. 15.      

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