Profiting from the Great American Phone War: Out of America
Known for his commentary on international relations and US politics, Rupert Cornwell also contributes obituaries and occasionally even a column for the sports pages. With The Independent since its launch in 1986, he was the paper's first Moscow correspondent - covering the collapse of the Soviet Union – during which time he won two British Press Awards. Previously a foreign correspondent for the Financial Times and Reuters, he has also been a diplomatic correspondent, leader writer and columnist, and has served as Washington bureau editor. In 1983 he published God's Banker, about Roberto Calvi, the Italian banker found hanging from Blackfriars Bridge.
Wednesday 30 March 1994
If anyone doubts America is the land of competition, let him have a phone installed. For Luddites like myself, all that matters is that you regularly get through on a decent line. Whether the feat is made possible by British Telecom, by the electronic eavesdroppers of the National Security Agency, or by the Almighty in person is immaterial. One way and another, phone bills tend to look pretty similar and equally outrageous. Not so, however, from the vantage point of AT&T, MCI and Sprint, the three biggest long- distance companies. As one who makes frequent international and long-distance domestic calls, I am evidently a prize target. Defection to the upstart Sprint could not go unanswered. The phone hasn't stopped ringing, and my mental-arithmetic ability has been strained to breaking-point.
By signing up with Sprint, I had joined a plan offering a 20- per-cent discount on three numbers I rang most frequently and a 36-per-cent saving if one of these happened to be a Sprint subscriber (a cunning way to spread the gospel). Then MCI got into the act, touting its own discount scheme, PrimeTime, as well as a formula called Friends and Family, whereby you create 'calling circles' of up to 22 people, eligible for a 20-per- cent discount. That feat, alas, is well beyond my organisational powers. All pales, however, beside AT&T's effort to lure me back.
Its telemarketers have been on every week, promising all manner of discounts and promotional goodies. One is called True Rewards, which gives car-rental rebates, and frequent-flier miles. Another is TrueVoice, offering 'the clearest, most natural long-distance sound ever, absolutely free'. When these enticements failed, they sent a cheque - yes, a real cheque - for dollars 75 ( pounds 50), its sole condition that, upon payment into a bank account, you automatically rejoined AT&T. But, a spokesman explained to me, I was perfectly at liberty to take the money and promptly switch back to another company. I admit I haven't a clue which ultimately is the best deal. The reason I haven't cashed in my dollars 75 was fear of even more intense bombardment from the telemarketers. But ah, the joys of competition. Maybe the US phone companies really are the last resort of the free lunch. Sadly, not quite.
Obscured by the torrent of special offers (at least 300 of them, someone has calculated) is the fact that the three companies quietly upped their rates by 3.9 per cent last autumn. They now enjoy profit margins of 15 cents on the dollar - enough to finance the most lavish of advertising campaigns. And not only lavish, but essential. At stake is a market already worth dollars 70bn a year and growing by leaps and bounds. By 1996, new cables and satellites will have lifted capacity to more than 1 million separate calls per second between the US and Europe. To recoup their investment, the companies must find people to make these calls. And so the competition for my modest custom will grow fiercer still.
Making matters worse, there'll also be more suitors. Congress is likely soon to lift the ban on local phone companies, the so-called 'Baby Bells', from entering the long- distance market to do battle with the Big Three. MCI, meanwhile, is investing a fortune to set up its own local telephone networks. The result: a giant free-for-all, with the ultimate prize those information superhighways carrying phone, video, TV channels, computer data and the rest down phone lines. All of which induced one newspaper to describe AT&T's recently modernised long-distance network (which already generates income of dollars 40bn) as 'perhaps the most valuable business asset on earth'. Given that, plus the telemarketing harassment and mathematical agonies ahead, a dollars 75 cheque is the least I deserve. On second thoughts, I'll take the money and run.
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