TELECOMMUNICATIONS
     

artwork by Bill McCoy

"I probably get two dozen cold calls a week from telecom companies trying to beat somebody's pricing," says Lincoln, vice president of information systems for Northern Virginia-based Bikes USA, a chain of retail bike shops. "And those are just the ones who manage to get through. I have no idea how many others never get to me. It's getting worse. They're all pushing the same discounts with not a lot of service behind them. And we've had our service slammed several times." Slamming is the practice of switching your carrier or billing you for services without authorization.

In 1993, Lincoln dabbled in purchasing ala carte communications services. He picked Herndon-based Net 2000 to help his rapidly growing operation restructure intracompany calls. "That started a great relationship," he says.

The two companies connected when Net 2000 co-founders were still operating under the Bell Atlantic agent program. Federal regulation precluded local telephone companies from selling equipment in their own territories, so the Federal Communications Commission mandated these agent programs. The agent program gave entrepreneurs, like Net 2000's four founders, entree to Bell Atlantic customers who needed equipment and consulting services.

As Bikes USA's needs changed, its relationship with Net 2000 flourished. And following passage of the Telecommuni-cations Act of 1996, Net 2000 sought competitive local exchange carrier status. The telecom provider launched local service in 1998. This past December Lincoln transferred his ala carte services to a bundled Net 2000 package. "Net 2000's pricing is aggressive. They may not always be the lowest cost, but their service level is extremely high."

Service, reliability and the ability to grow are the things that keep Lincoln loyal to hisnew provider. "They are extremely personable, and they don't use the techniques of those telemarketers," he says. "They are there when you need them, and I even have my agent's home phone number and pager. Generally a midsize company like ours doesn't get this kind of service. Maybe you get it if you're Microsoft."

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Telecommunications convergence has created a complex system of copper wires, optical fiber, wireless spectrum, coaxial cable and digital subscriber lines. It's easy to get mired in the technical jargon, the bundling deals and the pricing options.

Telecommunications shopping is confusing for even the most sophisticated business buyers. Do you buy the cheapest services ala carte? Local from one provider? Long distance from another? And broadband from yet a third? Or do you bundle it all into one package from one provider?

"Welcome to the jungle," says Charles Bostian, director of Virginia Tech's Center for Wireless Technology.

It's complicated. Yet recent studies indicate that businesses are searching for custom services. According to Boston's Yankee Group, 71 percent of midsize businesses surveyed are interested in bundling telecommunications services. But technology, infrastructure and available services vary from state to state and from city to city.

The market is filled with vaporware -- offerings that are advertised but not yet available, says Daniel Zito, a telecommunications analyst with Legg, Mason, Wood, Walker in Baltimore. "What we've seen in the industry is providers getting their hands on the assets to bundle, but actual true bundling is limited," Zito says. "With the pieces for bundling being assembled, within the next six to 18 months, we'll see real bundled offerings coming to the marketplace."

Choose a provider that will be around for the long haul, advises Robert Spekman, a professor in the Darden Graduate School of Business Administration at the University of Virginia. "Buying based only on price is not a good idea. Communications is the lifeline of any business," he says. "If you lose your communications connection, you're out of business."

Still, Spekman says it's worth jumping into the fray and finding out what's available. "If a business keeps waiting to buy, they'll never do anything," he says. "You want someone who will take responsibility for the service, someone who will be there for you. You want your provider to have skin in your game."

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Until Net 2000's Jeff Williams walked into Katherine Morrison's Norfolk office last August, she had no idea that her company, Clark-Smith Associates, had options for local phone service. "That's what got me looking," says the engineering firm's corporate secretary.

With eight phone lines, Morrison says her company was too small to get much attention. After switching to Net 2000 for local and long distance, however, the firm's per-line charges were cut in half, saving about $300 a month. And when there's a problem, she gets personal attention. "I like this one-on-one service," she says. "I'm not just a number, and we get everything on one bill. It divides our long-distance charges by line, which makes client billing much easier." This past month Morrison added broadband services to her company's package.

Opening up local phone loops has ignited competition, as emerging telecom companies challenge incumbent local carriers for the nation's $57 billion-a-year small to midsize business market. Phone lines have become a commodity to be sold and re-sold.

While Net 2000 resells voice and data capacity that it leases from other networks, the emerging telco is building its own $250 million network for local, long-distance and Internet services that will extend from North Carolina to Connecticut.

Net 2000 was started by four thirty-something friends working in Bell's sales and marketing trenches. They saw a void in the market. "We focused on medium-sized business client network needs," says Cory Marsan, a founder and senior vice president of the company. Some were skeptical, saying the foursome wouldn't be successful in their approach. Now the company that was started with credit-card debt, cashed-in retirement plans and second mortgages recently signed a $170 million contract with telecom giant Nortel Networks.

But big deals and big networks are no substitute for solid customer service. Marsan says the company wants to be the Nordstrom of telecommunications. "We want to be asking, 'What else can I do for you?'" she says. "We want to earn our clients' business. We don't want to hold them hostage to our service."

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About five years ago Springfield-based Versar Inc., a national engineering and consulting firm with 24 offices and 12 project sites, needed to expand its teleconferencing capabilities. The company chose MCI, says Larry White, vice president of corporate development. "Now we have weekly conferences, and MCI manages the entire process. They call the roll for us, and it's like having everybody in the same room.

"There are big-time benefits with bundling," White says. "Back in the days of ROLM switches, everybody was always blaming someone else. Now we have one provider. We call them, and they fix it. We want the experts to manage our telecommunications needs and get it off our backs."

Sprint was one of the first to market an integrated strategy with ION -- its integrated on-demand network. ION offers bandwidth and access options that appeal to all segments of the marketplace, according to analyst Jonathan Haller of Sterling-based Current Analysis Inc. In a recent report, Haller applauds Sprint's strategy, but boos its execution. "Although Sprint was the first to market with its convergence strategy, the company has failed to deliver on any of its ION initiatives," he reports. "The complete ION package won't be available until ... 2000."

Haller gives MCI WorldCom high praise for its ONNet, an integrated approach to delivering voice, video and data. "Unlike Sprint's ION, MCI WorldCom's ONNet deployment was devoid of hype, and services -- including local voice services -- were available immediately with ONNet's announcement."

According to Barry Zipp, director of ONNet, the bundled program is available in some areas of Northern Virginia. "ONNet is our stepping stone to our next generation of services," he says.

AT&T's area vice president, Linda Ragland, says AT&T plans to grow its integrated services -- called INC -- in the D.C., Maryland and Northern Virginia area. "The way things are changing with all our mergers, we can be the any-distance provider -- wireless, local, data, Internet telephony -- all in one shop," she says. But AT&T is rolling services out slowly to make sure it can deliver on its promises. "Right now it is a fairly individual process," she says. "We meet with customers to find out their needs and then tailor the package for them."

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Bell Atlantic plans to provide more DSL and ISDN lines in Northern Virginia later this year. Both offer faster connections to the Internet and are more affordable than fiber-optic T-1 lines.

But Paul Miller, a Bell Atlantic spokesman, says that as people prepare to one-stop shop, Bell Atlantic is at a disadvantage without being able to offer long distance. Until regulators declare the company's local markets competitive, Bell Atlantic is not allowed to offer long-distance service. "Where it stands right now is that New York will be the first [Bell Atlantic] state to get the go ahead to enter into long distance," Miller says.

Meanwhile Bell Atlantic is experiencing competition from a variety of new companies across the commonwealth. In Virginia Beach, Picus is piloting residential flat rates for long distance, and this fall it plans to roll out a flat rate business option called Clear Vision 50/50 in Richmond and in Hampton Roads. "It's still in the working stage," says Peter Cousin, director of marketing. "In our residential pilot, if someone spends $90 to $125 a month for long distance, they might choose long distance, Internet and local for a flat rate of $60."

Vienna-based Teligent, led by former AT&T President Alex J. Mandl, is among the top telecommunications contenders. The wireless company recently launched Smartwave -- a wireless long-distance, local, data and video service --in the Northern Virginia area. "We bypass the copper lines," says Vice President Robert Stewart. "And it's very affordable, often 30 percent less for local and long distance."

Companies looking for field capabilities, like paging, cellular and two-way radio, might want to check out McLean-based Nextel's digital wireless options. "This is not a phone," says Garrett Fisher, branch manager of Nextel's Peninsula branch. "It's a business tool and very valuable for a mobile work force." With two-way radio capability as part of the package, Fisher says workers can communicate over digital voice quality radios, without long-distance charges.

* * *

Some say Internet telephony is the future, some say it's digital wireless. Others predict the end of traditional copper wire connections.

Perhaps the future of telecommunications lies somewhere in the middle.

Until it all shakes out, however, experts recommend short-term contracts. Discuss short- and long-term requirements, and make sure the provider understands your individual needs. "Staying power is important. Credibility is important," says U.Va.'s Spekman. "And the integrity of what they configure for you is critical. ... Make sure it's going to work when they put it all together.

© JULY 1999, Media General Business Publications Inc.,
publisher of Virginia Business Magazine