telecom

Brandweek,  April 24, 2000  by Todd Wasserman

Tags: advertisement, AT&T Corp., Baby Bell, MCI Inc., NETWORKINGSprint CommunicationsTELECOMMUNICATIONSTelephony

• E-mail
• Print
• Link

HOT BUTTONS

Big Three ease spending

Dial-arounds dead

Baby Bells and others fight for rest of long-distance business

OVERALL

Spending flat

DARK HORSE

Will the relentless consolidation in the telecom business ever end? And will Sprint find happiness with MCI WorldCom? Most analysts agree eventually that the two will pair off, though the Federal Communications Commission has made noises to the contrary. That may be good news for MCI WorldCom CEO Bernie Ebbers, but not for anyone counting on making a living off telecom advertising. Ebbers is notorious for cost cutting, and has already put the brakes on MCI's spending.

Will wireless spur more spending?

MCI has cut spending across the board. Last year MCI devoted $650.4 million to measured media, according to Competitive Media Reporting, but don't expect that to continue this year. Similarly, a post-merger Sprint is unlikely to top the $214.6 million it spent last year.

AT&T, which has sunk billions into cable in a gamble that will either remake the company or hobble it, is similarly unfocused on advertising. The firm spent a whopping $824.5 million last year. The eased ad spending reflects not only consolidation, but what amounts to a paradigm shift for the long-distance business. Prices--and margins--have collapsed, throwing out of whack any calculations of a favorable return on expensive TV spending. Remember when Sprint was touting a dime a minute? Now the company offers a rate as low as 2 cents a minute with its "bucket of minutes" plan. That's the latest salvo in a price war that started with Sprint's "Nickel Nights" promo last summer.

MCI extended its 5-cent Sundays program to other nights and weekends. AT&T stuck with a 7-cent all-day plan. Aside from the usual price pressures, long-distance providers have to battle Internet-based telephony, which threatens to gut the whole business. That may have been one of the factors that encouraged AT&T and MCI to cut their spending on dial-around advertising this year. After spending $394 million to promote its 10-10-220 and 10-10-321 dial-arounds last year, MCI is now drastically cutting back, a rep said. AT&T, which spent $61 million promoting its 10-10-345 (formerly "Lucky Dog") service, is also easing its spending to focus on repeat users.

As if the Big Three telecom companies didn't have enough to worry about, now there are some Baby Bells on steroids to watch. Thanks to federal rulings, they are now free to pursue the long-distance business as well. Bell Atlantic began chasing that business in New York in January and Verizon, the likely name of the $53 billion Bell Atlantic-GTE merger--assuming that goes forward--will probably chase it into other states. Bell Atlantic has already branded its wireless unit, the result of a merger with Vodaphone, under the Verizon brand. Overall, Bell Atlantic hopes to put $300 million behind the Verizon rebranding, compared to $200 million in total spending last year and $120.5 million for GTE.

SBC, another giant Baby Bell, swallowed up Ameritech for $62 billion and is still in the process of sorting itself out. Most recently, SBC consolidated Ameritech's $85 million account at its roster ad agencies.

An SBC rep declined to comment on SBC's future spending plans. SBC spent $231.7 million last year and Ameritech $98.8 million, according to CMR.

BellSouth, which has broken two campaigns with an estimated total outlay of $80 million so far this year, is eager to recast itself as an Internet-savvy company, rather than a Baby Bell.

The non-Baby Bells are more of a crapshoot. Analysts say with all the industry consolidation, some are merely biding their time until they get bought out or find a merger partner. Indeed, Qwest recently entertained a bid from Deutsche Telekom. Qwest, which is merging with US West, may be looking to do some consumer long-distance advertising, but so far it has stuck with its "Ride the Light" branding campaign via agency J. Walter Thompson, New York. Alltel, the Little Rock, Ark., telco, keeps a low profile, but runs a profitable business pushing its telecom services packages with wry TV spots via Martin Advertising, Birmingham, Ala. Its next effort is set for June. Alltel spent $198.6 million last year.

COPYRIGHT 2000 Nielsen Business Media, Inc.
COPYRIGHT 2008 Gale, Cengage Learning