Hawaii calling - profile of conference call business Aloha Conferencing Services

Nation's Business, June, 1993 by Michael Barrier

If there's a secret to small-business success, it's using to the fullest whatever resources are available--and, beyond that, seeing a resource where other people might not see one at all.

An example: time zones.

Hawaii, in the middle of the Pacific Ocean, lags the East Coast by five hours in the winter and six in the summer (when the mainland observers Daylight Saving Time). If a Honolulu firm wants to start its business day in sync with New York, it has to open its doors in the wee hours of the morning. But it reaps one great benefit: low rates for its phone calls to the mainland.

Four years ago, Richard Moody, the Hawaii manager for one of the major long-distance carriers, recognized in those low rates a foothold for a new business. He struck out on his own in May 1989, by starting Aloha Conferencing Services.

Aloha, which has since grown from two to 36 employees, is one of dozens of small firms--the spawn of telephone deregulation--that offer conference-call services of the kind that once were the preserve of AT&T. They provide the bridging points for calls that may bring together dozens of people, in as many places; Moody cites one weekly call that involves 26 locations, 12 of them outside the U.S.

A native of Tennessee, Moody, 50, has no technical background. He worked as an accountant in Washington, D.C., before moving to California and getting into the long-distance business as a salesman.

His initial financing came through a $200,000 loan from a state agency--a better deal for him than the private capital available, he says, because he didn't have to give up any equity. Moody had paid off the loan by the end of his third year in business.

Now debt-free, Aloha sells about 650,000 minutes a month of teleconferencing time, at 25 cents or 49 cents per minute, per location, depending on the service provided. Moody expects his 1993 revenues to total $3.5 million, up about 40 percent from last year.

When he started, with his conferencing equipment located in Honolulu, "that night rate was a tremendous advantage in keeping our costs low," Moody says. But now, ironically, Aloha's equipment is on the mainland, in New York and Los Angeles. "We tie to that equipment via dedicated data lines and voice lines," Moody says, "and operate it from here. Our calls actually originate from New York or L.A.; only the operators are in Honolulu." That way, Moody says, "we're guaranteed fiber for all of our connections--and we get to stay in Hawaii."

Until this year, only one fiber-optic cable connected Hawaii to the mainland, and that cable, Moody says, was reserved mostly for international calls. When the cable filled up, Aloha's calls had to be sent by satellite, "and satellite connections are not always the best," he says. "With fiber, it doesn't matter how far away you are."

Aloha still enjoys a price advantage because of its Honolulu location--it does all of its telemarketing when night rates still apply. As for the conference calls themselves, Moody says, "we have evolved to the point that we now qualify for the highest discount rate that the long-distance carriers provide"--and that rate is the same, day or night, and regardless of where in the U.S. the calls originate.

Moody says his biggest competitive weapon is no longer price. All the big long-distance carriers now offer conferencing services, and they "put a lot of price pressure on us," he says. "We've lost some of our customers. But within a very short time, everyone we've lost has come back." He keeps--and wins back--customers "because we work with them," Moody says. "If you do a large call every Monday, the same operator will handle that call every time."

The risk of operator error is great, because each Aloha operator may be handling 10 conference calls at once. But the operators have a powerful incentive to provide perfect service: Not only does a highly automated system keep track of their mistakes, but an error-free performance brings a large bonus.

Before the bonus program, Moody says, "we were having five to 10 mistakes every day, per operator. Now we may have five mistakes a month, for all operators--and we're five times bigger."

Moody has no illusions about the hard road that lies ahead for his small company. "I must grow the volume to survive," he says. As he works at that, he thinks that his Honolulu location will give him an advantage that goes well beyond any savings from night rates.

"A vast percentage of our customers like doing business with us because they know they're talking to Hawaii," Moody says. "It brightens their spirits." When his telemarketers call firms on the mainland seeking new business, they may have to talk to several people before hitting pay dirt, but "there is always somebody in an organization who has a sensitive ear to a call from Hawaii," he says. "And we'll find them."