Access across the miles - long-distance telephone services for small businesses

Black Enterprise, August, 1992 by Carolyn M. Brown

The cost of doing a business over the phone may become cheaper for small business owners thanks to a variety of new savings plans from long-distance carriers. These plans allow small companies to call anyone, any time and anywhere in the world at discount prices - a privilege once enjoyed only by large businesses.

Typically, under American Telephone & Telegraph Co.'s Software Defined Network service, Fortune 500 customers have received a 20% to 40% discount off regular rates. Also, large firms have been able to get volume discounts under AT&T's tariffed services. For instance, those customers whose phone bills were around $200,000 per month and who signed on for three to five years with AT&T got reduced rates.

Of course, this meant that the small business owner who spent $1,000 each month and could not commit long-term was left out in the cold. Now the three major long-distance carriers are offering small-business calling plans.

The recent surge in attention to smaller companies is no surprise, says James Warmack, an industry analyst with Link Resources Corp., a New York-based market research firm. "Small business is a viable market that has been overlooked, partly because no one realized the size of it," says Warmack. "Now everyone is rallying to cater to a primarily untapped, fast-growing market with tremendous buying power."

The more popular of these new calling plans are AT&T's Partners in Business program, MCI Communications Corp.'s Friends of the Firm and Sprint Corp.'s Business Clout program. These calling plans are not meant to fit the needs of a single small business. Instead, discounts off basic long-distance rates are given to a collective group of small businesses.

With AT&T's Partners in Business Program, for instance, a small business owner can save 20% by providing AT&T with the names of up to 20 most-frequently called domestic customers, suppliers and associates who all must be AT&T users. For international calls, there is a 10% savings on an eligible country of choice.

Another way the small business owner can save is to receive a 20% discount on the most-frequently made calls to a particular area code.

The Friends of the Firm plan that MCI offers is similar to that of AT&T's: Business owners must make calls to other MCI customers to receive a discount. So, a small business owner signing up with MCI would have to supply a list up to 20 business or residential phone numbers. These prospective clients must switch to MCI in order to get the savings. Friends of the Firm customers receive a 20% discount off MCI's regular rates.

Sprint's Business has a different twist from AT&T and MCI. The program allows a small business Sprint customer, who bills between $50 and $2,500 a month, to bundle its long-distance usage with other small businesses in the same area. Through Business Clout, Sprint merges the buying power of small business owners, who then receive as a group, savings of at least 20% off AT&T's basic direct-dial interstate rates.

While there are some small cost-savings, says Warmack, the primary objective of these calling programs is to increase market share and business for the long-distance companies who provide them. "Everything we've seen advertised so far shows a cost difference of mere pennies." The problem is that the discounts are totally dependent upon volume, he explains. "A small business is still going to have to make so many calls within a month in order to get a significant discount."

However, one way to sidestep the sign-up restrictions and volume limitations is to use an aggregating firm, which functions as a go-between for the telephone company and the business customer. Advantech Inc., whose headquarters is in Atlanta, works with the big three carriers to service businesses nationwide. Essentially, the 3-year-old company bundles its clients' telecommunications needs, representing a consortium of businesses to the long-distance telephone carriers in order to get rate discounts.

"Because we're doing the volume buying, the small business can piggyback off of us," says Advantech President Phillip M. Spencer. "Regardless of that company's size and unwillingness to commit long-term, they can get the same record rates as a General Motors Corp. or American Express Co."

But even if small businesses as a group are able to get volume discounts, how do these savings in dollars add up? "The discounts are based on the carrier's basic long-distance rates," says Rodney Lewis, executive vice president and managing partner with Advantech. "It's similar to going to a dealer and looking at the list price for a car. But how many people actually pay the price."

Even though rate discounts may be appealing to small business owners, there are other services that may be more viable. Long-distance carriers are providing a whole bunch of services from soup to nuts, including voice mail and messaging , conference calling and 800 numbers.