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Table of Contents
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19

Chapter 19:
TPC, Ltd. Case

The Case

Shera nervously looked around her brand new office. She had only been at her new job at TPC, Ltd. for one week. Already her desk was littered with newsletters, phone messages, faxes and internal company summaries. On her first day, her boss Lisa had come in and made clear, in no uncertain terms, just how critical her job was to The Phone Company.

"Shera," Lisa had begun, "I don't want to get surprised again like we did last year on that bill." Lisa refered to an embarrassing incident in which The Phone Company had been caught unawares by an "innocuous" provision in the Telecommunications Reform Act of 1996, a provision which had taken a significant chunk out of TPC's bottom line. Somehow no one at the company had even seen it coming!

"We want you to keep an eye out, to monitor the situation with the Feds, " Lisa had said. Shera knew she had been hired to keep tabs on the Federal legislative and regulatory situation. She just wasn't sure yet how she was going to do it. Most of the time, by the time something appeared in the newspapers, it was already too late. And then today, her boss had said she wanted her to also monitor what the competition was up to! How could she keep up?

Some Background

TPC, The Phone Company, is a hypothetical provider of residential and business phone lines in the upper midwest and northwest area of the United States. In telecommunications industry terminology, TPC is a telco. The marketing environment for American telecommunications companies like TPC is complex and changing rapidly.

Some of the key government players in this arena include the Federal Communications Commision, which has an important regulatory role. The FCC regulates phone companies through its Common Carrier Bureau. The FCC has recently begun to issue complex rules to pave the way for competition in the local telephone loop, an issue of great concern to TPC, Ltd. Traditionally, the role of government has been to insure "Universal Access" to the phone system for all citizens, and to insure that "scarce resources" are used for the public good. But more recently, the FCC has focused on making sure that new local phone competitors get a level playing field against companies like TPC which control one of the wires going into almost all American homes. Conversely, the FCC also fears that the telcos will leverage their captive audience to jumpstart their sallies into other businesses such as long distance phone service.

More Executive branch information is available in the form of the Clinton administration's National Telecommunications and Information Administration web site. The NTIA looks at issues pertaining to the emerging "information highway," as it were. Legislative information of all kinds is available from the Libary of Congress Web Site.

Those are some governmental bodies Shera needs to monitor, but it is far harder to figure out who exactly might be competing with TPC. Telephone companies like TPC have long been considered natural monopolies. Just as you only have one water pipe coming into your home, why should you have redundant wires? In recent years, however, new competitors have sprung up offering phone lines. These new companies are usually called competitive access providers or CAPs. CAPs have generally restricted their activities to business customers in high density city centers. One such company is Metropolitan Fiber Systems, recently purchased by Long Distance provider LDDS WorldComm. Key issues up in the air at this time are how "portable" your local phone number will be if you decide to switch to a competitor, how the local phone company and its competitors will interconnect and co-locate equipement, and the terms by which competitors will be allowed to lease phone company wire "plant" and other infrastructure.

Something more than a decade ago Judge Harold Greene oversaw the break up of AT&T. A set of new companies was created, each providing local telephone service in a different geographic region. These Regional Bell Operating Companies (RBOCs) are now spending some serious lobbying dollars to be allowed into other areas and be protected in their home turf. All of the surviving (several have been bought in the recent years) RBOCs are on the net: SBC, Ameritech, Bell South, US West, and Bell Atlantic. Just to give a flavor of the threat here, one important profit center for TPC is its Yellow Pages directory. Already Bell Atlantic offers an online service it calls Big Yellow which provides yellow pages for the whole US.

In addition to the RBOCs, there are many independent telephone companies, such as GTE or Sprint - Central Telephone, who might check out the prosperous rural region served by TPC.

Long distance companies such as MCI, Sprint, AT&T and the aforementioned LDDS WorldCom, represent another set of potential competitors.

Not so long ago we generally received TV over the air and telephone over a wire. The situation is closer to the reverse today. Cellular phone companies such as 360 Communications, United State Cellular, Cellular One, and AirTouch might give the local wire-based telephone business a run for its money.

Advances in microprocessors have allowed companies to figure out how to send phone calls via TV cable. This means that the cable company in TPC territory might turn into a competitor, either on its own or perhaps by making an alliance with one of the companies mentioned above.

Some of TPCs revenue comes from medium distance toll charges it receives when it carries a call from one of its calling areas to another. Even this revenue is not safe; clever software engineering has allowed the Internet itself to serve as a mechanism for voice traffic. A piece of software called the IPhone allows people to make phone calls anywhere in the world for no additional charge above their internet access fee. One company involved in this effort is VocalTec. Another product is DigiPhone. Of course the long distance companies may also try to jump into the medium haul market.

All in all, it is a marketing enviroment in which the button has got stuck on Fast Forward, and Shera has her work cut out for her. But there are some other possible resources to look at. One is the Telecom Information Resources page maintained by Jeff Mackie-Mason at the Institute of Policy Studies at the University of Michigan. Another collection is the Computer and Communications Entry Page maintained at Lawrence Livermore Nuclear Labs. Two very timely resources are the Washington Telecom NewsWire and the online newsletter Tele.com. The Benton Foundation is a nonprofit which looks at telecommunications policy. They analyze pending legislative and regulatory action from the point of view of nonprofit groups. Information about Internet Telephony can be found at Voices on the Net, the Internet Telephony Consortium as well as the Virtual Voice.

Your Assignment

Using the links provided in the previous paragraph, and your knowledge of the phone market, answer the questions given below.

  1. List the main possible threats to TPC.

  2. Take your list and place it in order of severity. Which are the most dangerous and severe threats? Which are probably not going to be an immediate problem? Back up your order with some solid reasons.

  3. What opportunities are there for TPC? Do you see any emerging markets that TPC should investigate?

  4. Discuss some ways that US government action might impact TPCs business. How likely are these actions?


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