Local And Long Distance Telephone Service example essay topic

I work for SBC Telecommunication which is the second largest telecommunication company in the world, and is ranked number 24 on Fortune's Magazine top 500 businesses in the world. SBC operates in thirteen states. SBC has been trying to enter the long distance market for over 18 years but to no avail. The Federal Communication Commission (FCC) and the Public Utilities Commission (PUC) kept denying their request to provide long distance service. SBC was told on many occasions that they had an unfair advantage over the other long distance companies. That they were a monopoly that gave them an unfair advantage over other telecommunication companies.

The telecommunication business is one the most competitive business's in the world. Long distance companies such as SBC, AT&T, Verizon, MCI, and Sprint are constantly fighting to stay on top. For SBC, getting into the long distance market was fundamental for their continued success. They were losing thousands of customers because other companies could offer local and long distance telephone service while SBC could only offer local telephone service.

In the beginning Long distance companies like AT&T, MCI, and Sprint controlled the long distance markets. Baby Bell companies like SBC, Verizon, and Bell South controlled the local telephone markets. Long distance companies could provide local Collier 2 telephone services to customers, but did not because it was not profitable for them. Baby Bell companies could not provide long distance telephone service at all. But just like all major businesses, monopolizing one market isn't enough; they wanted to get a controlling interest in the flood of money coming from long distance. Things began to change in 1996 when the Federal Communication Commission (FCC) passed a law that made it profitable for long distance companies to offer local services.

The FCC made all baby Bell companies sell their local telephone access lines to long distance companies at whole sale prices. This law called UNE-P "unbundled network elements platform", mandated the sharing of local lines so that independent phone companies could compete in local markets without having to build their own networks. This law allows long distance companies to lease phone lines and other facilities from Baby Bells at wholesale prices and resell access to them as local phone services bundle with long-distance services (Malik). SBC could only offer local services, and therefore began to loose thousands of customers to long distance providers. SBC and other Baby Bell companies cried foul. They stated that this gave long distance companies an unfair advantage.

This is because SBC and the other Baby Bell companies could not offer long distance telephone service. SBC said that they were losing money by selling their local telephone lines at wholesale prices. Per Ed Whit acre Chief Executive Officer (CEO), "it cost SBC $27 to maintain a telephone line but we have to sell it for $14". An article by Dana Cimilluca, from the Daily Record, which is a Maryland business and legal news website, said SBC Communication Inc. said that sales will fall for a third Collier 3 straight year because long-distance telephone companies are stealing local customers. Malik says, "That SBC has lost a billion dollars in revenue over the past three quarters in 2002 and will lose another $2.3 billion over the next year in its wire line business. Malik also writes that in 2002 the Baby Bells lost 11 million access lines.

The Detroit Free Press stated in an article on August 29, 2002 that SBC revenues fell from $51.4 billion in 2000 to $45.9 billion in 2001. They also report that in 2002 in a four-month period, AT&T took 100,000 customers just in the state of Michigan alone. Telecom News, an on-line website that monitors telecommunication said AT&T announced that more than 50,000 Michigan households are now served by AT&T local service-just a few weeks after the company announced general availability. SBC knew that it was imperative that SBC be allowed to offer long distance service just to stay competitive. If SBC was not allowed to offer long distance, they would continue to lose customers by the thousands daily. Telecom News also stated that AT&T reported that those who have elected to change their local service from SBC to AT&T cite the convenience of having a single bill for local and long distance calling from a single company.

The pure economics of this is simple. SBC will fail to be the second largest telecommunication company if they are not allowed into the long distance market. No company could survive loses that SBC has taken. In January of 2003, reprisal came at last for SBC as they were finally allowed to offer long distance service in the state of California.

SBC knew approval would soon come to their other twelve states which they offer local telephone service in. According to Robert Collier 4 Mullins of Business Journal, SBC, of San Antonio, Texas, is expected to quickly become one of the largest long-distance phone service providers in California now that it has been given state and federal approval to offer the service in this state. Given its size, marketing strength and the fact that it already is a presence in most people's homes as the local phone company, SBC is expected to quickly catapult to a strong position in long-distance service. In conclusion, in the world of economy where money rules, the company with the most customers wins. Since SBC has been allowed to offer long distance they hope to dominate long distance like they do local service. SBC will know shift its gaze to conquering the global market.