New Threats to Old Phone Companies
Corrections or additions?
This article by Kathleen McGinn Spring & Bart Jackson was prepared for the April 30, 2003 edition of U.S. 1 Newspaper. All rights reserved.
Marketplace Moves
In the l960s — the decade that saw the rise of the
“unisex” hair salon — the big marketing idea was universal
appeal. Have your store or product offer something for everyone and
it will sell. During the 1970s, marketing trends shifted to specialization:
Put a deli in that supermarket. Then, in the 1980s, marketers became
more sophisticated and began to play with segmentation: Define and
target your customers; carve up your demographics and serve each segment
the very thing it craves. The 1990s took the trend a step further.
It was not enough to know who your customers were. You had to develop
relationships with them, and make them your friends.
So far, the new century has featured a new, if unimproved, tactic:
Hunker down & survive.
Surely we can do better, and techniques revealed by Pat Nunno Roque
in “Driving Success Through 2005” may provide a roadmap. The
seminar is one of many taking place at the annual conference of the
New Jersey Association of Women Business Owners (NJAWBO): The Road
to Success, which runs from Thursday through Saturday, May 1 through
3, at the Ocean Place Conference Center in Long Branch. Register online
at www.njawbo.com or call 732-683-0092.
Nunno, founder of Wayne-based marketing firm Business Boomers (www.businessboomers.com),
discusses new marketing trends and offers specific ideas for businesses
of all sizes.
“Watch the big boys if you want to know today’s marketing trends,”
advises Roque. McDonalds, for example, is moving toward efficiency
by simplifying its menu, and individualizing its restaurants with
regional decor. Toys R Us has abandoned its former “grab and go”
layout, designed to move customers in and out quickly, and replaced
it with a attractions — including a giant ferris wheel in its
flagship Times Square store — that are enticing enough to make
customers linger, and even make a special trip just for the fun of
it. Another new Toys R Us tactic is the creation of multi-sensory
mazes where the customers seeking, for instance, a car seat, must
first pass by all the toys associated with that seat, along with any
other toy a child in the car seat years might crave.
For the past 13 years, Roque has been not only tracking such trends,
but also helping to create them for clients. Born and raised in Bergen
County, Roque attended Rowan University, where she studied marketing
and communications. In l988, she moved to Wayne and founded Business
Boomers, assembling a team that has launched promotions for DeBeers
Diamonds, Motorola, Met Life, Quaker Oats, the Infinity automobile,
and the U.N. She recently obtained her M.B.A. online from Thomas Edison.
She praises the university’s alternative learning options, saying
“it’s the only way a person like me could do it.”
While small businesses can learn from the trends and tricks of massive
corporations, Roque cautions that customization is the key to successful
marketing. Each business owner must choose the tools that are going
to bring in and keep the most customers:
Plan to make complementary sales. The big new marketingtrend is a shift toward targeting the consumer for all the purchaseshe is likely to make. Each potential customer has 10 to 25 variablebuying habits that, Roque insists, can be determined just by the factthat he has walked through your door — or visited your website.For example, if you have sold a middle-age man a bicycle, you knowthat this individual is probably interested in health. Stocking energybars and food supplements becomes an option, as does offering dietaryexpertise.Age, marital status, shopping and travel habits can all be discernedfrom his questions, purchases, and answers on the questionnaire youhave him fill out. These will help you customize an array of offerings,possibly including trips, accessories, outdoor clothing, and freebike route maps. By becoming a partner in his biking adventures, yourshop becomes a destination for all his athletic and outdoor needs— throughout the whole year. “Don’t forget seasons,” remindsRoque. In winter we burrow in, repair summer sports equipment, considertrying a new winter sport, buy comfort food, and crave anything madeof wool or Gortex. We also pine for the next warm season. How canyour products satisfy these natural cravings?Form strategic alliances. What you cannot sell throughyour business, you may be able to sell through a partner’s business.You may own a health spa, but know nothing about preparing sushi.Knowing that your customers see sushi as a healthy, tasty, and trendyfood, you might link with a nearby Japanese restaurant with whom youcan work out a short take-out menu for your many time-pressed customers.Yoga wear and accessories could be sold on consignment from a localboutique. Expanded offerings makes your shop a hub.Another type of alliance Roque encourages owners to seek out is withcustomer groups. What sort of clubs or businesses might use your product,and what groups would enhance your business? In the case of the spa,giving a discount to the local police and sheriff’s departments wouldnot only broaden interest from the patrol people themselves, but mightresult in equipment purchases for the local station. Also, havinga gym full of law enforcement folk certainly adds to customer security.Look into cross-ventures. These can range from linkedpublicity promotions to linked online newsletters. Proximity can turnyour strip mall into a destination shopping place, suggests Roque.Gather the other vendors and set up an reciprocal coupon system thatoffers, for example, free dry cleaning delivery for all you pizzashop customers spending $25 or more. In turn the dry cleaner couldoffer his customers coupons for $5 off on a four-topping pizza.Cross-product links can even give your business an image boost. Invitethe Rolls Royce dealer or high-end jeweler to display his goods atyour spa opening and you position yourself as a business with cache.Another type of link, and a valuable one for time-starved customers,involves giving them an easy way to evaluate purchase options. A furniturestore, selling relatively complex products, might provide your customerswith chat rooms where they could speak with upholsterers, finishers,restorers, and repair shops.”Just because a business idea is sound,” says Roque, “itdoes not mean people will automatically think of it. You have to reacha little into your creative imagination.” A while ago, Roque neededto explain the value of membership clubs, participant offers, E-newsletters,and other marketing tools to a lecture-weary audience of businesspeople. They filed politely into their chairs, where they were bombardedby strobe lights and the theme song from Rocky. As the music reacheda crescendo, Roque bounced out, wearing a massive pair of red boxinggloves and hurling questions — written questions — at heraudience, and giving prizes for their answers. Hokey, outlandish,and undignified, sure, but also clever — and her audience hungon every word.— Bart JacksonTop Of PageClient ArchaeologyThey just don’t come by any more. All those old customershave vanished behind the curtain of hard economic times. A typicalresponse? Get out there and hustle up some new ones. While admirable,unearthing new customers rates high on labor and comparatively lowon profit. If you doubt this, think how you personally respond toa call from the insurance agent who has seen you through hurricanedamage and banged bumpers as opposed to those dinner-time cold callsfrom a stranger.”A Sleeping Giant: Reactivating Old Customers,” led by MargeryDavidson, is another one of many topics on tap for discussion atthe annual NJAWBO conference. (See story above for contact information.)Davidson is the founder of the Davidson Team (www.davidsonteam.com),a business advisory group in Aberdeen. She is an entrepreneur wholearned the art of growing a business by example. Her father, an electricalcontractor, ran a business out of his home, as did each of his fiveentrepreneurial children. Even Davidson’s husband was a home-basedbusinessman until he became an employee — in her firm.Shortly after arriving in New Jersey in l977, Davidson earned businessadministration degrees from Brookdale Community College and then fromRutgers. In l983, she founded Davidson’s Bookkeeping and Tax Service.Within five years she had gathered a team to offer business consultingservices ranging from financial planning to marketing. And while herwebsite, www.Davidsonteam.com, lists plenty of major corporate clients,she still favors her small business specialty.”It’s a tried and very true rule,” says Davidson, “80percent of your business will come from 20 percent of your clients.”So any business owner’s efforts are best directed toward trying tomake the most of every customer. This strategy is not only cost effectivein near term, but it also leads to a service reputation that attractsadditional clients.Recalling lapsed sheep. “It’s very typical for ownersto be resentful of customers who have abruptly stopped buying,”says Davidson. “There’s always a feeling that they’ve betrayedyou by consorting with some other firm.” But that may not be thecase at all. The disappearing act could be connected to a death inthe family or to tax woes. Make a personal call — not an E-mailor voice message — and inquire how your old client has been.”Calls to known customers net an average of an 8 percent return,”states Davidson, “as opposed to a .05 per cent return on coldcalls — if you are lucky.” Have some new products on handto discuss, but make the primary purpose of this renewal call theclient’s welfare — not the product pitch.Creating a service niche. Almost every major corporationin America has costed out the service factor and decided it is notworth it. Most will now go to any length to keep a customer from placinga call to a live human. Any number of companies provide no phone numberon their websites, forcing customers to fill in an E-mail form andsend it into the ether. Automated phone answering systems force customersto endure multiple, multi-branched menus before being granted permissionto leave a message in voicemail. The tacit motto has become: Realcustomer service is too costly, give ’em lip service instead.”This provides you with an excellent chance to distinguish yourself,”says Davidson. Access 24/7 is primary. Customers have to know thatthey can wake you at 3 a.m. and you will link them right back to themanufacturer for parts, repair, or any need. Lyndon Johnson, who wasnever supposed to win his first Congressional seat, made one rulewhile in office: “This shop does not close up until everybodywho has called today has gotten an answer — this day.” Theresult? Landslide victories.Keeping in touch. If you strive to keep business relationsstrictly business, clients will view you as merely a product pipeline,rather than a destination provider or problem solver. All businessis personal, with people seeking to purchase from friends, or at leastinterested acquaintances. Davidson suggests getting the local paper,and also papers serving clients’ home towns. Scan the obituaries,wedding announcements, and graduations. Look for some bit of newsinvolving your client. A simple card congratulating a longtime customeron his son’s graduation shows that you are not only concerned, butstartlingly on the ball.Nothing is as gracious as a personal note, and nothing so annoys asa form response letter. Customizing cards from a boilerplate letterelevates your communication beyond the realm of a standardized junkmail, yet offers a little efficiency. Hint: In order to avoid gettinglost in the Christmas mail crunch, Davidson opts to mail Thanksgivingcards. They’re more unexpected and arrive at a less frenetic time.Creating links and profiles. Odds are, any past customerhas provided you with a marketing profile offering some clues as towhat else he buys. If not, a questionnaire may fill in the gaps. Itis an old and effective trick to discover where else the customersdoes business, and then to forge links with these establishments.Establishing links via website, promotions, or contracts with otherfirms takes time, as does creating customer profiles. What makes mostsmall business people balk at this challenge is the time required.”But if you can systematize a procedure, it is amazing how muchof it can be performed by $15 an hour outsourced labor,” saysDavidson. If one person can perform 80 percent of a procedure thatdoubles 100 clients’ sales, he has more than paid his way.Old clients, like old friendships, will die from neglect. Yet, asthe most fertile source of business expansion, they are the most worthcultivating.— Bart JacksonTop Of PageInaugural Cornerstone WeekendBill Clinton’s participation in Renaissance weekendswas a big help in winning him an eight-year tenure in Washington’smost imposing mansion. Begun in 1980 by Phil Lader — attorney,land developer, former ambassador, and one-time candidate for thegovernorship of South Carolina — and his wife, Linda, the weekendsstarted out as the Laders’ attempt to bring together friends, andtheir families, for a New Year’s weekend featuring serious discussionof the events of the day and of important trends on the horizon.Clinton became a regular, and the event, which is held on Hilton HeadIsland, has attracted hundreds of other luminaries, including at leastseven presidential candidates, Oscar winners, high-profile journalists,foreign dignitaries, astronauts, writers, and a number of CEOs. Familyand outdoor activity — lots of golf — were woven into theRenaissance weekends from the start.Now New Jersey is starting its own version of the Renaissance weekend.Sponsored by the New Jersey Chamber of Commerce, the first annualCornerstone New Jersey Weekend takes place on Friday and Saturday,May 2 and 3, at newly-restored Congress Hall in Cape May. Membersof Cornerstone New Jersey, organizations that pay $10,000 to join,are invited to attend at no charge and to bring a significant otheror a guest. Invitations also have been extended to Governor McGreevey,to state commissioners, the state’s Congressional delegation, andto state legislative leaders.Accommodations at Congress Hall, a colonnaded structure dating to1816, which has played host to four American presidents, are approximately$200 a night for participants. Call 609-989-7888 for more informationor get complete details at www.cornerstonenewjersey.comMembers of Cornerstone New Jersey include AT&T, Bristol-Myers Squibb,Fleet Union/Wachovia, Johnson & Johnson, the New Jersey Instituteof Technology, Rutgers, Silver Line Building Products, and the Universityof Medicine and Dentistry of New Jersey.The program for the first Cornerstone weekend is centered on fourtalks. Juan Enriquez, senior research fellow and director, HarvardBusiness School Life Science Project, speaks on “As the FutureCatches You: How Genomics and Other Forces Are Changing Your Life,Work, Health, and Wealth;” Stan Davis, author of a numberof books, including Lessons from the Future and Blur, speaks on “It’sAlive: The Coming Convergence of Information, Biology, and Business;”Michael Gallis, whose firm consults on large-scale metropolitanregional development strategies, speaks on “Positioning New Jerseyfor the 21st Century.”Finally, David Stillman and Lynne Lancaster, principalsin BridgeWorks (www.generations.com), a company consulting on generationalissues in the workplace, speak on “Understanding How GenerationalDifferences and Diversity Affect Your Workplace.” (See excerpt,page 7.)In a phone conversation from her office in the Sonoma Valley, Lancasterrecounted how she and Stillman formed their partnership. “I wasdoing speech consulting,” she recalls. “He was a client.”She was a Baby Boomer, and he was a Gen Xer. A multimedia producer,he had come to her because he was preparing to give an important presentationto a group of CEOs. “He was wearing a ponytail,” she says.”He told me he wanted to start off his presentation by looseningup the crowd by having them play a game of Jeopardy.” She thoughtconservative attire, a hair cut, and an opener establishing his credibilityand laying out the foundation of his pitch would be a better idea.”We butted heads immediately,” Lancaster says. “We didn’tlike each other very much.”In a compromise, Stillman kept the ponytail, but wore a suit to hispresentation. He did get his audience playing Jeopardy, but only afterhe had established credibility. Clashing on a number of points, Lancasterand Stillman gradually came to like what they saw behind each other’sgenerational facade. They realized that each could teach the othera thing or two.Then a light came on. If this was true for them, was it not also truefor any number of cross-generational workplace pairings? Realizingthey had hit upon a phenomenon with myriad implications, the two formeda consulting company, BridgeWorks, which is based both in Minneapolis,Stillman’s home town, and San Francisco, Lancaster’s home town. Theyalso wrote a book, When Generations Collide: Who They Are. Why TheyClash. How to Solve the Generational Puzzle at Work (HarperBusiness).Lancaster, a young-looking graduate of the University of Minnesota(Class of 1982), says that she and Stillman, a 34-year-old graduateof the University of Wisconsin, are sometimes mistaken for a romanticitem. But no. “We’re both happily married,” she says, “butnot to each other.” Lancaster’s husband, formerly an HR executive,is newly retired, and she is stepmother to his two GenX sons. Thisgives her in-depth insight into three of the four generations sheand Stillman have identified as having significantly different valuesand work styles.The first, like her husband, are traditionalists. Born prior to 1946,their work ethic was shaped by the Great Depression. There is no foolingaround for this group. Loyalty is supreme, sick days are for wimps,and the company is rarely wrong. The next group is the great populationbulge, the Baby Boomers. Born between 1946 and 1964, they are, saysLancaster, “defined by their work.” No sacrifice has beentoo great for the furtherance of their careers. Eighty-hour weeks,travel to Hong Kong on an hour’s notice, weekends in the office, anexecutive MBA at night; nothing was too much to ask.Then come the GenXers, like Stillman and her stepsons, they were bornbetween 1965 and 1981. “I was shocked at their cynicism,”says Lancaster. This is not a generation, she discovered, that putsits employers on a pedestal — or even expects that they will bearound tomorrow. She finds that GenXers also question the ways thatwork is done. Raised on technology, they have no patience for “facetime.” While Baby Boomers believe it is important that their superiorssee them working, and like to be the last out of the parking lot,GenXers, realizing that work can be done anywhere, want the freedomof a flexible schedule.Seeing GenXers exiting early in the afternoon, Boomers may think theyare slackers. This is not true, says Lancaster, who finds that theGenXers are every bit as willing to work as hard as their elders.The perception does give rise to bad feelings in at work, though,and can hinder advancement for the GenXers.Lancaster sees the millenials, young workers born after 1982, as thegeneration with perhaps the highest expectations from their careers.The Boomer’s traditionalist parents, she points out, urged them to”get an education and get a good job.” For the traditionalists,often first generation immigrants, putting their children throughschool was a major accomplishment.Many of the millenials, raised by financially comfortable Boomer parents,have been urged to find fulfilling work. At the same time, they havea front-row-seat perspective on the homelife of parents who have giventheir all to their careers.They wouldn’t mind having the lifestyle their parents have earned,says Lancaster, but they don’t want to kill themselves to get it.Top Of PageHumans Direct,Computers FollowA sturdy fireproof robot wheels into a burning building.Its prime directive: Pick up the trapped child indicated on its heatsensor, and then, using the building’s blueprint, work its way outof the maze. Yet, halfway in, a heavy fiery beam collapses acrossthe robot’s path. Without hesitation, the robot scans around and searchesout a new route. It will save the child if possible, but it may abandonthat goal in favor of a higher goal — self preservation. A computer”thinking” like a man, employing layers of prioritized goals,which it reshuffles within a dynamic environment?Is this possible? Can we program machines to follow the human thoughtprocess? Should we? “The Cognitive Question: Human and ComputerThought” addresses these questions on Saturday, May 3, at 3:40p.m. at the Trenton Computer Festival at the New Jersey ConventionCenter in Edison. The speaker is cutting-edge artificial intelligenceexpert and roboteer Joseph Wetterling, who will explain thelinks between human and computer thought processing strategies, andprovides insight into what cyber creatures will greet us in the nottoo distant future.If your mother gave you your first Commodore computer at age 8, andby age 9 you had totally filled it with programs of your own invention,where would you be today? Well, if you were Wetterling, you wouldhave spent the last several years as an engineer at Cherry Hill-basedLockheed Martin Advanced Technology Labs creating ultimate artificialintelligence (AI) prototypes and placing them in remarkably humanoidthinking robots.Born in Hamilton, Wetterling earned computer science degrees fromMercer County Community College and Rowan University. A self-confessedtinkerer and inventor, Wetterling is now turning his high-tech talentstoward opening his own training and consulting firm in Moorestown.”We are the God of computers,” says Wetterling simply. “Andlike any creation, we must model them after ourselves; for we haveno other model at hand.” Thus the flow of even the most basiccomputer process follows humanity’s own patterns. Our desktops categorizeitems by mimicking man’s thought bundles. The concept of long andshort-term memory programmed into all computers is a method that ismore emulative than mechanical.We are the Pygmalions, and we have fallen fearfully in love with ourcyber creation, worrying what would happen if computers truly tookon lives of their own. To these fears, Wetterling responds that “whilewe bestow on computers all of our own seemingly limitless endowments,they must always remain lower on the creative tree. It is our psychologicalprocesses that are original.” We can always infuse new correctivedecision making processes in any program. Yet computers cannot reachback to their creators and tweak their cognitive processes and judgments.We are the masters, and yet through the artificial intelligence wehave programmed into our little gray boxes, we can learn quite a bitabout the workings of our own little gray cells.Path planning. All humanity bemoans the tyranny of theimmediate in our lives. “All I did today was put out fires,”we complain. We seek desperately to recast our lives, moving towardlofty goals, pausing briefly at only the most interesting and importantimmediacies, while eschewing the unnecessary. Our cognitive processwants to keep moving. Alas, our environment invariably foils thesecarefully crafted plans.Ah, but we can fulfill this fantasy perfection through our computers.Search engines seek and retrieve data, prioritizing long and short-range goals constantly. Wetterling’s mobile search and rescue robotis based on algorithms that break its moves down into small goalsto deal with its changing environment. The robot, which all of uswould gladly sacrifice for the life of a child, must still containenough self-preservation programing so it (he?) won’t ignore the beamcrashing in its path. In other words, the robot rescuer has to beimbued with sufficient heroism, but this heroism can’t make it foolhardy.Hive mentality. The base animal intelligence of sharinginspires one individual who finds food to report back this benefitto the hive, rather than just satisfy his own needs. The advantagesof such behavior are obvious, and when transferred into software theyprovide amazing hive dexterity. Robotic swarms can “analyze”a damaged instrument’s circuitry, laboriously tracing each line. Whenone machine finds a break, infrared signals go out to his mechanicalwelding buddies, each of whom rolls to the spot and begins re-weldingthe breaks within that area. Such a smart technique saves time andenergy — both in society and in its tools.Emotions. “How does that make you feel?” asksthe voice in the chat room. The despondent lost soul, grieving fora lost friend, speaks his answer. Then the respondent encourages himto go on. The griever is seeking comfort from a totally electronicpre-programmed piece of therapy software. Some argue that the softwareis capable of offering at least as much sympathy and feeling as theirlast homo sapiens psychiatrist. In a study, this program was furtivelyintroduced into workplace computers. Even after the computers’ ownerslearned that no human being was at the other end, over 70 percentcontinued logging on to obtain comfort.”Here again,” notes Wetterling, “it is merely a case ofhuman cognitive modeling.” Linguists analyze the natural patternsof human language, blend in the semantics, and list the appropriateresponses. For example, upon being told about the death of a lovedone, the computer is fed the proper obligatory noises of sympathy.Compassion, concern, even anger can be simulated.Intelligence. The big fear, and a wonderful subject forscience fiction, is that computers will become smarter than theirmasters. Will this happen? “Never smarter,” Wetterling says,”only faster.” The computer’s ability to calculate so swiftly,to such fine extremes, makes possible tasks far beyond our capabilities.Life is not long enough for even the most agile of mathematiciansto trace satellite GPS signals or to calculate the distance to thefarthest stars. But while they undeniably can be blazingly fast, computersoperate according to a set of rules imposed by a programmer, and theydemand the constant hand of man to keep functioning. Artificial intelligencecan be very clever, but yet not creative.Virtual reality. Will those little computerized spidersfeatured in the futuristic film “Minority Report” turn upany time soon, making retina scans in accordance with Patriot’s ActIV? “Well, the technology is to a large extent in place,”says Wetterling. He himself has designed two palm-sized robots withIngram hive swarming capabilities. The retinal scan soon will be readyto implant. “And believe it or not,” he says, “the navigationof such creatures is relatively near at hand.”However, much more valuable — and more likely — are virtualreality improvements. The next step, Wetterling predicts, will bethe addition of touch and hearing to the graphics of computer interfacing.The computer screen across which Minority Report’s Tom Cruise sweepsimages, sounds, and tactile feelings is on the horizon. Imagine thevictim of a Manhattan hit-and-run receiving a virtual examinationand diagnosis from a Swedish specialist while the doctor sits in hisStockholm study and the victim races uptown toward a hospital.As to how these high tech changes will effect our daily living, Wetterlingplaces the reins solely in our hands. We do not have to destroy ourprivacy, just because we have means to do it. “The upside of computersis that they will do whatever you ask of them,” he says. “Thedownside is the same thing.”— Bart JacksonTop Of PageNew Threats to Old Phone CompaniesFor how long do you prop up a bad king, just becauseyou need government? For how long do we prop up the teetering regionalBaby Bell phone companies, just because we need telecommunications?If judgment on these questions gives you pause, you are not alone.The FCC is still waffling over this latter quandary. Such variablesas old-versus-new technology, fair competition, consumer cost issues,satellites, and an ever-broadening band of wireless possibilitieshave further muddied telecommunications’ waters — which haven’tbeen all that clear in decades, ever since the breakup of AT&T.To find what will become of this high-potential, poorly-managed industry,tune in to “Macbeth, the FCC, and the Future of Telecommunications”on Saturday, May 3, at 11:20 a.m. at the Trenton Computer Festivalin the New Jersey Convention Center, Raritan Center in Edison. PresenterSteve Cherry is senior associate editor of IEEE Spectrum Magazine(www.ieee.spectrum.org) and past president of the New York AmateurComputer Club.In an industry heavily affected by computer issues, Cherry pointsout that what should be one of our nation’s richest and most stableindustries is currently marked “by greed, scandals, misguidedderegulation, and poor business models.” He predicts that “itis not going to remain as it is for very long.”Cherry’s unusual training has allowed him to track the progress ofthe telecom industry with more than a casual eye. Son of a mechanicalengineer, Cherry grew up in Queens and attended the State Universityof New York at Genesco, studying philosophy and mathematics. Afterdoing graduate work in philosophy, Cherry began an editorial career,joining American Computing Machines (ACM), where he founded NetWorkingmagazine. His work has appeared in Internet World and Computer Shopper.At Spectrum, he specializes in Internet Protocol (IP) and telecommunications.When AT&T was ordered to end its monopoly, seven regional phone companiessprung up, and became known as the “Baby Bells,” or sometimesas the “Seven Dwarfs.” A major goal of divestiture was greatercompetition for telecom dollars. In point of fact, Cherry notes, thebreak up has in no way promoted local competition. Instead, in thefootsteps of their parent company, these firms have basked in thefull advantage of selected Federal Communications Commission (FCC)regulations, and have resisted all new firms and innovation.Keeping down the upstarts. While dabbling in the Internet,RBOX, DSL, and other Internet-based technologies, Verizon and theother Baby Bells have depended on voice and local communications astheir sacred cash cow, says Cherry. These Incumbent Local ExchangeCarriers (ILECs) have the wires — and the satellite augmentation.Granted, the Telecommunications Act of 1996 insists that any legitimatecompetitor, referred to as a CLEC, a competitive local exchange carrier,is allowed to tap into the network at any point, thereby, for example,allowing a Sprint customer to make a call from mid-Manhattan to Montana.The rates for this line rental are regulated by the FCC, not by theBaby Bells, which are renting the wires.Cherry says the Baby Bells are not thrilled with this system. Theircompetitive plan, says Cherry, has been to make the switching processso outlandishly complex — for both the CLEC and its customers— that they will buzz off in disgust. Meanwhile, the Baby Bellshave been lobbying the FCC, complaining that the rental rates areso low they are bankrupting the line owners. Cherry reviews theircomplaints wryly: “If truly the FCC’s rates were below the actualcost, why didn’t the Seven Dwarfs start renting from each other?”Consolidating. Of the seven original regional firms spunoff from AT&T, only Verizon, Bell South, SBC, and Qwest remain. “AndQwest,” notes Cherry, “is very much on its deathbed.”The main reason he gives is that voiceover’s days as the cash cowof the communications industry are over. Free telephony and Internetcommunication have caused any number of consumers to leave their phonehandsets parked in their cradles. Meanwhile the old regional phonecompanies are seeing their most profitable types of calls go away.Just as the first class, one-page letter carrying a 37-cent stampis the profit leader for the Post Office, so too are the quick localcall and the oft-relayed international call — think Princetonto Tanzania — the profit leaders for the regional phone companies.Take these calls away, and the wired lines are left with only themost expensive of transactions.New technology has whacked more than a dent in the old systems. Cablemodems and Digital Subscriber Lines (DSL) have moved strongly intothe U.S. market, and DSL has become the norm for most other heavily-phone-dependentnations. AOL, Yahoo, and similar firms are handling 70 million instantmessaging units at any given moment. The trouble has been bringingDSL and cable into the home. The last mile has been the most difficult.Tens of millions of households still have no access to either DSLor high-speed Internet.But even these families soon will have a broadband option. For a one-timecost, customer will be able to buy a link and an approximately eight-footantenna to point at a communications hub. Radio waves will connectboth his voice and his Internet messages point-to-point via the sameflow of electrons.Rescuing the regionals. In February of this year, theFCC reworked the 1996 Telecommunications regulations in a move thatoffered both crutch and rabbit punch to the remaining Baby Bells.The good news (for them) was that tapping into the existent wire systembecame more difficult and expensive. Now, the CLECs may tap in onlyat major points in the wire system, and they must contract for theentire data bundle. Further, the rates for this access are deregulated,and the ILECs get to set the rates.But not all the candy went to AT&T’s desperate children. In the samerevision, the FCC allows inter-exchange carriers, like MCI-Neighborhoodand other long distance companies, to enter the local loop and openlycompete for an individual’s full phone service.”In the short run,” says Cherry, “the four remaining ILECscan look forward to a great flush of cash. But in the long run, thesenew long distance firms may topple them. Certainly the strictly localfirms will definitely go under.”Moving ahead. Most of the old regional carriers are hopingto retain customers by offering attractive flat-fee rates. “Thisis just a stopgap,” says Cherry. “Verizon is offering $55(for all local and long distance calls), while broadband company Vonageoffers the same package for $40.”Cherry insists that plenty of gold remains in selling telecom services,but he does not think it is likely to be prospected by the currentcompanies. Broadband, DSL, cable, and evensatellite service will takeover copper wire voice technology sooner than foreseen. He picks companiesthat can combine broadband with cellular service, Motorola for example,as the best bets in the coming decades.And what does Cherry’s crystal ball foresee for the four remainingregional phone companies? “Anyone can make money by pooling thepower of the grid,” he says. Are the regional companies cleverenough to capitalize on fiber optic technology in the next five years.Maybe, maybe not. But, Cherry says, their very existence depends onit.— Bart JacksonNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
