Client Archaeology

Inaugural Cornerstone Weekend

Humans Direct,

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 marketing

trend is a shift toward targeting the consumer for all the purchases

he is likely to make. Each potential customer has 10 to 25 variable

buying habits that, Roque insists, can be determined just by the fact

that he has walked through your door — or visited your website.

For example, if you have sold a middle-age man a bicycle, you know

that this individual is probably interested in health. Stocking energy

bars and food supplements becomes an option, as does offering dietary

expertise.

Age, marital status, shopping and travel habits can all be discerned

from his questions, purchases, and answers on the questionnaire you

have him fill out. These will help you customize an array of offerings,

possibly including trips, accessories, outdoor clothing, and free

bike route maps. By becoming a partner in his biking adventures, your

shop becomes a destination for all his athletic and outdoor needs

— throughout the whole year. "Don’t forget seasons," reminds

Roque. In winter we burrow in, repair summer sports equipment, consider

trying a new winter sport, buy comfort food, and crave anything made

of wool or Gortex. We also pine for the next warm season. How can

your products satisfy these natural cravings?

Form strategic alliances. What you cannot sell through

your 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 trendy

food, you might link with a nearby Japanese restaurant with whom you

can work out a short take-out menu for your many time-pressed customers.

Yoga wear and accessories could be sold on consignment from a local

boutique. Expanded offerings makes your shop a hub.

Another type of alliance Roque encourages owners to seek out is with

customer 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 would

not only broaden interest from the patrol people themselves, but might

result in equipment purchases for the local station. Also, having

a gym full of law enforcement folk certainly adds to customer security.

Look into cross-ventures. These can range from linked

publicity promotions to linked online newsletters. Proximity can turn

your strip mall into a destination shopping place, suggests Roque.

Gather the other vendors and set up an reciprocal coupon system that

offers, for example, free dry cleaning delivery for all you pizza

shop customers spending $25 or more. In turn the dry cleaner could

offer his customers coupons for $5 off on a four-topping pizza.

Cross-product links can even give your business an image boost. Invite

the Rolls Royce dealer or high-end jeweler to display his goods at

your 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 furniture

store, selling relatively complex products, might provide your customers

with chat rooms where they could speak with upholsterers, finishers,

restorers, and repair shops.

"Just because a business idea is sound," says Roque, "it

does not mean people will automatically think of it. You have to reach

a little into your creative imagination." A while ago, Roque needed

to explain the value of membership clubs, participant offers, E-newsletters,

and other marketing tools to a lecture-weary audience of business

people. They filed politely into their chairs, where they were bombarded

by strobe lights and the theme song from Rocky. As the music reached

a crescendo, Roque bounced out, wearing a massive pair of red boxing

gloves and hurling questions — written questions — at her

audience, and giving prizes for their answers. Hokey, outlandish,

and undignified, sure, but also clever — and her audience hung

on every word.

— Bart Jackson

Top Of Page
Client Archaeology

They just don’t come by any more. All those old customers

have vanished behind the curtain of hard economic times. A typical

response? Get out there and hustle up some new ones. While admirable,

unearthing new customers rates high on labor and comparatively low

on profit. If you doubt this, think how you personally respond to

a call from the insurance agent who has seen you through hurricane

damage and banged bumpers as opposed to those dinner-time cold calls

from a stranger.

"A Sleeping Giant: Reactivating Old Customers," led by Margery

Davidson, is another one of many topics on tap for discussion at

the 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 who

learned the art of growing a business by example. Her father, an electrical

contractor, ran a business out of his home, as did each of his five

entrepreneurial children. Even Davidson’s husband was a home-based

businessman until he became an employee — in her firm.

Shortly after arriving in New Jersey in l977, Davidson earned business

administration degrees from Brookdale Community College and then from

Rutgers. In l983, she founded Davidson’s Bookkeeping and Tax Service.

Within five years she had gathered a team to offer business consulting

services ranging from financial planning to marketing. And while her

website, 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, "80

percent of your business will come from 20 percent of your clients."

So any business owner’s efforts are best directed toward trying to

make the most of every customer. This strategy is not only cost effective

in near term, but it also leads to a service reputation that attracts

additional clients.

Recalling lapsed sheep. "It’s very typical for owners

to be resentful of customers who have abruptly stopped buying,"

says Davidson. "There’s always a feeling that they’ve betrayed

you by consorting with some other firm." But that may not be the

case at all. The disappearing act could be connected to a death in

the family or to tax woes. Make a personal call — not an E-mail

or 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 cold

calls — if you are lucky." Have some new products on hand

to discuss, but make the primary purpose of this renewal call the

client’s welfare — not the product pitch.

Creating a service niche. Almost every major corporation

in America has costed out the service factor and decided it is not

worth it. Most will now go to any length to keep a customer from placing

a call to a live human. Any number of companies provide no phone number

on their websites, forcing customers to fill in an E-mail form and

send it into the ether. Automated phone answering systems force customers

to endure multiple, multi-branched menus before being granted permission

to leave a message in voicemail. The tacit motto has become: Real

customer 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 that

they can wake you at 3 a.m. and you will link them right back to the

manufacturer for parts, repair, or any need. Lyndon Johnson, who was

never supposed to win his first Congressional seat, made one rule

while in office: "This shop does not close up until everybody

who has called today has gotten an answer — this day." The

result? Landslide victories.

Keeping in touch. If you strive to keep business relations

strictly business, clients will view you as merely a product pipeline,

rather than a destination provider or problem solver. All business

is personal, with people seeking to purchase from friends, or at least

interested 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 news

involving your client. A simple card congratulating a longtime customer

on his son’s graduation shows that you are not only concerned, but

startlingly on the ball.

Nothing is as gracious as a personal note, and nothing so annoys as

a form response letter. Customizing cards from a boilerplate letter

elevates your communication beyond the realm of a standardized junk

mail, yet offers a little efficiency. Hint: In order to avoid getting

lost in the Christmas mail crunch, Davidson opts to mail Thanksgiving

cards. They’re more unexpected and arrive at a less frenetic time.

Creating links and profiles. Odds are, any past customer

has provided you with a marketing profile offering some clues as to

what else he buys. If not, a questionnaire may fill in the gaps. It

is an old and effective trick to discover where else the customers

does business, and then to forge links with these establishments.

Establishing links via website, promotions, or contracts with other

firms takes time, as does creating customer profiles. What makes most

small business people balk at this challenge is the time required.

"But if you can systematize a procedure, it is amazing how much

of it can be performed by $15 an hour outsourced labor," says

Davidson. If one person can perform 80 percent of a procedure that

doubles 100 clients’ sales, he has more than paid his way.

Old clients, like old friendships, will die from neglect. Yet, as

the most fertile source of business expansion, they are the most worth

cultivating.

— Bart Jackson

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Inaugural Cornerstone Weekend

Bill Clinton’s participation in Renaissance weekends

was a big help in winning him an eight-year tenure in Washington’s

most imposing mansion. Begun in 1980 by Phil Lader — attorney,

land developer, former ambassador, and one-time candidate for the

governorship of South Carolina — and his wife, Linda, the weekends

started out as the Laders’ attempt to bring together friends, and

their families, for a New Year’s weekend featuring serious discussion

of the events of the day and of important trends on the horizon.

Clinton became a regular, and the event, which is held on Hilton Head

Island, has attracted hundreds of other luminaries, including at least

seven presidential candidates, Oscar winners, high-profile journalists,

foreign dignitaries, astronauts, writers, and a number of CEOs. Family

and outdoor activity — lots of golf — were woven into the

Renaissance 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 annual

Cornerstone New Jersey Weekend takes place on Friday and Saturday,

May 2 and 3, at newly-restored Congress Hall in Cape May. Members

of Cornerstone New Jersey, organizations that pay $10,000 to join,

are invited to attend at no charge and to bring a significant other

or a guest. Invitations also have been extended to Governor McGreevey,

to state commissioners, the state’s Congressional delegation, and

to state legislative leaders.

Accommodations at Congress Hall, a colonnaded structure dating to

1816, which has played host to four American presidents, are approximately

$200 a night for participants. Call 609-989-7888 for more information

or get complete details at www.cornerstonenewjersey.com

Members of Cornerstone New Jersey include AT&T, Bristol-Myers Squibb,

Fleet Union/Wachovia, Johnson & Johnson, the New Jersey Institute

of Technology, Rutgers, Silver Line Building Products, and the University

of Medicine and Dentistry of New Jersey.

The program for the first Cornerstone weekend is centered on four

talks. Juan Enriquez, senior research fellow and director, Harvard

Business School Life Science Project, speaks on "As the Future

Catches You: How Genomics and Other Forces Are Changing Your Life,

Work, Health, and Wealth;" Stan Davis, author of a number

of books, including Lessons from the Future and Blur, speaks on "It’s

Alive: The Coming Convergence of Information, Biology, and Business;"

Michael Gallis, whose firm consults on large-scale metropolitan

regional development strategies, speaks on "Positioning New Jersey

for the 21st Century."

Finally, David Stillman and Lynne Lancaster, principals

in BridgeWorks (www.generations.com), a company consulting on generational

issues in the workplace, speak on "Understanding How Generational

Differences and Diversity Affect Your Workplace." (See excerpt,

page 7.)

In a phone conversation from her office in the Sonoma Valley, Lancaster

recounted how she and Stillman formed their partnership. "I was

doing 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 presentation

to a group of CEOs. "He was wearing a ponytail," she says.

"He told me he wanted to start off his presentation by loosening

up the crowd by having them play a game of Jeopardy." She thought

conservative attire, a hair cut, and an opener establishing his credibility

and laying out the foundation of his pitch would be a better idea.

"We butted heads immediately," Lancaster says. "We didn’t

like each other very much."

In a compromise, Stillman kept the ponytail, but wore a suit to his

presentation. He did get his audience playing Jeopardy, but only after

he had established credibility. Clashing on a number of points, Lancaster

and Stillman gradually came to like what they saw behind each other’s

generational facade. They realized that each could teach the other

a thing or two.

Then a light came on. If this was true for them, was it not also true

for any number of cross-generational workplace pairings? Realizing

they had hit upon a phenomenon with myriad implications, the two formed

a consulting company, BridgeWorks, which is based both in Minneapolis,

Stillman’s home town, and San Francisco, Lancaster’s home town. They

also wrote a book, When Generations Collide: Who They Are. Why They

Clash. 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 graduate

of the University of Wisconsin, are sometimes mistaken for a romantic

item. But no. "We’re both happily married," she says, "but

not to each other." Lancaster’s husband, formerly an HR executive,

is newly retired, and she is stepmother to his two GenX sons. This

gives her in-depth insight into three of the four generations she

and Stillman have identified as having significantly different values

and 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 fooling

around for this group. Loyalty is supreme, sick days are for wimps,

and the company is rarely wrong. The next group is the great population

bulge, the Baby Boomers. Born between 1946 and 1964, they are, says

Lancaster, "defined by their work." No sacrifice has been

too great for the furtherance of their careers. Eighty-hour weeks,

travel to Hong Kong on an hour’s notice, weekends in the office, an

executive MBA at night; nothing was too much to ask.

Then come the GenXers, like Stillman and her stepsons, they were born

between 1965 and 1981. "I was shocked at their cynicism,"

says Lancaster. This is not a generation, she discovered, that puts

its employers on a pedestal — or even expects that they will be

around tomorrow. She finds that GenXers also question the ways that

work is done. Raised on technology, they have no patience for "face

time." While Baby Boomers believe it is important that their superiors

see them working, and like to be the last out of the parking lot,

GenXers, realizing that work can be done anywhere, want the freedom

of a flexible schedule.

Seeing GenXers exiting early in the afternoon, Boomers may think they

are slackers. This is not true, says Lancaster, who finds that the

GenXers 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 the

generation 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 through

school 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 have

a front-row-seat perspective on the homelife of parents who have given

their 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 Page
Humans Direct,

Computers Follow

A sturdy fireproof robot wheels into a burning building.

Its prime directive: Pick up the trapped child indicated on its heat

sensor, and then, using the building’s blueprint, work its way out

of the maze. Yet, halfway in, a heavy fiery beam collapses across

the robot’s path. Without hesitation, the robot scans around and searches

out a new route. It will save the child if possible, but it may abandon

that 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 thought

process? Should we? "The Cognitive Question: Human and Computer

Thought" addresses these questions on Saturday, May 3, at 3:40

p.m. at the Trenton Computer Festival at the New Jersey Convention

Center in Edison. The speaker is cutting-edge artificial intelligence

expert and roboteer Joseph Wetterling, who will explain the

links between human and computer thought processing strategies, and

provides insight into what cyber creatures will greet us in the not

too distant future.

If your mother gave you your first Commodore computer at age 8, and

by age 9 you had totally filled it with programs of your own invention,

where would you be today? Well, if you were Wetterling, you would

have spent the last several years as an engineer at Cherry Hill-based

Lockheed Martin Advanced Technology Labs creating ultimate artificial

intelligence (AI) prototypes and placing them in remarkably humanoid

thinking robots.

Born in Hamilton, Wetterling earned computer science degrees from

Mercer County Community College and Rowan University. A self-confessed

tinkerer and inventor, Wetterling is now turning his high-tech talents

toward opening his own training and consulting firm in Moorestown.

"We are the God of computers," says Wetterling simply. "And

like any creation, we must model them after ourselves; for we have

no other model at hand." Thus the flow of even the most basic

computer process follows humanity’s own patterns. Our desktops categorize

items by mimicking man’s thought bundles. The concept of long and

short-term memory programmed into all computers is a method that is

more emulative than mechanical.

We are the Pygmalions, and we have fallen fearfully in love with our

cyber creation, worrying what would happen if computers truly took

on lives of their own. To these fears, Wetterling responds that "while

we bestow on computers all of our own seemingly limitless endowments,

they must always remain lower on the creative tree. It is our psychological

processes that are original." We can always infuse new corrective

decision making processes in any program. Yet computers cannot reach

back to their creators and tweak their cognitive processes and judgments.

We are the masters, and yet through the artificial intelligence we

have programmed into our little gray boxes, we can learn quite a bit

about the workings of our own little gray cells.

Path planning. All humanity bemoans the tyranny of the

immediate in our lives. "All I did today was put out fires,"

we complain. We seek desperately to recast our lives, moving toward

lofty goals, pausing briefly at only the most interesting and important

immediacies, while eschewing the unnecessary. Our cognitive process

wants to keep moving. Alas, our environment invariably foils these

carefully 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 robot

is based on algorithms that break its moves down into small goals

to deal with its changing environment. The robot, which all of us

would gladly sacrifice for the life of a child, must still contain

enough self-preservation programing so it (he?) won’t ignore the beam

crashing in its path. In other words, the robot rescuer has to be

imbued with sufficient heroism, but this heroism can’t make it foolhardy.

Hive mentality. The base animal intelligence of sharing

inspires one individual who finds food to report back this benefit

to the hive, rather than just satisfy his own needs. The advantages

of such behavior are obvious, and when transferred into software they

provide amazing hive dexterity. Robotic swarms can "analyze"

a damaged instrument’s circuitry, laboriously tracing each line. When

one machine finds a break, infrared signals go out to his mechanical

welding buddies, each of whom rolls to the spot and begins re-welding

the breaks within that area. Such a smart technique saves time and

energy — both in society and in its tools.

Emotions. "How does that make you feel?" asks

the voice in the chat room. The despondent lost soul, grieving for

a lost friend, speaks his answer. Then the respondent encourages him

to go on. The griever is seeking comfort from a totally electronic

pre-programmed piece of therapy software. Some argue that the software

is capable of offering at least as much sympathy and feeling as their

last homo sapiens psychiatrist. In a study, this program was furtively

introduced into workplace computers. Even after the computers’ owners

learned that no human being was at the other end, over 70 percent

continued logging on to obtain comfort.

"Here again," notes Wetterling, "it is merely a case of

human cognitive modeling." Linguists analyze the natural patterns

of human language, blend in the semantics, and list the appropriate

responses. For example, upon being told about the death of a loved

one, 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 for

science fiction, is that computers will become smarter than their

masters. 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 mathematicians

to trace satellite GPS signals or to calculate the distance to the

farthest stars. But while they undeniably can be blazingly fast, computers

operate according to a set of rules imposed by a programmer, and they

demand the constant hand of man to keep functioning. Artificial intelligence

can be very clever, but yet not creative.

Virtual reality. Will those little computerized spiders

featured in the futuristic film "Minority Report" turn up

any time soon, making retina scans in accordance with Patriot’s Act

IV? "Well, the technology is to a large extent in place,"

says Wetterling. He himself has designed two palm-sized robots with

Ingram hive swarming capabilities. The retinal scan soon will be ready

to implant. "And believe it or not," he says, "the navigation

of such creatures is relatively near at hand."

However, much more valuable — and more likely — are virtual

reality improvements. The next step, Wetterling predicts, will be

the addition of touch and hearing to the graphics of computer interfacing.

The computer screen across which Minority Report’s Tom Cruise sweeps

images, sounds, and tactile feelings is on the horizon. Imagine the

victim of a Manhattan hit-and-run receiving a virtual examination

and diagnosis from a Swedish specialist while the doctor sits in his

Stockholm study and the victim races uptown toward a hospital.

As to how these high tech changes will effect our daily living, Wetterling

places the reins solely in our hands. We do not have to destroy our

privacy, just because we have means to do it. "The upside of computers

is that they will do whatever you ask of them," he says. "The

downside is the same thing."

— Bart Jackson

Top Of Page
New Threats to Old Phone Companies

For how long do you prop up a bad king, just because

you need government? For how long do we prop up the teetering regional

Baby 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 variables

as old-versus-new technology, fair competition, consumer cost issues,

satellites, and an ever-broadening band of wireless possibilities

have further muddied telecommunications’ waters — which haven’t

been 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 Festival

in the New Jersey Convention Center, Raritan Center in Edison. Presenter

Steve Cherry is senior associate editor of IEEE Spectrum Magazine

(www.ieee.spectrum.org) and past president of the New York Amateur

Computer Club.

In an industry heavily affected by computer issues, Cherry points

out that what should be one of our nation’s richest and most stable

industries is currently marked "by greed, scandals, misguided

deregulation, and poor business models." He predicts that "it

is not going to remain as it is for very long."

Cherry’s unusual training has allowed him to track the progress of

the telecom industry with more than a casual eye. Son of a mechanical

engineer, Cherry grew up in Queens and attended the State University

of New York at Genesco, studying philosophy and mathematics. After

doing graduate work in philosophy, Cherry began an editorial career,

joining American Computing Machines (ACM), where he founded NetWorking

magazine. 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 companies

sprung up, and became known as the "Baby Bells," or sometimes

as the "Seven Dwarfs." A major goal of divestiture was greater

competition for telecom dollars. In point of fact, Cherry notes, the

break up has in no way promoted local competition. Instead, in the

footsteps of their parent company, these firms have basked in the

full 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 the

other Baby Bells have depended on voice and local communications as

their sacred cash cow, says Cherry. These Incumbent Local Exchange

Carriers (ILECs) have the wires — and the satellite augmentation.

Granted, the Telecommunications Act of 1996 insists that any legitimate

competitor, 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 the

Baby Bells, which are renting the wires.

Cherry says the Baby Bells are not thrilled with this system. Their

competitive plan, says Cherry, has been to make the switching process

so outlandishly complex — for both the CLEC and its customers

— that they will buzz off in disgust. Meanwhile, the Baby Bells

have been lobbying the FCC, complaining that the rental rates are

so low they are bankrupting the line owners. Cherry reviews their

complaints wryly: "If truly the FCC’s rates were below the actual

cost, why didn’t the Seven Dwarfs start renting from each other?"

Consolidating. Of the seven original regional firms spun

off from AT&T, only Verizon, Bell South, SBC, and Qwest remain. "And

Qwest," notes Cherry, "is very much on its deathbed."

The main reason he gives is that voiceover’s days as the cash cow

of the communications industry are over. Free telephony and Internet

communication have caused any number of consumers to leave their phone

handsets parked in their cradles. Meanwhile the old regional phone

companies are seeing their most profitable types of calls go away.

Just as the first class, one-page letter carrying a 37-cent stamp

is the profit leader for the Post Office, so too are the quick local

call and the oft-relayed international call — think Princeton

to Tanzania — the profit leaders for the regional phone companies.

Take these calls away, and the wired lines are left with only the

most expensive of transactions.

New technology has whacked more than a dent in the old systems. Cable

modems and Digital Subscriber Lines (DSL) have moved strongly into

the U.S. market, and DSL has become the norm for most other heavily-phone-dependent

nations. AOL, Yahoo, and similar firms are handling 70 million instant

messaging units at any given moment. The trouble has been bringing

DSL and cable into the home. The last mile has been the most difficult.

Tens of millions of households still have no access to either DSL

or high-speed Internet.

But even these families soon will have a broadband option. For a one-time

cost, customer will be able to buy a link and an approximately eight-foot

antenna to point at a communications hub. Radio waves will connect

both his voice and his Internet messages point-to-point via the same

flow of electrons.

Rescuing the regionals. In February of this year, the

FCC reworked the 1996 Telecommunications regulations in a move that

offered both crutch and rabbit punch to the remaining Baby Bells.

The good news (for them) was that tapping into the existent wire system

became more difficult and expensive. Now, the CLECs may tap in only

at major points in the wire system, and they must contract for the

entire 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 same

revision, the FCC allows inter-exchange carriers, like MCI-Neighborhood

and other long distance companies, to enter the local loop and openly

compete for an individual’s full phone service.

"In the short run," says Cherry, "the four remaining ILECs

can look forward to a great flush of cash. But in the long run, these

new long distance firms may topple them. Certainly the strictly local

firms will definitely go under."

Moving ahead. Most of the old regional carriers are hoping

to retain customers by offering attractive flat-fee rates. "This

is just a stopgap," says Cherry. "Verizon is offering $55

(for all local and long distance calls), while broadband company Vonage

offers 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 current

companies. Broadband, DSL, cable, and evensatellite service will take

over copper wire voice technology sooner than foreseen. He picks companies

that 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 remaining

regional phone companies? "Anyone can make money by pooling the

power of the grid," he says. Are the regional companies clever

enough to capitalize on fiber optic technology in the next five years.

Maybe, maybe not. But, Cherry says, their very existence depends on

it.

— Bart Jackson


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