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Not All Phone Users Buy Freedom : 'Junk' Models, Supply Glut Turn Many Back to Ma Bell

January 21, 1985|WILLIAM C. REMPEL | Times Staff Writer

When consumers flocked to buy the cheap, disposable telephones that flooded the newly deregulated U.S. telephone market in 1983-84, retailers like Doug Jarvis of House of Phones in Costa Mesa were compelled to sell the high-demand "junk." It was a mistake.

"It seemed like you sold two and got back six," he said, describing widespread consumer disillusionment with the inexpensive-but-unreliable equipment. "We lost customers," Jarvis, the general manager, said.

In Washington, complaints about poor-quality phones became common at the Federal Communications Commission offices, where a spokesman said he is advising customers to "throw them away and buy a good phone."

Engineers at one American telephone manufacturing company, disassembling a $6 imported phone, found it filled with lead fishing weights to make it feel more substantial.

Today a consumer backlash against inferior residential phones is giving manufacturers cause for some optimism after two years of price wars and disappointing profits. Consumer telephone prices are expected to continue a gradual decline, however, forced down by consumer demand for moderately priced phones and an inventory glut.

"Everybody's caught with inventory; you can buy phones for door stops," said Fred Page, director of strategic planning market research for Northern Telecom Inc.

While consumers figure to benefit from the lower prices of phone equipment, at least through most of 1985, some manufacturers are warning that phone quality is likely to suffer as a result.

"Low prices and (high) quality are mutually exclusive," said Richard A. Lindenmuth, president of the business and consumer communications division of ITT Telecommunications Products Corp. He predicted that "there will be a degradation in quality of basic telephones."

"Phones aren't going to last 20 years anymore," Lindenmuth said. "It's not a trade-off we're making unilaterally. It's the decision of the marketplace. You get what you're willing to pay for."

In the future, according to telephone makers, phones will be like toasters--manufactured in a range of qualities, with a range of features and sold at a range of prices.

"The telephone is becoming a commodity," said Bernard Appel, president of Radio Shack USA Inc., a relative newcomer to the phone manufacturing field. "People are going to shop for it like they shop for small appliances. It used to be that toasters were built to last 10 years, then it was seven years, now it's three years. I think you're going to see telephones lasting five to seven years instead of 20."

Years ago it was said that Ma Bell would provide any telephone a customer wanted, so long as it was black and had a dial. In the 1980s, however, telephone industry deregulation brought an explosion of price competition--and variety.

The suddenly open U.S. phone market inspired hundreds of new telephone manufacturing ventures around the globe. "For a while, the biggest business in Hong Kong was building buildings to build telephones," said Northern Telecom's Page.

Now consumers can choose telephones in wood, chrome or plastic; disguised as bananas, elephants or chocolate milk cartons, and equipped with dials, buttons or computers that dial Mom electronically at the command of a voice.

However, to the surprise of telephone manufacturers--new and old--the American consumer has not been universally eager to take advantage of this new freedom of choice. According to industry statistics, about 40% of U.S. households still rent all their telephones from their local phone company. More than 50% of households still have at least one rented telephone.

Back to Ma Bell

Bad experiences with cheap, unreliable phones may have slowed the shift to consumer-owned phones, some manufacturers acknowledge. Others say it has driven some consumers "into the arms of Ma Bell."

"People went back to what they knew, to the old familiar phone company model," said Kurt Behm, a Pennsylvania distributor of Conair telephones, a leading low-priced challenger to American Telephone & Telegraph Co.'s continuing dominance of the phone equipment market. AT&T's share of phones leased and sold to customers has fallen to 67% from a high of 85% in 1982, according to the Electronic Industries Assn. in Washington.

Samuel A. Simon, executive director of the Washington-based consumer lobby group Telecommunications Research and Action Center, criticized the government for not helping consumers to better prepare for the pitfalls of purchasing phones.

"The public never had to buy phones before," Simon said. "It was vulnerable. It had no life experiences to draw upon. It ended up learning from mistakes. The government should have had a major consumer education program to minimize those mistakes."

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