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It's a Pick-and-Choose Phone Market

California consumers see more products and services as telecom competition heats up.

August 03, 2003|James S. Granelli | Times Staff Writer

John Higdon knows enough about telephones and telephone companies to wring exactly what he wants out of California's ferociously competitive telecommunications market.

Ignoring pitches for increasingly popular service bundles, the San Jose radio engineer worked the system to build his own custom communications package. He picked SBC Communications Inc. for local service, AT&T Corp. for long-distance and a small Oakland company for high-speed Internet access. And to score the best prices, he rearranged features, canceling some and adding others, on the five lines in his home several times.

"Competition," Higdon said, "is good for the consumer."

Indeed, Higdon figures he wouldn't have his high-tech smorgasbord were it not for the state of telecommunications in California, where customers are seeing more choices at lower prices as companies fight for position in the nation's most lucrative telecom market.

In the seven months since SBC, the state's dominant local carrier, has been allowed to sell long-distance, the Baby Bell and its competitors have blitzed Californians with ads touting ever more elaborate packages that mix traditional local phone service with such lures as fast Internet connections, unlimited long-distance and wireless phones.

Consumers have responded by snapping up the so-called bundles, getting discounts on DSL or other products if they buy local phone time, or, like Higdon, cutting costs by picking and choosing among ever-expanding service menus.

"The competition is intense today. There are all kinds of ... products and services being offered," said Jeff Weber, SBC's vice president for corporate planning. "It's not going to get any less intense. In fact, it's going to get even more intense."

With revenue from conventional land-line service falling -- and the number of lines in use dropping -- telecoms are selling a wide variety of services not only to shore up the bottom line but to compete in the fast-changing marketplace.

In addition to national players such as AT&T Corp., Sprint Corp. and the MCI unit of WorldCom Inc., cable companies, led by Cox Communications Inc. and Comcast Corp., are carving out bundling opportunities for themselves.

Sometimes the bundling goes far afield from a company's roots: SBC is getting into the satellite TV business. And as phone and cable companies diversify, wireless providers are gaining subscribers at sometimes double-digit rates and finding that customers increasingly are ditching land lines altogether.

In California, the stakes are highest for SBC, formerly Pacific Bell. The state is SBC's biggest market, accounting for a third of its access lines throughout its 13-state region. In California, the San Antonio company serves 17.4 million lines, or 69% of all lines in the state.

But SBC has lost nearly 4% of its lucrative local lines in the year since regulators lowered the price competitors must pay to lease the infrastructure SBC owns.

SBC is determined to avoid the kinds of losses it has suffered in some Midwest markets. And since the company began offering long-distance in January, its aggressive marketing and pricing have captured more than 18% of California's long-distance market.

"The crown jewel of SBC is California," said Berge Ayvazian, senior analyst at the Yankee Group research firm in Boston. "Wouldn't you defend the crown jewel?"

Competition in California got a jump-start last year when the state Public Utilities Commission slashed the wholesale rates that SBC could charge rivals to lease basic network parts, such as copper lines to homes and switches to connect calls. The agency did the same in March to Verizon Communications Inc., the state's other major local phone company.

Competitive Rates

Those rules form the cornerstone of competition in California by guaranteeing that companies other than SBC and Verizon can offer all-important local service at competitive rates.

The Bells don't like it: SBC is seeking to more than double lease rates to $30 a month, and Verizon appealed its rate reduction June 17 to the U.S. District Court in San Francisco. And a PUC that has become more business-friendly this year may well be inclined to raise rates at the risk of stifling the nascent competition.

Increasingly in the last year, that competition has been hot for SBC. Now, in the wake of the PUC rate change in March, rivals soon will turn up the heat on Verizon. It's all gratifying for consumers.

Last November, Lisa Wataba of Walnut Creek went shopping after AT&T and MCI lowered local and long-distance prices.

"If I had saved $5 a month, I'd be very happy," said Wataba, who is on a tight budget. In fact, she's elated: She figures she is saving $6 to $7 a month after switching her local and long-distance carrier to AT&T.

The competitive landscape could change with the see-saw fortunes of MCI, the nation's second-largest long-distance carrier behind AT&T.

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