It's a beautiful day in the Neighborhood!

May 7, 2002 12:00 PM, Peter Bernstein

Hence, I greeted the news several months ago that Fred Rogers, he of "Mister Rogers' Neighborhood," was retiring with mixed emotions. While I was never a fan of the program, I did appreciate the knowledge it imparted to my enraptured children. I also marveled Mister Rodgers' acumen at understanding the needs his core business. All of us parents have wistful memories of the time our kids spent watching Fred Rogers, especially those of us whose children are now teenagers. Mister Rogers was always a soothing voice with an encouraging word. He always had the answer to the most vexing of little people problems. Unfortunately, we can't freeze time. Our kids got older. It turns out the problems don't necessarily have answers, and if they do they are not always easy or painless.

The same can be said of the April 15th announcement by the struggling MCI Group of troubled WorldCom about its new "Neighborhood Complete" service. It reminds one of the good old days when MCI was king of telecom marketing. However, this prescription may not be the cure for what ails them.

For those of you who may have missed it, MCI announced the immediate availability in 32 states of Neighborhood Complete. In essence, this residential-only service is all-you-can-eat voice (local, regional and long-distance) from anywhere in the U.S. to anywhere, any time, for a flat rate of $49.99 to $59.99 per month. The price varies according to your state of residence. Included are such popular enhanced features as: caller ID, call waiting, voice mail, three-way calling, speed dial and the ability to take advantage of free partner reward benefits like frequent flyer miles or free movie rentals. All remaining states are expected to have service by the end of 2003.

This is just like the popular cellular deals where the high-end tier of pricing is for unlimited calling without roaming charges. It is also similar to Internet DSL and cable modem access deals with flat rates for unlimited usage. It is basically the modern version of Outbound WATs without the tapers but with some bells and whistles.

You have to admire MCI for extending their "Friends and Family" concept to "The Neighborhood" (including perfect strangers), and for one-upping AT&T. The "AT&T Unlimited Plan," for those unfamiliar, while priced at $19.99 per month, does not include: local calls, calls to non-AT&T customers or most of the calling features. Of course, if you live in New York where AT&T offers local service you can augment the unlimited long-distance plan with an unlimited local one, which has a few bells and whistles. And if you really want to know who has the cheapest rates at any moment in time, please don't ask me because I don't know. Ask Jeeves. 

This is marketing the way it used to be. An invitation to a bare-knuckles brawl. It provides an attractive offer to frequent long-distance talkers, is a nice vehicle for stealing market share and locks in share in anticipation of Bell company entry into long-distance. As a marketing aficionado, I love the idea even if the economics and timing may be suspect. 

From an analyst's perspective, the good news is the possibility for share gain, less churn and more certainty in revenue, if not profit, projections. Additional hope for good news is that MCI can: use this as a leader (hopefully not a loss leader) for more exotic service bundles; leverage its substantial metro facilities by actually putting traffic on them instead of ILEC ones; make MCI more attractive as an affinity partner to the likes of AOL, Microsoft and cable companies; and leverage the assumed cost benefits arising from its backbone IP network. 

The bad news is:

• Voice is now the commodity everyone always said it would become.  

• While one must guess that MCI has done enough modeling, this could turn into a "be careful of what you wish for" situation. Too many people could become incessant talkers. Worse, MCI could end cream skimming it best customers at significantly reduced monthly revenues. There is also a question of what happens if the service turns out to be wildly popular in local measured rate areas such as New York, and how much MCI will have to pay the local companies for origination and termination in such places since they don't control the last mile.

• By getting rid of the last vestiges of metered voice service, the company may also have opened a Pandora's Box. It is going to be hard to run the meter again except as part of a tiered approach (like the old WATs bands and tapers, or the hourly limits and message limits imposed by AT&T Worldnet and AOL). If Internet access is now flat rate along with voice services (including premium enhanced features), who is going to make money and how?

The ILECs have been patiently awaiting the day when they could offer long distance and get into the metered business. They have been looking at the meter as a hedge against voice-over-IP services, particularly voice over cable modem. MCI just threw a very large monkey wrench between the spokes of their tires. Whether it was out of desperation or that they can actually stanch the continuing erosion of customers and voice revenues almost doesn't matter. They have crossed the proverbial Rubicam, and there is no turning back.

Look for others to follow the MCI lead. They will have no choice, unless they don't want to have residential customers and traffic. Until such time as these kinds of offers start having limitations put on their use, as a customer all I can say is, "It's a beautiful day in the neighborhood!" Fred Rogers must be smiling as he changes into his sweater and sneakers.

Peter Bernstein is President of Infonautics Consulting, Inc. He can be reached at pabernstein@worldnet.att.net.