Businesses bargain for better bundles

Telecommunications providers must offer better service, not just lower prices, or risk losing their business customers to competitors, according to a new report by Deloitte Consulting.

Carriers should better prepare their account teams to help businesses choose the best deal because more competition and service bundling make purchasing decisions more complicated, the report concluded.

"Ultimately, the true winners won't be determined by modern mega-mergers, but rather by good old-fashioned customer relations," said Steven M. Martin, a Deloitte Consulting principal and co-author of the study.

Customer dissatisfaction consistently has been a major complaint since the Atlanta-based consulting firm began the annual survey of business users of telecom services five years ago. This year's report is based on a survey of 500 telecom managers in various industries and at firms of different sizes.

Carriers recognize the problem and can afford to fix it, but "it's a matter of execution. They just haven't figured out how to do it," Martin said. For example, long-distance carriers are prone to reducing staff, including customer service personnel, to keep prices low and profits up, he said. Improvements tend to be incremental.

The mergers sweeping the telecom industry don't bode well for customer service, either. In the short run, customers often suffer as merger partners concentrate on integrating their companies, Martin said. In the long run, overall service levels don't decline, though promised benefits often don't materialize.

Although price largely drives initial buying decisions, carriers' service levels determine customer loyalty, the report said. And plenty of customers are dissatisfied. The percentage of account teams rated as failing was higher than the percentage of teams in the "loyalty zone," according to the survey (see figure).

Customer unhappiness holds across all types of carriers, the survey found. Interexchange carriers' (IXCs') overall performance continues to rate higher than local exchange carriers' (LECs), although the gap is narrowing.

Competitive LECs (CLECs) offer low prices but lag behind other LECs in operational responsiveness, including network problem resolution and provisioning.

The result of this dissatisfaction is that nearly half the firms surveyed are at a "significant risk of defection," the report said. Only 53% of respondents preferred their traditional LEC as their local service provider.

Defectors would go to IXCs (76%), CLECs (19%), wireless providers (3%) or cable TV providers (2%).

Although common in the long-distance market, defections have been slow to occur in markets for local and bundled services, Martin said. "When there are real functional operational equivalents...you have potential to see massredistribution of the local exchange carrier market. We're just not there yet." In long-distance service, about 75% of businesses surveyed said they'd stick with IXCs - a finding that suggests an uphill battle for the RBOCs as they obtain regulatory approval to sell in-region, long-distance service. Bell Atlantic-New York in December became the first RBOC to gain that right. SBC Communications' application for Texas is pending.

Bell Atlantic plans to roll out long-distance service for businesses by late March, said a company spokesman. "We will be very aggressive. We will be very competitive. We spent a lot of time and research finding out what business customers in New York need."

When it comes to buying bundled services, customers again favor IXCs. All things - reliability, availability, service and price - being equal, 52% of businesses, especially multinational firms, said they would buy from an IXC.

A total of 24% would buy from an LEC, 5% from a CLEC, 1% from a cable TV provider and 1% from a wireless carrier. Seventeen percent had no preference from whom they buy.

With all this discontent, how can carriers hang on to business customers? Survey respondents said they want two main improvements: better operational responsiveness and higher-quality account teams. Operations refer to functions such as installation of new services, maintenance and repair and billing.

Most businesses said they want to be served by personal account teams, not alternative channels such as call centers or the Internet. Customers expect account teams to know their products and services, to know customers' business requirements and to provide customized solutions, the report said.

Each type of carrier faces particular challenges to remain competitive, the survey said. IXCs should provide seamless service and build high-quality account teams at the local level. LECs should cut prices and increase coverage areas. CLECs should retain customers through better technical service and sell solutions, not price.

ICG Communications tries to emphasize customer service, from initial sales through installation and beyond, said Wendy Lloyd Curley, vice president of market management. A team ensures a "clean installation," then a client account manager personally services each business account, she said.

ICG also is trying to speed installations by centralizing its provisioning system, Curley said. Voice-services provisioning is based in Denver, and data-services provisioning in San Jose.

Bell Atlantic has continued to improve customer service, its spokesman said. For example, "we've vastly improved how fast we can fix [equipment]," he said. Between 1998 and 1999, the carrier increased by 17% the number of lines fixed in six hours or less.