Incentive Plan

For anyone who had the good fortune to be one of the 27 million people to tune into the Evander Holyfield/Lennox Lewis fight in March, GTC Telecom may ring a bell - and not the kind that ends the round. In addition to HBO and Budweiser, telecommunications and e-commerce company GTC Telecom was one of the sponsors of the fight.

Only two years old, the company has evolved into an interexchange carrier/Internet service provider with an interesting hook. Besides offering services such as wireless T-1 access, Web hosting and long-distance calling cards via the Internet, GTC provides free Internet access through its ISP division, which will launch in July. There is a catch: To get free Internet service, customers must use the GTC long-distance service. But for 7.9cents a minute, that might not be such a bad deal.

The first breakthrough for this fledgling Costa Mesa, Calif., company came in September 1998, when it secured an interconnection agreement with MCI WorldCom. This gave GTC the push it needed and helped it keep network costs as low as possible.

"When we were getting into the industry, we found being a reseller was not giving us an advantage," says Paul Sandhu, president and CEO of GTC. "We needed our own network to be a long-term player. How can we be cost-effective being a young company without a lot of resources?"

Enter Williams Communications. Together, the companies started laying down plans for GTC to lease fiber on Williams' coast-to-coast network and connect GTC with cities and people across the nation.

Getting networked

"We are building a network that will allow us to be a large company with a nationwide strategy, not just regional," says Mark Fleming, executive vice president for GTC.

After examining the prospect of working with Nortel Networks and Siemens for the buildout of its own network, which turned out to be highly expensive, GTC struck a deal with Tulsa, Okla.-based Williams in November 1998. Because GTC did not have its own fiber, it needed a company such as Williams, with the capabilities of building a network that could handle voice over IP using an ATM backbone.

"We had an advantage because we were starting with a clean slate," says Eric Clemons, chief operating officer for GTC. "[We could] gain a network that would bring our costs down, putting us on par with major telecommunications companies. It is one of the first voice-over-IP networks that is coast to coast."

With Williams, the cost to deploy the new technology is low, and the savings will be passed on to GTC customers, says Kevin Williams, regional vice president of sales for Williams' West Coast division. "It has been a fascinating ride and a fast-paced progression. The interesting thing was that [GTC] had clear objectives and goals for the services they will provide."

Williams not only is implementing and installing the network but also maintaining it, providing expertise and personnel. This reduces overhead and gives GTC an opportunity to focus on its business strategy. The company's expertise and maintenance of switches allows GTC to concentrate on marketing, which can be critical for a new carrier's success, says Sandhu.

"No one is doing anything like this: actually providing 1 million minutes over a voice-quality network," says Williams. "It is very manageable and highlyflexible. The network was designed to support anything multimedia."

The first phase of network buildout, which includes 90 markets, will be completed during the first quarter of 2000. Phase 2, to be completed during the fourth quarter of 2000, will add 30 markets.

With nominal network costs, GTC can secure savings for its customers. After the June launch of its Internet portal, gtczone.com, the company announced the free Internet plan in July. With this plan, Internet access is free to customers who sign up for long-distance at the premium rate of 7.9cents per minute. Without the plan, long-distance costs 5.9cents per minute. The company also offers a flat rate for Internet service at gtcinternet.com for $9.95 per month. Its flat-rate long-distance program starts at $29.95 per month for 500 minutes of service.

"We feel comfortable as a company to say we will have 200,000 customers on this [free Internet] program by the end of the year," says Clemons. "The ISP launch will mark a milestone for GTC; it will be the biggest revenue generator within the company. If we want to be an integrated communications provider, the Internet is vital."

As competition spurs the telecom industry forward, carriers seek ways to stay one step ahead of the pack. The more services a company can provide, the more likely it is going to stay out in front. Low rates are becoming increasingly crucial as more companies take a stab at the market. For GTC, being an interexchange carrier has given it the ability to function as a large telecom company and alleviate overhead, which translates to savings for the consumer. Now all GTC needs is to become a recognized carrier.

"This will turn a new page in the history of the company," says Frank Naccarelli, vice president of sales and marketing for GTC. "It will put the company on the map when it establishes a footprint in corporate America."

The marketing edge

Besides sponsoring events such as the Holyfield/Lennox fight to establish itself as a recognized telecom player, the company has employed two advertising firms to focus on market research and eye-catching advertising. J.J. Farris specializes in print and radio, while Webzter Corp. focuses on Internet advertising.

"We are modeling our advertising after priceline.com, which spent money on national network radio," says Joe Farris, president of J.J. Farris. "It worked well for the company. It went from an $11 million company to a $20 billion company."

The firm is planning the same attack for GTC but on a smaller scale. J.J. Farris has created a small amount of television advertising, with a market test performed in Los Angeles. In the near future, the company is looking to employ a well-known personality to become a spokesperson for GTC.

"We are still in the testing phase. We will figure out a long-term strategy from there," says Farris. "We do know we want to do an advertising campaign on a national basis, and radio is the best way to do it."

The firm has been working on GTC's campaign for the past four months. Most of the planning centered around the free Internet service which it will announce in July.

"It is an interesting idea to bundle the free Internet with telephone services," says Dean Shafer, president and CEO of Webzter. "It will help position the company as a leader - if not the leader - in the industry. GTC is also light on its feet and can move quickly to position themselves in the marketplace."

Shafer and his advertising team are trying to put GTC on the interactive map by introducing the company to the fast-growing world of the Internet.

"We are Internetizing them," says Shafer. "We are helping make them an Internet-centric company and would like to make them the Amazon.com of the telecom industry."

GTC is staging an attack on the market. The company aims at becoming a Tier 1 carrier, says Clemons. However, it is interesting to note that company image was not always a focus. When GTC first entered the telecommunications scene, it focused on getting a handle on the market. "Getting into the market as a reseller did not equal money," says Clemons. "It was not competitive, so we went back to the drawing board."

For a year, the company did research, forgoing marketing in order to figure out exactly what its mission statement should be. The company focused on management. It focused on strategy. It wanted to be different.

"We took the time to put our management and infrastructure in place," says Clemons. "We found out how the market is evolving and decided we wanted to be leaders."

Since September 1998, the company has been a publicly traded entity. This has helped the company gain recognition. "Awareness has really picked up," says Clemons. "Now with the free Internet offering, we will see more people looking at the company."

There was also an onslaught of attention when GTC announced its network agreement with Williams, says Clemons. GTC expects to see consumer interest rise as it finishes its network and rolls out more bargain-based services.

"We pack products together in an interesting way with new sizzle and a twist for consumers," says Naccarelli. "The free Internet offering is underscored by the fact that what we sell are quality products. We stand by the quality of selling, taking advantage of the fact we are a small company without the infrastructure costs of [other major carriers]."

Big aspirations

GTC is a new breed of carrier. It provides long-distance and Internet services, including its online calling center and e-calling cards, and it passes savings on to the customer. It gives customers choices as well. Although the company offers separate flat-rate Internet and long-distance programs, customers have the option of combining the two. To boot, the recently launched ISP will not require special software or bombard customers with additional advertisements.

"As MCI [WorldCom] built the network for the 1980s, we are bringing a network for the new millennium," says Naccarelli. "We are not just a small company; we have aspirations of being big and there is a lot of business out there waiting for a company like us." GTC is certified to sell in 45 states currently but expects to be in 49 by the end of August.

As for the future, the company considers the free Internet offering the catalyst that will propel its customer base to 1 million in the next two years.

"There is no reason we cannot achieve growth rates comparable to that," says Clemons. "We firmly believe we can entrench ourselves as one of the largest carriers in the nation."