Leading economic indicators

Competition ups ante in telephone service

Maggie Boys

Business Report Staff Writer
Business people in Northern Colorado can expect to benefit in 1998 from increased competition in the telecommunications industry.
No fewer than 44 local-phone-service providers have flocked to Colorado in the last year, hoping to win a share of U S West˜s former monopoly market territory, according to information from the Colorado Public Utilities Commission.
Changes in state and federal telecommunications law in 1995 and 1996 have opened Colorado up to competition in local as well as long-distance services. Since then, six companies have completed the Public Utilities Commission approval process to operate in Colorado. Some of these companies simply resell U S West services, while others ("facilities-based") are building telecommunications infrastructure by laying fiber-optic cable. Many do both.
Early to market was McLeodUSA, the first company to challenge U S West in Northern Colorado. Typical of the new phone companies, McLeodUSA first approached the business market.
"U S West˜s rates for business customers are higher than residential," said Terry Bote of the PUC. The situation leaves more room for competitors to undercut U S West with discounts on packaged or individual services. Working first with businesses and publishing the familiar black-covered phone book also establishes McLeod˜s credibility with residential customers-to-be.
Other companies in Colorado have first gone after the largest metropolitan areas while holding open the option to expand throughout all of U S West˜s Colorado territory. McLeod has instead pursued the strategy it established in Iowa, Illinois, Minnesota and Wisconsin, beginning in second- and third-tier cities and then moving on to larger markets. In Colorado, this has meant beginning in Pueblo and Greeley, then moving to Fort Collins and Boulder, and looking toward Denver late in 1998.
"We˜re dealing in a marketplace that has been overlooked," said John Smith, McLeod˜s Cheyenne branch manager. The strategy allows the company to establish a presence and get acquainted with market conditions before approaching the most competitive markets.
Benefit to the Northern Colorado business customer comes not only from McLeod˜s ability to undersell U S West in the business market, but also from its effort to offer individualized attention and customized services that U S West does not. A further benefit will eventually come from McLeod˜s laying fiber-optic cable in Colorado, which it will do beginning in 1999 or 2000, Smith said.
As for 1998, the first challenger to U S West˜s supremacy in Northern Colorado and Southern Wyoming sees the market heating up.
"We know the telecommunications industry is only going to get more competitive and intensive," McLeod˜s corporate communications director, Katie Wacker, said.