Big telecom companies dominate local market

Six companies have most of local, long distance business

Who are the big players in providing local and long-distance calling service in Northern Colorado? Not surprisingly, they’re primarily the names with which you are already most familiar.

AT&T, MCIWorldCom and Sprint are the top long-distance service providers, thanks to their worldwide networks and multi-million-dollar marketing campaigns. All three of the telecommunications giants have statewide service areas. But exactly how many customers each of the companies have in Colorado is a trade secret.

“We don’t give that out,´ said an AT&T spokeswoman. “That’s considered proprietary information ”

AT&T is the granddaddy of all telephone companies, founded in 1875 by Alexander Graham Bell, the inventor of the telephone. AT&T was the parent company of the Bell System, a monopoly that provided phone service across the nation for more than 100 years until it was broken into eight “Baby Bell” companies by the U.S. Justice Department in 1984.

That brought a proliferation of long-distance telephone service providers, with AT&T shrinking in its long-distance market share from about 90 percent in 1983 to less than 50 percent today. It’s now estimated there are more than 1,000 long-distance carriers across the nation, with customers changing services at the drop of a rate charge.

In 1995, following the biggest voluntary break-up in the history of American business, AT&T restructured itself into three separate, publicly held companies:.Lucent Technologies, a systems and equipment company; NCR, a computer company; and AT&T, which focused on communications.

Even with the break-up and a further restructuring last year, AT&T remains the world’s largest telecommunications company with 160,000 employees and annual revenues of $62 billion.

MCIWorldCom is generally considered the second-largest long-distance carrier in the U.S., with 77,000 employees in 65 countries and 1999 revenues of more than $37 billion.

Sprint is the third-largest long-distance provider, with annual revenues of more than $20 billion and 81,000 employees. Sprint and MCIWorldCom attempted to merge last year — which would have made the new combined telecommunications company the world’s largest — but the union was rejected by the Federal Trade Commission.

When it comes to Northern Colorado’s local telephone service providers, three companies dominate the region.

The biggest is Qwest, the Denver-based company that merged with USWest in June 2000. As a result of the merger, according to Qwest spokeswoman Audrey Mautner, the company had to divest its long-distance service in Colorado and 13 other states. Mautner said Qwest is attempting to regain long-distance carrier status in those states.

“One of our strategic goals is to receive approval from the regulatory bodies,” she said. “There’s certain steps we need to take and we’re aggressively pursuing that now.”

Mautner said Qwest has applications for long-distance service pending in all 14 states. Qwest has a major infrastructure system in Colorado, Mautner noted, with 2.9 million access lines already in place.

Qwest, founded in 1995, has quickly become one of the largest phone networks in North America, with more than 67,000 employees and 29 million customers nationwide.

The company grew from the 25th to the third-largest carrier of Internet traffic in 14 months, according to the same statement.

Another company with a growing presence in Northern Colorado is McLeodUSA, based in Cedar Rapids, Iowa. Bruce Tiemann, company spokesman, said McLeodUSA has 18 percent of the local business lines in Colorado and currently provides local and long-distance service in 25 states in the Midwest, Southwest, Northwest and Rocky Mountain regions.

Tiemann said McCleodUSA, with its 9,500 employees and 905,000 local lines across the nation, is attempting to become a strong competitor in the Northern Colorado region.

“We provide complete local exchange service and do the same things as (the largest long-distance providers) do,” he said.

Tiemann said the rapid growth in the local telephone service industry is a direct result of the Telecommunications Act of 1996, when Congress decided to open up local surface markets to consumers.

“That was the big catalyst,” he noted.

Third-largest of the local telephone service providers is ICG Communications, Inc., an Englewood-based company that grew rapidly after the AT&T breakup in the mid-1980s. Originally a satellite communications system called Teleport Denver, the company reincorporated as ICG in 1996 and entered the local telephone service market in 1997.

ICG, which has specialized in offering local, long-distance and calling card services primarily to small and mid-sized businesses, began having financial problems in late 2000. Earlier this month ICG announced it would reduce its 3,000-member workforce by about 500 employees as part of its “ongoing financial restructuring efforts and reorganization plan.”

Braun Mincher, president of PCG Consulting Group — a Fort Collins company that advises business clients on the best telecommunications systems for their needs — estimates that Qwest has the lion’s share of local service at between 75-80 percent. McLeodUSA and ICG each have about 10 percent of the rest of the local market, Mincher said.

Change in the telephone service industry is occuring almost daily as new providers spring up and evolving technology produces new wireless and Internet-based voice services. But Mincher said he expects fewer companies to get into the crowded and intensely competitive long-distance service market.

‘The long-distance market used to be a lucrative market but it’s now a terrible market,” he said. “The margins are so small now. The carriers, AT&T included, have seen that profitability erode like crazy over the last few years.”

Competition and new technology have resulted in what used to cost more than $1 a minute for long-distance service now costing only a few pennies, and that’s led companies to branch out into a multitude of other service offerings. In fact, Mincher predicts the long-distance call as we now know it will be virtually eliminated within the next decade, thanks to a new technology called Voice over IP.

Using the public Internet as a voice communications system, users will be able to make calls without regard to distance or cost, with flat rates charged for unlimited outbound long-distance calls.

“Essentially, it’ll make your phone call the same as sending an e-mail,” he said. “It won’t be distance-based anymore. It’s really where the future is going.”

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