More Trouble for Traditional Long Distance Companies.

Incumbent local exchange carriers (ILECs) – companies such as Verizon and SBC – are threatening to take control of the long distance market away from long-time traditional players such as AT&T, MCI, and Sprint. According to IDC, recent FCC rulings have enabled ILECs to sell long distance services in five states: New York, Massachusetts, Texas, Oklahoma, and Kansas. Because of the increased competition in these states, the traditional long distance companies have been forced to reduce their rates and as a result are experiencing plummeting profit margins.

According to IDC, bundling and the discounts offered on the bundles are key to ILECs’ appeal. “Consumers want to purchase all their communication services from one source, receive one bill, and have one point of contact,” said Ross Sealfon, an analyst for IDC’s Residential Telecommunications Services program. “They also realize it’s less costly for service providers to offer bundled services and expect a portion of the savings to be passed on to them, and ILECs can offer deep discounts on bundles.”

Another advantage ILECs have is their existing customer base. Typically, they’re selling long distance as an additional service to customers they already have a history with, which is easier than selling to new customers.

While the ILECs seem to have the upper hand, IDC says traditional long distance providers won’t go down without a fight. “Low-volume users seem to be the ones most attracted to the ILECs’ plans, and traditional long distance companies are working to retain their high-volume customers, who generate substantial revenues,” Sealfon said. “Additionally, bundling may prove to be a double-edged sword for ILECs. Being all things to all people is a very difficult strategy to sustain.”

For more information at http://www.idc.com.