One-Stop Shopping Is Hot Number

Alan Stiffler is in the front lines of a nationwide battle over dial tones.

Dial tones?

That may remind you of the old line about selling every part of the pig including the squeal, but it’s serious business. The Telecommunications Act passed by Congress and signed by President Clinton this year throws an estimated $90 million worth of local and toll call service--heretofore largely controlled by a handful of former AT&T; Corp. spinoffs--up for grabs.

New competitors such as Vienna, Va.-based Cable & Wireless Inc., where Stiffler is director of local calling services, are expected to capture as much as 25% of the market over the next decade, according to FIND/SVP, a New York-based consulting and research firm.

That’s put Stiffler, a trim 34-year-old with close-cropped red hair, on the road. For nearly a year, Stiffler has been crisscrossing the country to wage war against such competitors as the Baby Bells, which dominate the market for local telephone service; long-distance behemoths such as AT&T;, MCI and Sprint; and cable TV providers.

On a recent Friday, Stiffler, a 4 1/2-year veteran of the company, presided over a meeting of sales associates at Cable & Wireless’ Culver City office. His mission: To explain CWI’s local phone strategy and fire up the 16-member sales corps.

“The No. 1 characteristic you have to have in order to survive is one-stop shopping,” he told them. “Our customers want someone who can provide all their solutions in one place.”

Stiffler has already made this presentation in New York, Hartford, Conn., and San Francisco, where Cable & Wireless is already selling dial tones to businesses. This meeting will be followed by a more detailed presentation of CWI’s new calling packages. By the end of the month, sales will begin in Southern California.

“Right now, we’re employees of a long-distance company,” Stiffler said. “I’m trying to change that so we’ll think of ourselves as a full-service telecommunications company.”

He is hardly alone. The new federal law and a bevy of state regulations have lured scores of companies, big and small, into the market for local phone service.

Practically all of them are planning to emphasize one-stop shopping as they try to woo or retain local phone service customers. Internal surveys by some companies show that as many as 85% of businesses are likely to switch to a vendor that can provide a broad spectrum of communications services, including local and long-distance dialing, paging, cellular and wireless services, and even data and Internet connections.

“We’re providing local service, local toll calls, long-distance service and Internet access in one package,” said Larry Cox, a spokesman for GTE California. “Our customers are telling us that they want one high-quality provider of telecommunications services with a single monthly bill.”

The local phone revolution is happening all over the country, but California’s huge market makes it a key battleground. So far, 66 companies have been certified by the state Public Utilities Commission to provide service here, and many others have applications pending.

These companies will have almost immediate entree into the market because federal and state rules require the large incumbent local phone companies--in California, Pacific Bell and GTE--to sell phone time to competitors at wholesale rates. The buyers then “resell” the time to home or business customers at a profit.

Stiffler likes to point out that Cable & Wireless was the first company to resell local service in California. But that is only part of its long-term strategy. Eventually the company will install its own switches to route calls and lay its own fiber-optic lines so it can provide local service using its own equipment.

Other new competitors will be cable TV companies, which are relying on their own wiring networks to carry phone service. Tele-Communications Inc., for example, has set up TCI Telephony Services in Walnut Creek to offer dial tones to Bay Area residents and small businesses starting in February.

TCI is getting into the phone business in part to squeeze more money out of its underground coaxial cable lines. But it’s also aiming to strike back at local phone companies planning to sell television via satellite, said John Stagl, TCI Telephony Services’ director of technology.

As it happens, the cable companies do have to clear one important technological hurdle that doesn’t affect their competitors: getting the phones hooked to their lines to ring.

“Cable lines have a tremendous capacity to carry information, but they really don’t pass voltage,” Stagl said. Since people count on their phones to work even during a power outage, engineers had to find a way to send power through the phone network instead of relying on electricity in a home or office. It took two years to devise a system with extra battery back-ups that pushes more voltage down the cable lines, he said.

Still, the main hurdles aren’t technical but legal. Contracts must be hammered out between incumbent local access providers and newcomers such as CWI, said Steven Wildman, director of the Program in Telecommunications, Management and Policy at Northwestern University. The parties must agree on wholesale rates for services, use of the Baby Bells’ intricate network of local loops and switches, and the logistics of interconnecting old and new networks.

Newcomers complain that local service providers are stalling competition by demanding unreasonably high prices. Baby Bells contend that their would-be competitors are underestimating the true cost of providing local service.

“About half our costs are fixed costs, and no one can stay in business if they don’t cover fixed costs,” said Lee Bauman, Pacific Bell’s vice president for local competition. “Besides, if local networks are so cheap, why aren’t [PacBell’s competitors] building their own?”

That argument does not move Cable & Wireless’ chief executive, Gabriel A. Battista.

“Here’s the score right now: 100 to 0,” Battista said. “Even after 13 years [of competition in long-distance], AT&T; still has almost 60% of the market. If anybody’s at a disadvantage, it’s us.”

Bauman said negotiations with potential competitors have been arduous, typically requiring 20 meetings over three months. The talks practically came to a halt in early August when the FCC issued more than 700 pages of rules on how to implement the federal Telecommunications Act, which opened the field to competition. GTE recently sued to block the rules, saying they violate the law’s intent of fostering competition.

Those are the issues that could take years to sort out, said Eli Noam, director of Columbia University’s Institute for Tele-Information.

“The technical issues are just transitional,” he said. “It’s the regulatory issues that are much more complicated.”

For its part, Pacific Bell is looking forward to the flexibility competition will bring, said Afshin Mohebbi, the company’s vice president for product marketing. Before the recent reforms, PacBell complained of being hamstrung by regulations that prevented it from responding quickly to changes in the marketplace.

To try to retain both business and residential customers, Pacific Bell--which later this month will install its 10 millionth residential phone line--has been rolling out new services such as caller ID, call return, repeat dialing and Internet access, said Mark Pitchford, vice president for consumer marketing. Also on the way are a new calling card, personal communications services and a digital video service meant as a substitute for cable TV.

Pitchford says it’s inevitable that Pac Bell will lose some customers to new competitors, but he plans to gain at least one new line for each customer he loses. That means selling additional lines for Internet service, fax machines and teenagers to existing customers and making inroads into territory formerly held by rival GTE.

Meanwhile, his enemies are massing. At Cable & Wireless, the atmosphere resembles that of a revival meeting as Stiffler revs up his staff to go out and sell.

“I’ve been in the industry for four years, and this is the biggest thing I’ve seen in my career,” said one charged-up senior account representative. “Our customers have been asking when they can get local services from Cable & Wireless, and this is the biggest thing I can do for them. This is huge.”

Next on Stiffler’s agenda is an appointment with Bill and David Lange, who run a communications consulting firm in Newhall that serves as an independent agent for Cable & Wireless. The Langes bundle CWI’s phone services with voicemail, cellular phone service and telecommunications equipment from other companies and sell the packages to their customers.

The one-stop-shopping concept reminds Bill Lange of the old days of the AT&T; monopoly, when Ma Bell sold local service, long-distance and equipment such as phones and answering machines before the court-ordered break-up in 1984.

“It makes just good, common sense to a businessman to have a relationship with a single agent,” he told Stiffler and his crew. “In this case, the whole is greater than the sum of its parts.”

Over lunch, Stiffler met with his California regional sales manager to go over the schedule of everything that must be done before sales of local service can begin. The sales, marketing and customer service departments will receive detailed training on the company’s new products and pricing packages.

Afterward, Stiffler headed down to Orange to make a pitch to John Jarvis, branch manager for Discount Trophy. Jarvis is already a Cable & Wireless long-distance customer, and Discount Trophy’s home office in Connecticut has signed up for CWI local service as well.

Jarvis said he spends about $1,000 a month on local phone lines, and he’s happy with the service he’s been receiving. But he needs to comb his budget to find ways to cut expenses. Cable & Wireless is promising savings of 15% off the rates he currently pays with Pacific Bell, a discount worth $1,500 a year.

“It’s a case of survival, and the bottom line for everyone is you’ve got to save money everywhere you can,” he said.

Of course, none of this is as easy as it sounds. What it will take to make competition real is an as-yet-undetermined combination of technology, investment and government regulation.

“We’re going to muddle around for five years or more before we figure out whether the market can set prices that make sense, and if not, to find a way to regulate prices that work,” Northwestern University’s Wildman said. “We’re breaking new ground here, and no one has a template for what this is going to look like.”

Karen Kaplan covers technology and careers. She can be reached via e-mail at karen.kaplan@latimes.com