The past fortnight has seen a massive shake-up in trans-Atlantic telecommunications. The UK government has decided to licence all 46 companies applying to compete with BT and Mercury on international calls, with licences effective from 1 January. Over the pond, the Federal Communications Commission has relaxed restrictions on tariffs for calls between the US and other countries.
This move applies only to countries that the FCC deems have opened their market to US entrants. The US decision that the UK counts in this category is not only a direct result of the DTI licensing action the week before, but also gives BT its best hopes yet for completing its merger with US partner MCI - the main obstacle would probably come if the FCC decided the merger would be anti-competitive, on the grounds that BT's home market was not sufficiently open.
For the consumer, the net result of all this politicking should be a drop in trans-Atlantic call charges, which may be accelerated still further by the advent of increased cable and Internet phone competition offering super-low prices.
Last week's TMA telecomms show in Brighton saw the main UK operators jostling for position in an attempt to build the barricades against the onslaught of new competitors after Christmas. The focus was firmly on new trans-Atlantic business services and on promises of price reductions.
Mercury?s new ATM service enables business customers to transfer data and images across networks in seconds rather than hours. And Mercury will soon follow arch-rival BT in setting up a trans-Atlantic ATM link.
The service will compete with BT?s Cellstream ATM offering, which this week linked up with MCI?s US-based Hyperstream so that customers can configure circuits between sites in the UK and the US.
Rates are not set yet, but Mercury claims the key competitive edge over Cellstream will be price, so it is expected to come in 10 per cent or more cheaper.
Datalink ATM will be offered as a public service, so tariffs will be filed with Oftel, under Mercury?s PTO licence, so that customers can choose and buy data services in the same way they currently choose voice services.
BT was in more rapidly with ATM services however. It is already piloting its service for relaying voice, video and data applications to the US and has installed 45Mbits of capacity to link its own Cellstream ATM infrastructure with MCI?s Hyperstream.
UK Internet service provider, Netcom, will be the first customer of the pilot Cellstream service and BT plans to launch a full-blown commercial service to the US in mid-1997.
According to Barry Hinton, BT?s ATM services manager, Cellstream allows customers save money by only buying the bandwidth that they know they will use. Providing more bandwidth, or new virtual circuits, takes only a few days as opposed to several months for traditional circuits.
While the big two jostle over ATM, keeping tight lipped about any tariff-based reactions to the incoming competition, Energis, the fledgeling challenger to BT that is owned by the National Grid, restated its policy of keeping its national call charges at least 10 per cent lower than BT?s, and its international rates 20 per cent lower or more. In an effort to win market share in advance of the new licensees, it reduced its direct dial call rate to the US to 10 pence per minute.
The market may be battered further by the growth of cable and Internet services. It is widely believed by analysts that Mercury will defocus on the conventional telecomms market, especially in the face of broader competition, to focus on its newly formed cable venture with the UK arms of three US giants. One of those partners, Nynex Cablecomm, set the agenda last week when it launched a price war on BT?s ISDN pricing. The company says it will charge a #285 connection fee in comparison to BT?s #400.
Nynex' business sales director, Jack McHale, said the basic rate ISDN market was the fastest growing part of the telephony market as more businesses were demanding sophisticated methods of telephone transfer. ?You need a goddamn comms consultant to work out BT?s complex scale of charges,? said McHale. ?With our pricing structure it is #285 connection fee and #22 a month - end of story. There are no site fees or other charges.?
However, cable modems, as an alternative to ISDN, are likely to lower rates even further for high end telecomms requirements and Internet access. BT responded, saying the cost of installing an ISDN line was more than #1,000 and Oftel had assessed its pricing as the lowest in Europe.
And if Internet telephony gains robustness and market acceptance, trans-Atlantic pricing may be working on completely new ground rules. This is an immature technology, but one sign of possible things to come was the announcement last week by US-based IDT that it could connect users to any one of 120 countries at a cost of 10 cents per minute. This is using a product, Net2Phone, that does not even require the call recipient to be Net-connected.
BT played it cool, but acknowledged the Internet could change the whole pattern of international telecomms. ?International call costs are coming down anyway and we have already acknowledged that by 2000 a large proportion of our lines will be taking Internet calls,? said a spokesperson. Customers will still use BT for local calls to the Internet service provider, and BT is an ISP itself, he added.
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