priceline.com Asks Customers To Name TheirLong Distance Price

Posted: 01/2000

priceline.com Asks Customers To Name Their
Long Distance Price
By Liz Montalbano

Priceline.com (www.priceline.com)
customers who have been able to choose their prices for cars, home mortgages and
airline tickets soon will be able to add another commodity to their list:
international and domestic long distance.

A deal announced between priceline.com and Net2Phone Inc. (www.net2phone.com)
gives customers a chance to name their price for international and domestic long
distance that will travel over Net2Phone’s managed Internet protocol (IP)
network. Under the terms of the deal, priceline.com will receive $18 million
from Net2Phone over three years, in addition to revenue from long distance
service purchased by priceline.com customers. The service will be rolled out in
the first quarter of this year.

In turn, Net2Phone gains access to an alternate distribution channel and a
customer base that previously was not available to the IP telephony provider. It
also can maximize efficiency on its network by raising traffic volumes at what
currently are off-peak times. This is why: Customers name what price they want
to pay for a certain brand of long distance calling, such as domestic or
international, and, depending on the traffic on Net2Phone’s network at the time,
priceline.com will let them know if the price has been accepted. When traffic on
the network is low, lower prices will be accepted; in turn, the higher the
volume on the network, the higher the price will be to complete the call.

In theory, once customers become savvy to the best times to make their
calls–that is, the times when their lowest offers are accepted–they most
likely will begin to time their calls to those times, giving Net2Phone more
traffic on their network when calling volume usually is low.

In a press conference, priceline.com President and COO Dan Schulman explained
that his company is applying the same "buyer-driven" technique it uses
to get customers discounts in home mortgages, cars and airline tickets to save
money in long distance–except instead of having a range of sellers to choose
from, there is only one carrier providing the service thus far. At the
conference, Schulman added that priceline.com currently is lining up other
carrier partners, and requires that any partners have "all the capabilities
of a dedicated network."

Customers currently can sign up for the service on priceline.com’s website by
choosing the block of time they would like to purchase–for example, 30, 60, 120
or 180 minutes–entering the destination they would like to call or by choosing
domestic long distance or an "anywhere" plan, which would require a
higher per-minute price bid than other plans. Since the service is prepaid,
customers also must give priceline.com credit card information, which then is
verified to avoid fraud.

At the time they specify the particular long distance service they want,
customers also name the price they’d be willing to pay for the service.

"We store that info and in a minute … [the customer knows] whether or
not the price has been accepted," Schulman said at the conference. "If
it has, we’ll give them the access number and their PIN number, and away they
go."

Since carriers such as MCI WorldCom Inc. (www.wcom.com),
Sprint Corp. (www.sprint.com) and GTC
Telecom (www.gtctelecom.com) already
offer nickel-per-minute domestic long distance, and AT&T Corp.
(www.att.com), the No. 1 long distance provider, has a 7-cents-per-minute plan,
it might seem hardly worth the trouble of having to bid for a good price to
shave a few cents off the price of long distance for domestic long distance
callers, says Carl Garland, principal analyst, network services, Current
Analysis Inc. (www.currentanalysis.com).
Since a customer will only get his or her low bidding price if network traffic
volumes are low enough to warrant that price, using priceline.com’s service is
"a bit of game," he says, that might send a customer back to using his
or her original long distance provider if the price is not accepted.

Garland, however, thinks there is a possibility for consumers to garner
substantial savings on international calling by using priceline.com’s Net2Phone
service.