Posted: 4/2003

Long-Distance Resellers Moving to
Any-Distance Bundle

By Josh Long

AT&T Corp., WorldCom Inc. and
Sprint Corp. have made it clear that providing American households local phone
service is crucial to their future. They are not alone. Long-distance resellers
say they also must incorporate any-distance calling to stay competitive with
their larger rivals, including the Bell operating companies.

The FCC’s February decision to
preserve UNE-P regulations that allow competitors to lease the Bell networks at
discounted rates may accelerate this trend. State regulators ultimately must
determine whether or not to preserve the regulations in particular markets.

"While we are still analyzing
the results [of the FCC’s rules] it appears the opportunity is still open for
communications carriers like us to take advantage of the UNE-P platform to offer
local bundled services to our customers," says Ken Hilton, CEO of San
Diego-based long-distance company, Acceris Communications Partners, formerly
known as WorldxChange Corp.

"We feel that if you fast
forward three to five years that most customers will be provided service via a
local and long-distance bundled bill and bundled product," Hilton says.
"We are very much making money so, yes, you can continue to make money in
the long-distance space, but I believe there will be a consumer preference …
toward a bundled product at some point and time in the future. I don’t think
it’s tomorrow."

Lightyear Communications Inc., a
long-distance company based in Louisville, Ky., introduced local residential
service in Kentucky and Georgia in January, adding California, Florida, Nevada,
North Carolina and Tennessee the following month. As of February, the company
also provided 7,500 local lines to small businesses in nine states and plans to
expand its footprint. "It’s amazed me the way our agents are selling
it," says J. Sherman Henderson III, president and CEO of Lightyear.

PowerNet Global Communications, a
Fairfield, Ohio-based long-distance reseller serving approximately 500,000 —
mostly residential — customers also is giving consideration to entering the
local phone market.

"Overall we are looking at
local and also just kind of expanding the whole range of services we offer so we
can kind of put ourselves on an apples-to-apples position … against the Baby
Bells," says PowerNet spokesman Brian Lammers. He adds the company plans to
introduce a wireless product. "I think if you don’t match everything they
have exactly, you have to be pretty close as far as the range of services you
offer. There is no being comfortable. There is no sitting on your laurels with
the way the marketplace is now."

VarTec Telecom Inc., one of the
largest privately held long-distance providers, declined comment on its
strategy. However, the Dallas-based company does offer consumers bundled local
and long distance, according to its Web site.

Robert Fagin, a telecom analyst with
Bear, Stearns & Co., says while he doesn’t know what particular private
companies are doing, "It would seem that since the RBOCs and IXCs are
putting incredible emphasis on bundled products that this is something all
providers will need to offer."

Adds Nick Regas, an analyst with
research and consulting firm Atlantic-ACM: "I don’t think the pure
long-distance play will continue to move forward."

"Yes, you can continue to make
money in the long-distance space, but I believe there will be a consumer
preference … toward a bundled product at some point and time in the
future."