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UPFRONT 1997: Telecommunications

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Newcomers, Baby Bells and other local telcos pick up slack as the big-spending long-distance carriers turn to promotions





Last year, notorious big spenders AT&T and MCI both curtailed their advertising expenditures. Expect more of the same in 1998, as the long-distance carriers seek to tilt the marketing scales in favor of promotions, contests and sweepstakes to build brand image.





For the first time in the '90s, MCI and AT&T scaled back their advertising outlays last year. AT&T topped out at $547 million, down 9.4 percent from $604 million in 1995; MCI spent $301 million, off nearly 5 percent, according to Competitive Media Reporting. Analysts said the move was long overdue, as the companies' ad barrages did little more than confuse U.S. consumers and actually increased churn, or customer turnover.





But just because the top-two spenders have scaled back doesn't mean industry spending has dried up. Total ad commitment exceeded $1.5 billion in 1996, a 5.5 percent jump.





Newcomers to the $75 billion-plus U.S. long-distance market, such as WinStar and MFS WorldCom, are expected to add to that tally as they angle for a nationwide market. And if this year is any indication, Sprint in 1998 could top the $300 million advertising expenditure level, depending on the success of an image campaign slated for later this year.





The biggest injection of new ad dollars, though, is expected to come from the Baby Bells and GTE. The signing of the Telecommunications Act of 1996 not only increased competition but also created an urgency by the local-exchange carriers to boost their ad budgets. The most aggressive local-exchange carriers have been GTE and BellSouth, who each boosted spending by more than 50 percent since the bill's signing. Along with Chicago-based Bell Ameritech, GTE and BellSouth are considered the favorites as the next local carriers to make national media buys.





Even smaller local-exchange carriers, while indicating no designs on branching into competing markets, have a huge marketing arsenal at their disposal in the United States Telephone Association. The Washington, D.C.-based trade group embarked on a $20 million national ad campaign in March. The Bells and more than 1,000 local carriers are bullish on the USTA's marketing impact. The ad investment likely will exceed $50 million in 1998, according to USTA's director of special projects Rennie Truitt.





The industry is trying to shake off its image as the traditional telephone business. Nearly all of the long-distance carriers and regional Bell operating companies offer a slate of Internet and wireless products that will continue to be heavily advertised in 1998.





The Yankee Group, a Boston-based telecom consultancy, projects that telcos next year will grab more than 30 percent of the projected $4.2 billion-plus on-line subscription business. Internet service providers, or ISPs, are viewed by telcos as the plum to keep their customers from defecting. As a result, advertising behind the ISPs should skyrocket in 1998 behind the lead of AT&T WorldNet, Sprint Passport and MCI Internet.





Digital wireless communications is expected to reach national penetration by the end of 1997. For a few brands, namely AT&T Wireless and Sprint PCS, this means national ad campaigns to introduce the country to the latest digital technology. Handset manufacturers like Nokia, Motorola and Ericsson should continue with their increased advertising and promotional pushes, as the overall market continues to mature. -Bernhard Warner





HOT BUTTONS





* AT&T, Sprint and MCI focus ads on image, not price





* Long-distance and local telcos to tout fledgling Internet service provider offerings and digital wireless products





* Local exchange carriers could spend $50 million on image advertising





OVERALL: Spending up





DARK HORSE: Newcomers MFS WorldCom and WinStar Telecommunications should make sizable media buys as they angle for a national audience








Copyright ASM Communications, Inc. (1997) ALL RIGHTS RESERVED





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