When New Englanders found themselves socked in by a blizzard last week, many of them decided to simply work at home.
With faxes, home computers and all the other high-tech gear that makes telecommuting so popular nowadays, it seemed like a perfect option when snow drifts forced workers to stay at home anyway.
But to their surprise, many of these would-be telecommuters found that getting a phone line was as difficult as calling home on Mother’s Day.
Like phone systems nationwide, the one in New England is straining under the load of everyday use. A snowstorm only exacerbated the problem.
All that electronic apparatus–with so many people ready to use it–provided a vivid example of just how important electronic communication has become and its vast potential for further growth.
But the snowstorm also illustrated the problems phone companies will face as they try to keep up with this proliferation of new equipment.
A stark counterpoint was delivered last week in New Jersey where executives of AT&T Corp. said they plan to lay off 40,000 workers.
It seems bizarre at a time when people are using the phone network more than ever that the nation’s largest phone company should announce such massive layoffs, but, experts predict, it is only a foretaste of what the new year is likely to bring.
Conventional wisdom anticipates a competitive frenzy of corporate mergers and downsizing once Congress passes the long-debated rewrite of America’s telecommunication laws.
Some players, like Chicago-based Ameritech Corp., publicly trumpet their eagerness for the chance to abandon the dull safety of regulated monopoly to embrace the opportunities and perils of the free market. Other regional Bell companies reluctantly have concluded that much as they liked regulation, competition is coming and they’d better get ready.
The trick for most is trying to figure out what it means to be “lean and mean.” Regulated monopoly phone companies have been large and bureaucratic, but mostly they’ve kept their customers happy. Wholesale downsizing could well leave them small and still bureaucratic with a lot of unhappy customers.
“We’re already starting to hear complaints from corporate customers that the regional Bells aren’t as responsive as they used to be,” said Thomas Valovic, editor of Telecommunications, an industry magazine. “As the Bells downsize, the big challenge is doing it in a way that keeps the customers satisfied.
“It’s like trying to turn the Queen Mary around.”
Even Ameritech, which has been touting the benefits of competition longer and louder than any other Bell company, has found the transition from monopoly status a difficult one. Company officials admitted they goofed last summer when hundreds of Chicago area customers were unable to get through to the company on the telephone.
Similar snafus, blamed on a new computer system and staff shortages, occurred in Michigan, Ohio and Wisconsin.
Ameritech’s work force now is down to about 61,000, about 16,000 fewer than when the company was formed in 1984 as part of the breakup of the national Bell System. The other six regional Bells also have shed employees in the last decade for an average reduction in staff of about 22 percent.
New technology is one cause for the reductions. Robert Rosenberg, president of Insight Research Corp., a telecommunications market research firm based in Livingston, N.J., notes that in 1955 the Bell System employed 180 people for every 1,000 lines it had in service. By 1970 that number was down to 120 Bell employees for every 1,000 lines in service, and by 1990 the number was 50.
Another reason that Bell companies have slimmed down is that even without federal legislation, various states, including Illinois, have passed their own laws deregulating telecommunications.
“Providing great customer service wasn’t too difficult when you got to hire as many people as you wanted and include them all in your rate base,” said Andrew Blau, director of the Benton Foundation’s communication policy project.
“But when you get away from an environment where you get a guaranteed rate of return, then there’s a tendency to cut corners on customer service. Just look at the service in the cable TV industry or the computer industry. The help lines provided by computer firms are woefully inadequate. Customer service is expensive, and it’s a place where you can shift the costs to the customer who has to hire a consultant to fix things.”
In a truly competitive market, unhappy customers can spend their money someplace else, Blau said.
“That happened in cable television where a lot of people shelled out money for satellite dishes so they could drop their cable carrier, a case of vindictive buying. But in local phone service right now, you don’t have anyplace else to go. What’s needed here is wise management of the transition period that will get us into true competition.”
In Illinois, the state authority that oversees phone service audits Ameritech and others, said Dan Miller, chairman of the Illinois Commerce Commission.
When phone companies fail to provide adequate service, they are fined severely, Miller said, and the amount Ameritech must pay because of service lapses in Illinois in 1995 will be tallied and assessed later this year.
“We want phone companies to find it costs them more to lay off workers and let service slip than it does to provide adequate service,” said Miller. “These rules will be in place until the end of the decade. If we have sufficient local competition then, we’ll drop them. If not, we’ll extend them.”
When they first proposed that competition should replace regulation in local phone service, Ameritech executives said that competition and new demand for communications services would become a job engine for Illinois and the nation.
Despite its own shrinking payroll, the company still believes that, said Walter Oliver, Ameritech senior vice president for human resources. While letting employees go from traditional areas of the business, Ameritech has been adding employees in new areas such as wireless communications and home security, Oliver said.
The same is true for AT&T, which is hiring people for its wireless service operations and for its anticipated entry into local service, even as it announced the intent to lay off 40,000.
Large firms such as AT&T and Ameritech that hire new people while firing others, on balance, likely will shrink in the future even as the industry booms, experts say.
“You’ll see the older, large companies shrink while the new, agile competitors grow,” said Brian Thompson, chief executive of LCI International, a long-distance company based in McLean, Va., that is seeking to provide local phone service in Chicago.
“Our payroll is now up to about 1,800 and four years ago it was 600,” said Thompson. “We generate more than $500,000 (in revenues) for every employee we have. That compares to something between $300,000 to $400,000 per employee at AT&T or MCI.”
It is possible for a phone company to be lean and also to answer its phones promptly and provide good customer service, Thompson said.
“What you want to do is not to get rid of people who answer your phones and watch your customers,” he said. “You want to get rid of the layers of people who are watching your people.”
