FOCUS: Getting a wake-up call

Battered by scandals and the economy, the telecom sector must shift its focus back to the customer.

Battered by scandals and the economy, the telecom sector must shift its focus back to the customer.

Over a year ago, the biggest names in telephony were doing to their best to recover from a storm of malfeasance that ravaged the telecommunications landscape. News of the telecom meltdown obscured all other stories coming out of the industry, forcing even those who weren't tainted by scandal to alter their communications to cut through the noise and make sure their audiences didn't look at them with suspicion and doubt. MCI, formerly known as WorldCom, had to withstand its CEO quitting, its CFO being fired, and one of the biggest corporate bankruptcy and fraud scandals in history. It has since spent the past year trying to shore up its reputation while deflecting attacks from competitors eager to make sure MCI doesn't get out of bankruptcy alive. Global Crossing has also spent at least the past year moving beyond its own bankruptcy and fraud scandals. To see how seriously telecom companies are taking any semblance of malfeasance this past year, take a look at AT&T, which last month admitted that past expenses had been understated in 2001 and 2002, because two employees had underestimated telephone access charges, and then tried to cover up their mistakes. AT&T notified the Securities and Exchange Commission, and fired the two employees and their supervisors. "It's no secret that the entire telecom sector has taken quite a hit over the past few years," says Hugh Clifton, a VP with Carma International, which evaluates PR and media coverage. "Spending and investments have dried up, which froze demand for new orders, leading to a significant tailspin for the financial performance of nearly everyone in the sector. Throw in a few accounting scandals, and the industry was further beaten down, losing several companies to bankruptcy and pushing a few others to the brink." Communications' role in the recovery The business environment has been challenging, and as such, communications is playing a greater role in trying to meet those challenges, be it demonstrating a greater investment in corporate governance, or striving to differentiate each company from the competition, says Brad Burns, MCI's SVP of corporate communications. "We're seeing more companies taking the gloves off. They're using communications to try and damage others rather than try to tell a positive story. "Our approach has been to defend ourselves using the facts, and make sure the public has a perspective of reality rather than the myths put out in the marketplace," says Burns. "So corporate governance has been a big theme for us. It's all about rebuilding trust and credibility." Looking at media coverage since July 2001, Clifton says that the top-five telecom companies with the best press coverage in North America are Nokia, Qualcomm, AT&T Wireless, Motorola, and Verizon. These five companies were also the only ones that had more positive coverage than negative coverage in that time. Other companies - AT&T, BellSouth, Ericsson, Nortel, SBC, and Sprint - had negative coverage that outweighed positive reporting, with MCI/WorldCom, Global Crossing, Qwest, Nortel, and Lucent having the most negative coverage. While those five companies with favorable coverage were credited with being innovative and leaders in their space, the reports about the five at the bottom of the list had to do with intense coverage of bankruptcies, government investigations, or massive layoffs. The media is so intensely focused on every move by the telecom industry because "it is a hugely important industry to the nation, in terms of the service they provide, and the economy," explains Michael Coe, an SVP at Fleishman-Hillard, who works with the agency's telecom clients. "The media has criticized the telecommunications industry, but it is also eager for good news. By and large, the media is interested in what the telecom want to talk about, because it is such a critical industry." Turning attention to customer service And what the industry has been talking about this past year is customer service. Bundling was the buzzword, as companies offered a combination of services, including long distance, internet access, and wireless service - at cheaper rates and all on one bill - in an effort to appeal to consumers' desire for a convenient, good deal. Such offers have been well received by consumers, who are faced with more options than ever before, says Coe. With so much competition, there's no such thing as overselling services. And with so many companies offering the same services at the same price point, customer service has become a key differentiator. Moreover, the bundling offers are another sign of how fierce competition has become. "We're facing the advent of more and more competition in the business, which comes from regulatory policy, and technology such as cell phones and internet telephony," says Eric Rabe, Verizon's VP of media relations. "PR has been a critical element, and on the regulatory side in particular. We're seen as a monopoly, and that drives the mindset that there needs to be regulations, but we need to talk about how there is already competition in the industry. "We [as an industry] have been viewed as being in a struggle, and in some ways that's fair," Rabe continues. "There's more competition, and it's a slow economy. And people are reducing their number of lines. Five years ago, there was huge growth, and people were adding lines because of faxes and internet connections and a line for the kids. But now with more people using cell phones, and using broadband, people are reducing the number of lines they have. So we're focused on customer service, and on areas such as service bundling. We're making people aware of what we have to offer. We're winning customers back, keeping them, and getting them to buy up." But if the industry wants to continue to be taken seriously, it needs to update its image and stop thinking like a utility, and start acting more like the technology industry. "There's a lack of innovation [in telecom]," says Hill & Knowlton SVP Vince Hulbert, who works with telecom clients such as MCI. Hulbert points to MCI CEO Michael Capellas, whose background as president of Hewlett-Packard and CEO and chairman of Compaq brings the sorely needed hi-tech mindset to the telecommunications industry. "The industry looks extremely tired. It's still stuck in this utility mindset. Telecom companies need to be seen more like technology companies. They've worked [in the utility mindset] for so long, that they are essentially monopolies, although there is a bit of competition. They're just interested in protecting their corner of the market, and haven't moved to a true tech mindset." Hulbert concedes, however, that the telecom companies are gradually changing their ways. "Bundling doesn't distinguish them all that differently, as they can all pretty much offer similar deals," he explains. "[But] they're working to instill confidence. They have to win the confidence of lots of audiences: customers, prospective customers, their own employees, regulators, and partners." When it comes to instilling that confidence, "the facts are what matter," asserts MCI's Burns. "If customer loyalty is any test, we've fared very well." ----- Managing portability Just in time for the holidays, the Federal Communications Commission is giving wireless consumers the gift of number portability. But for wireless carriers, number portability is more like a lump of coal in their stockings that they've had to accept, like it or not. On November 24, consumers will be able to keep their cell-phone numbers and use them with any provider. The wireless industry fought the FCC's efforts to give consumers the ability to switch carriers once their contracts were up and to take their numbers with them. But now that it's about to become a reality, wireless carriers have changed their tune, focusing on communicating to consumers why they should stay, and how they now support number portability, to prevent churn. "The FCC ordered the industry to do this three years ago, and the industry has fought that for a number of reasons," explains Jim Gerace, VP of corporate communications at Verizon Wireless. "The wireless industry is the most competitive industry in the US, even without number portability. Because of the industry fighting this mandate, consumers have become more aware of number portability. So in June Verizon broke ranks with the rest of the industry, to be the first carrier to support number portability. Customers are telling us they want this, so we are going to support it. We're jumping in with both feet. We've been doing a full-court press to educate customers that we support this, and we want to implement it correctly." Ken Keatley, a VP with Ketchum who oversees the Cingular Wireless account, says number portability will make the wireless industry's normally busy holiday season all the more intense. Cingular is working to educate consumers on all the issues, such as that number portability does not void wireless contracts, and just because consumers can take their numbers with them from carrier to carrier, that doesn't mean phones will work with multiple carriers. "We'll focus on differentiation and local awareness and coverage," adds Tim Klein, Cingular's VP of PR. "You have to help emphasize what makes your company different. And you have to do it where the customers are - in the markets, at the local level. PR already plays an integral role in virtually all of our marketing efforts, and marketing, in all its forms, is going to be the major driver in customer acquisition and retention during local-number portability."

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