Interactive: Look Out Net, Here Come Baby Bells

With nearly all of the gazillions of web sites these days offering free email service, recent news that US West plans to provide the same to its 25 million customers may have barely shown up on your radar screens. But the move involves more than free email. This strategy, US West hopes, is just part of a play that involves building brand, keeping customers and grabbing a part of the e-commerce pie.
"Free email is only a piece of the equation," says Doug Hickey, president and CEO of Critical Path, a San Francisco startup to which US West will outsource its email services. (The RBOC declined comment, citing a funding announcement with its new partner on the way as MC went to press.) 
"Voice and video. They're clearly going to take place. And if you believe that, then the telcos are in a unique position to capitalize on those opportunities. If they don't, someone else will," Hickey says.
Other RBOCs agree that free email is one step on the way to the mighty telcos becoming full-service communications providers. "BellSouth can be the provider of as many services as possible and integrate as much of the experience as possible," says Donna Lachance, vp of marketing for BellSouth.net, which began offering its free Web Mail Service last May. Lachance, like Hickey, frames the service as a value-add for easy email aggregation. 
Customers want the advantages of increasingly complex options, but they want it all to be simple, Lachance says. The big dream is the universal inbox, where a person can get any type of message anywhere, anytime, on any kind of device. Someday.
In the meantime, telcos plan to put as much onto a customer's bill as possible. Creative packaging, such as the single-rate wireless plans that are transforming consumer behavior, will manifest in a variety of ways. Look for more affinity efforts and frequent flier-like programs. Cross-marketing with media titans like Disney is possible, too. And if offering long distance for free to mobile phone users has proven itself, why not free Internet access? Or just to be sublime: free long distance bundled with $24.95/month Net access?
Most observers agree that free Net access, at least, is a possibility. "It's conceivable that a company that wants a business relationship with our customers would be willing to pay for Internet access," Lachance says.
BellSouth has already talked to an airline about footing the bill for a month of access for customers who purchase at least three tickets on their web site in one month. "It's going to take a big hitter like us to aggregate customers and transactions in a meaningful way. The ad revenue and commerce revenue will be so great that we will be able to turn on a Net account when we turn on the phone. I'd love to see that day come," Lachance says. 
Telcos have their eyes on commerce as much as Yahoo! and Amazon.com. Lachance believes her unit's mission is to lead the development of e-commerce for BellSouth. RBOCs, then, are positioning themselves as more than local phone companies, and more than access providers. 
"In the end, you're talking about services and content. So there are other players to think about," says Dataquest analyst Tim McElgunn. Telcos in time will look more like America Online than an ISP, he adds. 
What companies will take the lead? McElgunn advises to watch for those with the most integrated billing efforts. Those firms, after all, have a lead on building the corporate infrastructure. "You could argue that the telcos don't do a good job. But if you think about it, they do. They provide services and do what they say they will," he says, suggesting AOL and cable firms are less reliable. "It comes down to customer care and feeding."
BellSouth seems to have customer service down. It has won awards from J.D. Power for three years and The Yankee Group recently rated it the top RBOC in customer satisfaction. 
Of course, that's just the basics. And free email is just a start. "As we announce our next initiatives, you may find yourself saying, 'I wouldn't expect that from a phone company,' quite a bit," Lachance predicts. --KD

February 01, 1999