MCI Lands Volvo Pact As Long-Distance Carriers Target Businesses

When MCI said Tuesday that it has agreed to provide Volvo with 32,000 remote-access links, the deal illustrated that there's still life for long-distance providers in the wake of last week's access-fee developments that are viewed as disastrous for the long-distance companies.

MCI's agreement with Volvo calls for MCI to provide IP remote access for more than 150 countries via dial-up and Wi-Fi services. The Volvo contract could be a harbinger of a wholesale move away from local consumer markets by the long-distance companies--AT&T is the other big long-distance player--and towards the business market.

"The big savings in the enterprise market still come when you move to facilities-based service from AT&T and MCI," said Pete Wilson of Telwares Telecommunications. "For instance, they have been laying cable into buildings for eight years now and they're not dependent on the [regional Bell companies] there."

While both AT&T and MCI have indicated the chilling effect from access fees will cause them to gradually vacate local consumer-oriented markets, they're likely to address business markets with renewed vigor. The long-distance companies say they can't connect to the regional Bells' local links at rates they believe can be profitable for them.

Wilson, CEO and president of Telwares, a telephony consulting firm, says the best way for most companies to save money on local telephony is still usually to move to one of the long-distance companies--provided, of course, that the long-distance company has built out its own facilities-based network.

Wilson said the access-fee decision is not a death knell for the long-distance companies. He noted that the long-distance companies have been struggling ever since the original AT&T was broken up two decades ago. Long-distance fees have plunged, draining revenue and profit from the long-distance firms, while the importance of "the last mile" telephone line ownership by the regional Bells has ascended in value.

While Wilson believes AT&T and MCI will bolster their efforts to serve the business market, he says some segments have been particularly hard hit by the access-fee developments. He cited the retail section, particularly where big companies have hundreds or thousands of separate locations. These locations are too scattered to have facilities-based networks dedicated to their business, so they're expected to see a sharp increase in the cost of their telephone service.

The FCC is attempting to mitigate the cost of access fees. FCC chairman Michael Powell has said the agency will strive to develop rules to keep wholesale access-fee rates from rising too high. The regional Bells--BellSouth, Qwest, SBC, and Verizon--all have pledged not to raise the wholesale rates they charge long-distance companies until year's end.

As for MCI's Volvo contract, the agreement calls for MCI to migrate Volvo Group users in the United States, Europe, the Middle East, and Africa to a Volvo IP VPN using MCI's IP-access platform. It is a perfect example of a facilities-based enterprise solution.