MCI Communications-"Longdistance Carrier"

During this time, the cost structure was created around an average price strategy. Prices had been calculated so that shoppers in heavily populated areas, exactly where phone program was a smaller amount expensive, paid over the actual cost of their support to subsidize customers in rural areas. Similarly, the high fixed costs of providing local service have been offset by the revenues generated by the long-distance market. Thus the pricing structure from the industry was not according to the genuine price on the service provided, but averaged the prices of providing service across the entire marketplace (Stahl-Gibney, 1992, p. T-40).

Technology removed the first in the barriers to competition in the telecommunications market. Microwave radio provided a way exactly where voice signals could be transmitted with out to lay copper wire, thus reducing the capital investment involved in establishing a second nationwide network. In 1968, a federal judge ruled that AT&T could no longer prohibit non-AT&T equipment from being utilized on AT&T networks. MCI, which had been exploring telephone technology, brought suit against AT&T under anti-trust statutes, and in 1974, the government ruled that AT&T would no longer be in a position to operate as the sole source of long-distance service.

Because AT&T dominated the long-distance market, new lengthy distance businesses had been designated Other Popular Carriers (OCC) and AT&T was still subject to a big degree of regulation to which the OCCs have been not.

However, you will find various opportunities which MCI can take in advantage of, each within the domestic market, but also during the international arena. Domestically, the company can pursue a strategy similar to AT&T's with product or service diversification. This doesn't mean that the business would have to enter completely new markets that have high start-up costs (such as AT&T from the network business), but instead suggests that the business can expand its modern-day merchandise line into areas that are synergistic.

Another on the company's strengths is its strong brand recognition and its aggressive advertising and marketing strategy which has positioned it to get the second largest industry share of both company and residential clients (Everett, 1994, p. 79). The company has moved into collect calls (1-800-COLLECT) which enables callers to entry its network directly, which opens up new advertising and marketing opportunities for ones company.

Pursing the residential market is an both equally significant strategic decision for MCI because the company is in the unique position of becoming able to provide both long-distance and local support (in some areas). Just as AT&T applied its long-distance income to subsidize its local calling charges once it was the only telephone company in operation, similar economies is also realized by MCI if it is in a position to establish a powerful residential local client base.

In late 1994, MCI received approval from Washington to offer competitive local telephone support in that state. The company can be authorized to provide local program in New York, Massachusetts, Maryland and Wisconsin. MCI is pursuing permission in another six states. This puts the business into direct competition with the local telephone companies, but also increases its buyer and income base towards the point that it can withstand the increased competition in the extended distance market somewhat better.

 

 

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