AT&T and MCI face off.
For most people, the excitement of choosing a long-distance telephone service ranks right up there with the sort of adrenaline rush you get when choosing which brand of motor oil, laundry detergent, or blank VHS tape to buy. But to AT&T Co., MCI Communications Corp., Sprint Corp., and a number of regional Bell companies that have just jumped into the game, this is serious business. What's at stake here is US$800 billion that you and your friends spend each year in around-the-world phone bills. And that doesn't include the untold billions once the infobahn turns from vapor into a reality. Everyone who's anyone in phone carrier service wants a piece of that sweet-tasting pie, and so they're all recklessly jumping on the battling-for-buyers bandwagon.
If you've been watching TV or reading the newspapers - or even picking up your phone any time after 8 a.m. when the telemarketing hounds begin to bay - you know that the carrier competition is most intense between AT&T and MCI. These two giants have the most money to spend and the most market share to win or lose, and each year, both AT&T and MCI spend close to $200 million on advertising for the US long-distance carrier market alone.
But the print ads and Burger King bonus point coupons you're handed at lunch are just the a small part of the effort. The real bucks go into creating TV spots. Each company creates close to 250 television spots per year. About 200 of those TV spots are image ads thrown to the wind in a desperate attempt to appeal to every sort of demographic there is. No matter who you are, you have to have seen some of them. You've got your MCI ads featuring good ol' Southern boys talking about the importance of friendship with Tom Bodett-style "Motel 6" banjo music banging in the background, and you've got Spike Lee pounding out the importance of AT&T's 1-800-OPERATOR service to hip young dudes. You've got Brooks Brothers-clad execs pitching cool business conferencing services to corporate power brokers during financial shows and on ESPN. You've got your spunky short-haired 20-ish babes who look like they've just come from a Glamour photo shoot pitching the best gablines during daytime soaps. And last - but not least - you've got your sweeping visions of the information highway that both vendors want to own, pitched by reflective 11-year-olds with foreign accents.
But wait! There's more! Both MCI and AT&T create about 50 ads per year - that's almost one each week - that specifically bash a competitor or a competitor's program. So if MCI offers you a way to save 20 percent on your phone bill this week, you can be almost sure that next week AT&T will devote 60 seconds to analyzing a hypothetical MCI bill, telling you why and how MCI is lying through its teeth, and, oh, by the way, how you can save 21 percent by using AT&T. If this sort of mudslinging seems like a silly corporate battle fought with soupspoons and unsharpened crayons, that's just because you don't understand what's at stake.
The Market Dynamics Why do these carriers care so much about establishing and maintaining brand loyalty? Call the phone companies and they won't tell you. Instead, they'll send you a dozen 50-page publications, overflowing with details, footnotes, and clauses that outline each of some 20 recent initiatives and explain why the masses should convert to their carrier. Intel Corp.'s CEO Andy Grove is credited with saying that "only the paranoid survive" in the technology industry. If you're a media maniac who watches TV ten hours a day - or simply a reporter on assignment following the phone wars beat - you slowly realize that MCI and AT&T are fighting for their lives. And both of them are very, very paranoid. $800 billion is a lot of money. The smallest success might make you a millionaire, but the slightest failure could put you out on the street, licking the insides of discarded chicken gumbo cans.
When you talk to some people behind the scenes, you find that AT&T is mad as hell at MCI, and some of the more zealous AT&T fanatics would probably bomb MCI headquarters if they could. But the company doesn't want the world to know that. It would ruin the caring, paternal, and stable image the company thinks is one of its greatest strengths in the ongoing telephone service wars. AT&T wants to portray itself as old, wise, and someone you can trust. But meanwhile, upstart MCI has grabbed about 25 percent of the consumer long-distance market in the last decade and whittled AT&T's share down to about 65 percent. And this is a market that AT&T used to own, dammit!
Sprint, the third-largest carrier, isn't really in the game, depending on whom you talk to. The company has about 10 percent share and is clinging to its ubiquitous spokesperson, Candice Bergen, years after AT&T and MCI gave up on Burt Reynolds, Joan Rivers, and the whole celebrity marketing concept. "What'll happen to Sprint if Candice dies?" asks a creative director at Foote Cone and Belding/Leber Katz Partners (FCB/LK), the New York-based ad agency that creates and produces AT&T's TV spots.
AT&T has become hellbent on creating a kinder and gentler image it wants to project: True Friends. True Value. True Rewards. True Savings. True Aggression. It all started last August when Joseph "Wild Man" Nacchio was promoted to president of AT&T's consumer division and immediately decided to aggressively step up ad spending and throw the account into review. A former associate described Nacchio to Adweek magazine as a "cutthroat marketing guy, but not in a nasty way" (an important qualifier, that).
Once settled into his new position, Nacchio made it a priority to sit down with The Wall Street Journal and tell them that one of the big campaigns AT&T was running at the time - called "the i plan" - pretty much sucked. It did, but in the ad world you're not supposed to say those kinds of things. It's a breach of protocol. Still, lured by creative challenge and money, five of the nation's best ad agencies stepped up to bat, hoping to win Nacchio's blessing and the AT&T consumer account. In November, FCB/LK walked away the winner (although N.W. Ayer retained AT&T's famous "You Will" campaign).
The agency will probably bill GrandMa Bell close to $200 million this year, but it's keeping its cards close to its chest. You'd be paranoid, too, if every market share point you won or lost counted for $80 million - or about 1,000 jobs - and if Wall Street analysts were watching your every move. "I can't tell you anything about money," says Ruth Moss, an account executive at FCB/LK. "But you can talk to the creatives. They're harmless."
Behind the Scenes Lewis Kuperman is a creative - and a lofty one at that. He learned the tricks of the ad trade under the famed zany creative Jerry Della Femina twenty years ago, and today he's vice president and executive producer at FCB/LK. He's a little more laid back than your average account executive: busy but happy to talk. Kuperman is a man who loves his work, and that work is creating many of those 250 AT&T TV spots you'll see this year ("Gotta go! Due at a shoot!").
Kuperman says putting together an ad storyline and getting it approved is a lot like having a baby. "Sometimes you don't even try, and it works right away. Other times you have to keep at it for weeks." Average turnaround time from storyline conception to on-air TV status: about six to eight weeks. That's down from four to six months a few years ago, and a lot of that, Kuperman says, is due to the state-of-the-art equipment the agency uses to create ads. In the old days - and we're talking maybe ten years ago - to edit film you'd have to lay hundreds of yards of it on a floor or a table and use razors and tape to cut and paste together the sort of film spot you wanted. Today most agencies have a high-end Macintosh-like machine called the Avid Media Pro that lets you edit and resequence segments digitally. You want to zoom in on the woman? Segue to a sunset? Tilt pictures on their sides and make them vibrate to give your spot a fast-and-urgent-as-MTV feel? No problem.
Your average 60-second spot will run you between US$300,000 and $500,000, says Kuperman. ("Your AT&T dollars at work.") When I talked to him, Kuperman had just finished a 48-hour nonstop shoot in Florida for a spot he loved doing called "Rosie and Joey" that has a romantic theme and ran for about a week before Valentine's Day. He's also excited about work he's done hyping AT&T technology called True Sound ("Think of it as Dolby for the phone," he says). Kuperman prefers that sort of work to the aggressive stuff, like the agency's "True Confessions" - a spot that features recovering MCI users standing up and telling the world why, deep down inside, they've made the commitment to stick with AT&T.
Most people at AT&T and at FCB/LK, it seems, are like Kuperman. They're nice, and they're a bit bewildered by the new no-holds-barred-siege mentality that's pervading AT&T these days, a company that used to be as fat, happy, and complacent as IBM in the old days. And many of them are emotionally committed to their client for reasons other than dollars. "AT&T is really the telephone company," said a youngish woman who works in PR there. "They just are. They've been there since I was little. I mean, it comes down to, 'Who can you trust?' There's an emotional benefit there that's worth more than saving a few pennies."
Meanwhile, on the other side of Manhattan, Tom Messner, partner in MCI's ad agency, Messner Vetere, is talking to me from his car phone. Maybe he's driving through the Midtown Tunnel. If he is, he's probably enjoying the billboard he helped MCI place there that reads "What America is Saving By Using MCI Instead of AT&T." The board is constantly calculating and displaying in real time a stream of changing digits that's somewhere in the millions, billions, maybe trillions. No one really seems sure exactly how MCI arrived at the number on the board. But that's not the point. The point is that hundreds of commuters get to see that sign every single day.
"Well, what's happening here between AT&T and MCI," he says, "is really just reflecting the way the whole world is moving. Phone service is becoming more and more important." If you're a normal family you might have four kids, he says, and they'll all grow up and move to different areas of the country. You have to use the phone to keep in touch. "I don't relate to this myself, but it's the way society is moving, you know?" says Messner. "And it just happens to have worked out to be a fortunate thing for my business."
The full name of Messner's agency, based in New York, is Messner Vetere Berger McNamee Schmetterer/EURO RSCG. Messner has had the MCI account since 1990 and is producing about the same number of spots for MCI per year as FCB/LK is for AT&T. MCI is a company to watch. Advertising Age named Chair and CEO Bert Roberts its "Adman of the Year" for driving much of the company's current advertising work. This year the company engineered a $4.3 billion alliance with British Telecommunications and gained a powerful international partner and new cash reserves. The company just formed an alliance with a Mexican telecommunications carrier and has publicly announced it will commit $20 billion over the next few years toward building an information highway for the world. And MCI is watching AT&T very closely.
From MCI, or from its agency, Messner Vetere, you can sometimes get more coherent analyses of AT&T's advertising and a more articulate explanation of AT&T's vision than you can from AT&T itself - which leads you to think that MCI has whole divisions devoted to monitoring AT&T.
MCI ad spots exploit every sort of strategy: Some ads herald the company's alleged greatness and its multiplicity of consumer and business plans, programs, and options; others unashamedly bash competitors; and still others dramatically paint a vision of the future information highway MCI hopes you'll buy into (via MCI, of course). The company carefully calculates the success of TV spots and print ads. Most ads call for your response via specific 800 numbers, so when you call the company telling it you're ready to sign up on its team, MCI automatically tracks which ad you're responding to.
Some of the most successful MCI TV spots Messner creates, say internal sources at MCI who track the responses, are the spots that - unlike the Midtown Tunnel billboard - don't come out and confront AT&T directly. In these spots MCI asserts superiority by obliviousness, acting unthreatened.
In most of its TV ads the company acts as if it's unaware of AT&T. You know: MCI is just on the cutting edge, zooming along with neat ideas, tuned into new technology. They're normal, hip, young people who'd like to spend some time hanging out with you and your friends. And your friends' friends. And your friends' families. "What they're doing," says Eric Garland, executive editor of Adweek, "is cleverly employing their customers as their marketing force. And like a political campaign, they scrap and fight for votes every day." MCI and AT&T agree on what's strategic: low prices to sign you up now and a vision of the future to keep you on, shoveling money their way. Part of keeping you on includes creating a vision of the future to awe and intrigue you. But in executing their parallel strategies, they sometimes choose very different tactics.
Take MCI's corporate image ads, called "NetworkMCI," which position MCI as the oracle of the information highway future. The spots were introduced this January and feature Anna Paquin. Anna is an 11-year-old New Zealander who plays Holly Hunter's child in The Piano, a movie still playing in first-run theatres when the spots broke. Messner moved within ten days to create this one. In the ads, Anna muses that the information highway "is not about digits, data, or even highways. It's about you, and me, and Uncle Jack. And everybody." Does this stuff work? "Thanks, but I can already fax Uncle Jack on his car phone," snarls Adweek's ruthless Barbara Lippert, a woman who publishes weekly critiques that inspire fear and loathing in the ad industry.
Still, Anna's lilting accent is vulnerable and thoughtful. The information highway, she muses mystically, will not connect two points; it will connect all points. It won't connect here and there, she says, because there will be no more "there": We will all be here. The spots are surrealistic, kind of like Alice in Wonderland. They're filmed showing Anna standing alone in snowy Oregon woods or on the salt flats of Utah, and they're designed to be non-threatening. Dress a young girl up in nineteenth-century clothes and have her reassure you that something like the information highway isn't scary but instead is about togetherness. Strategically, these ads were created as a direct response to AT&T's "You Will" campaign, where Mommy says good night to baby through the box that Barney usually beams into. Have you ever tucked your child in from 2,000 miles away? the AT&T spots ask. "You will." This stuff is comfy, but besides elevating vaporware to Microsoft levels of corporate positioning, these AT&T spots smell suspiciously like a live-action episode of The Jetsons. Who wants at-home videoconferencing when it mostly means Mr. Spacely can catch us working in our bathrobes?
Both companies are after the same thing: Your money and your future brand loyalty. MCI and AT&T are working with their respective ad agencies to capture your loyalty by appealing to your most deeply felt sensibilities.
But that's treading on very touchy ground: It's like talking about religion or politics with strangers. If you're into art and philosophy and used to smoke weed and watch lots of Ingmar Bergman films, you'll probably find MCI's vision of the information highway more compelling than AT&T's - and maybe you'll form a lifelong brand loyalty to MCI products. If tucking a child in at night in a more familiar and less stark environment than the Utah salt flats touches your heart, you may opt to commit your family and your business to AT&T. Or maybe not.
With image ads, if you're on target, you score big; but if you offend someone, you risk alienating them from your company for life. But image ads are really all any company can do in 30 to 60 seconds on TV. The choices agencies have to make when putting together an ad are enormous. Man or woman? Black, white, Latino, Asian, or Eskimo? In the city or in the country? At the office or at home? Rap, country, classical, or rock in the background? The telephone companies create so many ads because they have to; most phone service is about keeping in touch, maintaining emotional connections, so to sell people on your phone service you have to find the right way to emotionally connect with them. Your construction worker in Texas probably has different sensibilities than a member of the Moroccan royalty or the manager of a 7-Eleven store in Los Angeles. But everybody's dollars count. If you're watching TV and seeing 250 telephone commercials per year, per carrier, you might be getting a good idea of what a 500-channel world will be like. What do you think: Tedious? Fascinating?
Maybe confusing. "As AT&T's ads concede, it's a game measured in pennies," says Chris Clark, marketing guru for Creamer Dickson Basford, a New York-based consultancy. "Make a minimum number of calls to a specific area code at an inconvenient time and you'll save, what, a quarter?" Clark asks. Saving money on long-distance telephone service is about as exciting to most of us as free air at the gas station (though nowadays that too is ephemeral).
Do consumers care about cost? Sure. But most of us want every phone call to cost a dime. Unfortunately, like losing weight, there are no quick fixes. The only way to reduce your monthly bill is by making fewer calls, or not staying on the line so long, or planning cross-country conversations to take advantage of special/off-peak rates. All of these strategies mean lower profits for the carriers, so instead AT&T and MCI show "real-life" customers blabbing for hours to exotic countries in the middle of the day. This advertising isn't simply fighting for the pennies you spend today, it's urging you to spend dollars tomorrow.
The Bottom Line Nobody can really keep track of who can offer the best deal for you this month - or even this week - because both MCI and AT&T's programs are constantly in flux and subject to so many qualifying conditions. But the gladiators keep on battling.
Messner at MCI's ad agency insists that "The telephone price wars are good for you, because competition drives down the cost of your phone bill." That may be true, but after watching a few hours of their commercials, I have to wonder: Isn't there a huge amount of waste going on? Couldn't the $200 million per year that both MCI and AT&T spend on advertising long-distance services be better spent developing faster, more efficient, and cheaper products? Well, maybe. To understand the advertising strategies of these phone-carriers-who-would-be-kings, you have to understand the way they view future market potential.
The long-distance carrier market is the biggest market in the world. The only industry that comes close is the worldwide automotive market ($700 billion), and the potential for growth in the carrier business is far more vast than the potential for growth in the auto business. No matter how much you like your Lexus, unless you're some sort of Road & Track freak, neat advertising isn't going to convince you to drive up and down the empty freeways around your town late at night or move you to buy another three, five, or ten cars. The investment up front is too big, and the payoff isn't that great.
The same thing holds true for commodities like jeans and soap. You'll probably see less than 100 TV ads this year created for jeans and soap brands, because no matter how much you love jeans, and no matter how clean you want to be, if you have common sense, you're only going to buy a fairly limited stash of soap and jeans this year. And the margins you can make selling soap aren't anybody's ticket to wealth unless you're producing in a huge sort of way.
Phone connections are a very different sort of beast. Each customer represents a growing and potentially infinite number of online hours because of the addiction factor. Think: What's the drug dealer paradigm? Make it easy for consumers to get hooked on your stuff, then habit takes over and addiction drives profits in exponential waves. This is how the phone businesses operate.
You don't believe it? Think of all your failed long-distance love affairs and the money you sunk into them. Better yet, think of how hooked you get logging on to your favorite bulletin boards on the Net. The addictive thing is both in the emotional connection, the human interaction, and in the hunger for information that sometimes keeps your modem software up all night sorting and gathering data for you while you sleep.
Carriers create hundreds of ads and sink millions of dollars into trying to hook you on their brand because for them it's a great long-term investment. Every time a carrier signs you up, you're a potential gold mine. AT&T, MCI, and Sprint, along with the scores of regional Bell services, don't care that much about selling you just one service. They want you to buy all phone services from them. And, in the next decade, every one of them will offer more data, sound, and video connections than ever before to extend your reach into the most obscure corners of the planet, galaxy, and universe - where, I'm sure, their ads will tell us, there are fascinating things to be found.
