It remains to be seen whether a decision by GT Group Telecom Services Corp. to offer Canadian businesses free long distance within North America will have an impact on those firms that are looking for a new telecommunications company. At the end of the day, an enterprise's telecom needs are a little more complex than some savings on long distance, according to one industry insider.
Mark Quigley, research director, Yankee Group Canada in Ottawa, said that since many telcos are emerging from bankruptcy or troubled times, they are trying to gain traction in the market and are using price as the carrot to get people's attention.
"I think this might fit the needs for a number of smaller businesses, but the further upstream we go, I think the needs become so much more complicated that prices are not going to be the sole determining factor for an enterprise-level company," Quigley said.
Even for the smaller companies, Quigley explained that in order to provide free long distance, Grop Telecom would have to attract a larger amount of customers in order to make a profit on its network, something that telcos in the past have not been successful doing, noting the restructuring of AllStream Corp. and Sprint and the demise of many other telcos along the way.
"It's not like we have an established path for success," he added.
On Wednesday, Group Telecom and its parent company, 360 Networks Inc., announced two free voice packages that were developed to meet the voice requirements of medium and large businesses. These packages offer savings of more than 40 per cent when compared to offerings of other telcos, the company said in a statement.
The first package is called local voice and is offered at $53.95 per line. It includes 1,000 minutes of free long distance per month, with additional minutes at $0.039 per minute. The package also includes features such as voice mail, call waiting, name and number display, call forwarding.
The second offering is the T-1 offering priced at $999 and includes 17,000 minutes of free long distance per month, with the same rate of $0.039/minute after the 17,000 minutes are exceeded.
Group Telecom called the free long distance offerings the future of long distance. They also said it would turn North America into a virtual local calling area.
Yankee Group's Quigley doesn't necessarily agree.
"I would suggest that we aren't even close to that happening yet," he said, adding that there is a long way to go before all telcos offer free long distance calls. The long distance market at the end of 2003 for both consumer and business was about $5 billion, Quigley said.
"It's a substantial chunk of money," he explained, which is the reason that the telecommunications companies won't want to give up the revenue by giving long distance away for free.
The marketplace has been in decline and it will likely continue to fall, Quigley noted, but the price of long-distance is dropping rather fast, so the telcos aren't making the kind of profit they used to. "But they still generate $5 billion on an annual basis, so to say that is going to disappear over night is ridiculous."
Price erosion will continue, but as voice continues to be pushed across Internet protocols across the enterprise, many firms -- in theory -- already have free long distance over their WANs.
"I guess from Group Telecom's perspective or from 360's perspective, it doesn't cost them much to provide the minutes," Quigley said.
In the meantime, other Canadian telecommunications companies will likely take the wait-and-see approach, Quigley explains.
"Value proposition [for many of these companies] goes way beyond price, something that a lot of enterprises will consider," he said. "Enterprise requirements tend to be more complex than simple long distance service and it's more complicated decision."
The Group Telecom offerings also include two Internet solutions and are valid until June 30, 2004.