Reprinted by Permission from the August 1996 (V2-8) of The International Insider

Retske Report
AT&T Enters Callback As a Service Provider

AT&T, the world’s largest international telecommunications carrier, has quietly added callback services to its product line. Like most other US based international carriers, it has openly sought and courted callback service providers for a long time, offering its international network connections for their use. It is not only good marketing, but any attempt of a carrier to deny service to callback companies legally sanctioned by the FCC could bring the wrath of the FCC on the carrier.

But most carriers have limited their foray into unauthorized international competition to supply side agreements. There have been recurring rumors of carriers expanding callback service offerings in the form of partitioned switches and service bureaus, but these are either merely rumors or so hidden as to have escaped detection altogether. Of the big 3 US international carriers, AT&T has been removed the farthest from any appearance of engaging in callback. It was AT&T, after all, that originally filed actions with the FCC to ban the practice.

But AT&T, as with all carriers, has maintained some level of interest in callback, beyond viewing callback operators as potential customers.

Last year, AT&T took a minor step forward into the callback fray, by signing a joint marketing agreement with VoiceSmart of New York (then - Ft. Lee, NJ). Under the supposed terms of this arrangement, AT&T sells its network services to callback service providers, and VoiceSmart’s SmartNet subsidiary acts as a service bureau, providing the switching and billing functions for the callback company.

AT&T, as all carriers, has had some concerns about the collection of funds from callback companies. Many carriers, including AT&T, have sustained some substantial losses through write-offs due to bad debt to resellers, including callback companies. AT&T has vacillated in its approach to resellers. It has actively courted them, and even forming specialized local sales groups to sell to resellers, focused in regions where resale activity is high. Then, apparently when bad debts made the provisioning of these services financially unattactive, it backed off, raised the minimum threshold for wholesale deals, and reassigned the local reseller sales forces.

But it has obviously maintained an active interest in callback, despite the setbacks.

AT&T recently began offering callback services directly to AT&T Calling Card holders. The offering is limited to customers in 10 countries, although the list suggest that 3-4 of the countries are real targets of the campaign, and the rest being included on the list for unknown reasons. The details are included in a tariff filed by AT&T on May 22, 1996, which adds a product called the “MULTI-OPTION CALLING PLAN” to the USADirect product line. USADirect is an international calling card offering plans for travelers around the world. The original intent when USADirect was introduced in 1985 was to serve the needs of US travelers while traveling abroad.

TheMulti-Option Calling Plan expands AT&T’s repertoire of international calling arrangements to offer DID and 800 access to its US network at rates that are moderately competitive, even when compared to cut rate US callback companies. For example, callback calls to the US from Brazil are priced at US$.89, while most US callback companies are in the $.64-$.69 range. But what is significant is the savings The plan is only offered in a select group of 10 countries. The 800 calling option allows the caller to access the network directly, at a higher charge, but is not available from all countries.

The non-800 access is callback, in that a call is made to a Direct Inward Dialing (DID) number in the US, the caller lets it ring twice, and hangs up. The system calls back, and prompts the user for a PIN code. If the proper PIN is entered, the system will then allow the caller to make one or more calls. The service is reported to be offered by SmartNet, the services arm of VoiceSmart, with whom AT&T already has a joint marketing agreement, as well as equity interest.

Although the service is supposedly only offered to USADirect calling card holders in the US, marketing letters have been sent to addresses in Brazil. There is a US telephone number in the marketing information, that is located in an AT&T Consumer Services telemarketing center in Fort Lauderdale, Florida. Calls to this number are answered in Portuguese, but the operators we spoke to switched quickly to English, and took our order, using a Delta Sky Miles (American Express) credit card, without verifying that we had a USADirect account. It is a good thing they did not check, because AT&T is not even our PIC. The service has a monthly service charge of $10, which is waived for three months, no connection charge and no monthly minimum.

NHK (Japan Broadcasting) representatives attempted to interview AT&T representatives, who declined to comment. Public relations personnel told them that the service was “ a trial only” and did not warrant comment. Our AT&T marketing representative was not aware of any trial and assured us that the service was “here to stay”.

This foray of AT&T into the netherworld of callback is probably not a trial as the PR folks tried to paint it. AT&T has spent a lot of time and effort over the past several years studying callback, so there is very little it could gain by running an elaborate and visible test. It is more likely that this is actually a beta test, meaning that they are ready to deploy callback as on a larger scale.
Why would AT&T consider an AT&T branded callback product in the first place? Why wouldn’t they maintain a low profile, and sell wholesale to callback companies instead?

In a company as large and complex as AT&T, there is no way to accurately assess the reasons from our perspective outside the company walls. At AT&T, in particular, sometimes things are done for internal reason, reacting to company politics or It is also possible, in fact, likely, that there is more than one reason that prompted for this action. AT&T probably sees the potential in providing callback, but may have lost some of its desire for selling wholesale, which has recently been restricted by AT&T.
AT&T, like many other US based international carriers, has suffered some significant losses recently by resellers not paying bills, or going bankrupt. This rubs salt in the perceived wound that AT&T feels when dealing with wholesalers/resellers because of the cost issue. AT&T is arguably the best carrier in the world, but generally has the highest rates, although the gap has narrowed in recent years. Still, AT&T’s international rates do not approach those of its discount oriented competition, so it has to narrow margins considerably or lose wholesale business.

Thus, AT&T has a somewhat jaundiced view when it considers the sale of callback through other carriers. It may also feel that it competes with itself when providing these services to wholesalers at big discounts, since this may replace minutes it would have been paid for at a retail level, or shared with a foreign correspondent. AT&T’s answer to this dilemma appears to be an effort to eliminate the middlemen, and avoid the bad debt risks by selling directly to end users in foreign countries. There may be some other considerations as well, and the possibility of an internal turf war between competing business units within AT&T cannot be overlooked.

Regardless of why AT&T chose to go into callback, the fact that it is firmly in the battle, with an AT&T branded product will forever change the business. I can think of several negative impacts, but there is one, overarching (a word I learned at AT&T), reason why I think we should celebrate this development. AT&T’s entry into the market as a service provider at the retail level has completely legitimized the callback business. < Casey, I suggest you use this sentence as a drop quote! >
The impact on PTT’s, investors, other carriers, and end users cannot be overlooked. When MCI began to open markets in the early 1970’s, one of the first targets for their sales forces were to land “marquee accounts”, that would demonstrate the legitimacy of the competitive long distance industry. This was a key to the success of MCI, since it removed some of the fear that other potential customers might have about “leaving the Bell System”.

AT&T’s action in introducing callback in this way accomplishes the same thing. Callback has a very shady reputation in many countries, so people who have heard of it may fear trying it. Those who have not heard of callback may express fewer doubts when informed that even AT&T provides callback service to end users. This action in conjunction with the ITU action, or non-action as the case may be., last month regarding callback, should give callback operators some things to think about.

© 1996 & 2004, Gene Retske, All Rights Reserved

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