Marketing Costs Drive Up Telecom Service Costs

NEW YORK (05/11/2000) - At BusinessWeek's daylong e-Networks conference, WorldCom Inc. vice chair John Sidgmore was given the keynote address to say whatever he wanted to hundreds of corporate CEOs and chief information officers.

Sidgmore used his golden hour at the podium to complain about how much MCI WorldCom spends on marketing its network services. According to Sidgmore, an astonishing 49 percent of the telecom giant's service costs to customers can be traced to marketing. In contrast, 34 percent of cost stems from paying local-access charges, 6 percent for switching and transport equipment and 11 percent for operational support systems.

"Everyone assumes network cost is connected to technology," Sidgmore said during his keynote. "But it's all selling and marketing," Plus another telecom tidbit: "It also costs twice as much to bill the service as it does to provide it."

But despite spending all this money on print, TV and phone marketing, Sidgmore is dissatisfied with the results. In the future, as more people are connected to the Internet, MCI WorldCom intends to place more emphasis on somehow getting consumers and businesses to tune into Web advertising, which could be cheaper, Sidgmore said. He also is hopeful that advertising is one day going to be pushed out to customers carrying the new generation of Web phones.

But today, only 27 percent of families in the U.S. regularly use the Internet, according to recent data from Morgan Stanley Dean Witter, Sidgmore pointed out.

"The myth is that everyone is one the Internet, while the reality is that hardly anyone is on the Internet."

Sidgmore told the BusinessWeek conference audience he spends half his time "trying to convince regulators to let MCI WorldCom operate around the world."

MCI WorldCom acquired 75 different companies in the last few years so regulatory agencies tend to be treat it as a dominant player.

"Thank God for Microsoft," Sidgmore exclaimed. "If it weren't for Microsoft, we would be the most hated company at the Justice Department."

MCI WorldCom's vice chair ended his keynote on an upbeat note. "I really believe that 40 years from now, everyone will look back and say this was the Golden Age of communications. We're lucky to be part of it because it doesn't get any more exciting than this."

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