Prices of long-distance phone calls and Internet connections for
businesses in the USA have hit rock bottom and may be about to go
up, Ron Beaumont, chief operating officer of WorldCom, has
said.
WorldCom, the second-largest long distance carrier in the USA and
one of the largest Internet access providers, will lead a drive
among the major service providers to start selling services not
only to generate revenue but to actually make a profit, Beaumont
said.
"Customers became accustomed to voice prices going down and I
believe we will see voice in the business world do what happened in
the consumer market," Beaumont said. "We actually increased price
over time for the consumer," he added. "Basic US long distance
pricing will be stable and I think we are going to be able to put
some price increases in."
WorldCom would also like to increase prices for business IP
(Internet Protocol) connections, especially in data centres where
companies can house their servers and connect them to the Internet.
Prices should stabilise soon and rise after that, Beaumont
said.
"IP (pricing) has plummeted over time to where it is getting very
ridiculous. I think it is coming below cost," he said. "We will be
encouraging our customers to go to shorter term contracts to give
us some flexibility as things change over the next few
years."
The only areas where Beaumont sees prices going down are
international phone calls, because international carriers are
reducing their termination fees and cost of private line
connections between cities.
Eileen Eastman, a vice-president at research company the Yankee
Group, said WorldCom and rival AT&T need to establish a pricing
floor for voice calls and "they have the power to do that" as
"dominant players in the enterprise market".
Second-tier carriers drove down voice telephony prices in their
struggle to gain revenue to maintain themselves. Prices hit a point
where it was questionable if the carrier was even making any money,
said Eastman. "WorldCom and AT&T went down to a point where
they felt they went as far as they could go," she said.
The timing is right to change the trend curve, according to
Eastman. Companies looking for phone service will think twice
before signing with financially beleaguered tier-two carriers.
"AT&T and WorldCom can offer a good price, perhaps not the
lowest price, but they are able to offer stability, " Eastman
said.
The IP price increase is a similar story, with service providers
desperate for revenue bidding down the prices in a market that has
excess capacity. The question is whether WorldCom will be able to
put a break on the price declines in that market and start to earn
on its investments in data centres, Eastman said.