Clear keeps eyes on long-distance market for profit

By Richard Braddell

Clear Communications will continue to target long-distance customers as its core business, despite shrinking margins and the explosion in competing providers in recent years.

Clear recorded its first loss this year and to outward appearances is at a crossroads as high interconnection charges erode already shrinking long- distance profit margins. Meanwhile, the influence of its new owner, British Telecom, is yet to become fully apparent.

But, tough times aside, Clear's business portfolio manager of tolls, Steve Jackson, said the underlying profitability of its long-distance business was very good and Clear's customer base was growing.

In residential, Clear says it has 500,000 customers, giving a penetration of 17 or 18 per cent of the market, while it claims 79,000 customers among small and medium-sized businesses.

If the figure for residential customers seems high, that is because Clear counts the total number of users in each household, rather than the number of accounts.

Even so, residential toll customers have been growing at 5000 to 6000 a month and 600 new business customers are being added. In addition, 90 per cent of Clear's long-distance customers use the company as its default toll provider.

But while Clear views the toll business as an end in itself, it also sees it as the customer springboard to the online and e-commerce revolutions which are expected to change the industry landscape in the next three years, as well as to other services such as data, fax and messaging.

Within three years, Clear expects to offer flat-rate "all-you-can-eat" long-distance dialling, with the first step in that transition likely in the next three months.

Mr Jackson declined to specify what that might be, but said the main impediment to flat-rate charging similar to that now offered by internet providers was Clear's time-based interconnection agreement with Telecom.

But in spite of the squeeze on long-distance margins from interconnection payments, Mr Jackson said international remained a good earner because there was less reliance on Telecom to complete calls. And although international prices have fallen sharply in the past year, call minutes have jumped 65 per cent.

Meanwhile, Clear's recently appointed general manger of voice and mobility, Kevin Millar, says the all-you-can-eat concept will go beyond tolls.

"Clear has always been in the business of providing solutions, but the definition of solutions has changed," he said.

He believes many of the 20 or so companies now competing in the long-distance market will lack the size to survive.

But with 40 per cent of Clear's business customers taking tolls only, he believes the potential to sell other services is strong.

At the forefront will be Clear's stated goal of being the leader in online services.

But with the most challenging environment since Clear and Telecom had the long-distance market to themselves in 1991, the company will rely increasingly on its new owner, BT, for direction and support New wireless technologies may also help. The LMDS spectrum held by Clear could well form the basis for direct customer access, thus reducing Clear's dependence on Telecom.

And with rapid improvements in that technology in the past year, servicing even smaller customers may be viable.