replica mont blanc pens uk Nynex After the Wake
IT is a tartly cool October morning in Manhattan. Three salesmen from the Nynex Corporation are in a conference room, listening to a big customer tell them why Nynex is such a lousy phone company.
The customer in the catbird seat is Robert M. Murphy, vice president telecommunications for the RMJ Securities Corporation, a big broker of Government bonds. It is the sixth meeting since May between Nynex and RMJ. The salesmen want Mr. Murphy, a compact and affably pugnacious man, to sign up for a long term contract.
Nynex used to be RMJ’s sole supplier, but nearly half of its $2 million annual phone budget now goes to Nynex’s rivals. Nynex must work hard to hold on to its shrinking piece of the pie. “MFS can do that for me, can you do that for me?” Mr. Murphy asks at one point, dropping the name of MFS Communications of Omaha, a Nynex rival. And later: “Some of your tech guys are pieces of work. What if they bring my whole network down?”
The Nynex salesmen, led by Wayne Zuckerman, vice president of systems marketing, nervously finger their Mont Blanc pens, nod politely and smoothly assure Mr. Murphy that such a misfortune would not occur. Their main enticement is a new service that can speed up network changes the customer might need. At last, Mr. Murphy commits to a seven year contract cancelable at any time with little penalty.
And so it goes, with Nynex slouching to another tentative victory. Like other regional Bell operating companies, Nynex has been sweating in the last few years because of unaccustomed competition from upstarts like MFS offering alternative phone service. Despite headline grabbing forays into the bloody fight for Paramount and showy investments abroad in Britain and Thailand, Nynex, like the six other “Baby Bells,” is still mainly a local phone company 86 cents of every dollar of revenue comes from serving Mr. Murphy and 8 million other business and residential customers.
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Lately, an anxious but newly competitive Nynex has won more than it has lost, most notably in a big showplace contract to provide pay phones in the New York subway system. But no one roots for a $13 billion Goliath, especially when its victories have been against Davids, like Teleport Communications Group of Staten Island for the subway contract. Moreover, Goliaths loom on the horizon U S West and Time Warner soon, Bell Atlantic and Tele Communications Inc. shortly after that. Both of those alliances between Baby Bells and cable television giants raise the specter of much more serious poaching in Nynex’s phone business. Nynex, even in its own mirror, looks vulnerable.
Indeed, though Nynex’s service area includes such seemingly lucrative markets as New York City and Boston, the company is in many ways the most troubled of the Baby Bells. It faces the toughest regulators in the country and the savviest business customers, like Mr. Murphy, in the world.
What’s more, Nynex has a cautious management, with a stodgy (albeit improving) corporate culture hobbled by the highest wages and taxes of any regional Bell. The bottom line: Nynex’s stock price has lagged other Bells and some analysts rate the company as the worst performer of the group. In the most recent quarter, it reported a profit of $298.3 million, a 7 percent drop from the year ago level, on flat revenue of $3.3 billion.
Nynex seems to have recognized the depths of its problems and shortcomings, and has begun to respond with better marketing and shrewder deals. Just last week, it announced plans to confront the Goliaths directly, vowing to offer cable TV and interactive services, along with local phone service, on an upgraded network it would build throughout its territory. Still, it is far from clear that it can hold on to its status as the dominant phone company in New York and New England, analysts say.
“Nynex faces perhaps the most significant competitive threats of any regional Bell company,” said Daniel Reingold, an analyst at Merrill Lynch. “What happens to Nynex will say a great deal about the future of competition in telecommunications.”
It will also say a great deal about the future of universal telephone service. Under Federal law, local phone companies must provide basic phone service to all customers at “just and reasonable” prices.
For the public good, government regulators have kept residential rates low, often below cost, through an elaborate system of internal subsidies, principally through higher charges for business and other customers.
BUT universal service providers like Nynex can foresee a time when their most lucrative subsidies will be under competitive attack. The American Telephone and Telegraph Company, for example, must now pay Nynex $9.4 million a year to use a big telephone line in Manhattan. Nynex’s profit on the line, which it uses to subsidize consumer rates, is 93 cents on the dollar. If competing lines become available, Nynex simply could not charge such rates.
“We used to own the marketplace; the customer had no place to go but us,” said William C. Ferguson, chairman of Nynex. “Competition has changed all that forever, yet we continue to be regulated as if all of our subsidies will remain forever.”
Like other regional Bells, Nynex wants to win more profits by being able to freely set prices to match rivals without filing lengthy government reports that give information to rivals. It also wants to own cable television providers in its own service area and, above all, offer its own long distance service. While legislation was recently introduced in Congress to free the Bells in these areas, passage is far from certain.
Tough luck, say regulators in New York, Nynex’s biggest region. “It would be like giving the fox the keys to the chicken coop,” said Richard Stannard, technical staff director for the State Public Service Commission.
NYNEX’S chicken coop is a big one. Its largest units are New York Telephone (61 percent of company revenue) and New England Telephone, which operates in Massachusetts (25 percent of revenue). The rest of New England Telephone’s service area is spread over New Hampshire, Maine, Rhode Island and Vermont. It must provide universal service in all these areas.
But the company also has big expenses, paying the most of any regional Bell in wages and benefits, an average per employee of about $44,500 annually, compared with a Bell average of $40,700, according to Coyle Research of Lake Bluff, Ill. Nynex also paid the most in local taxes, including $860 million in New York alone, or 11 cents of every dollar of revenue in that state. On average, the other Bells pay 5 cents.
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Nynex has worked hard to cut that overhead, trimming its work force by about 17 percent over the last few years, almost entirely by early retirement enticements.
But the payroll still remains large, in part a legacy of the boom on Wall Street in the 1970’s that called for an ever expanding number of more sophisticated phone lines. Thousands of employees were hired straight out of college and now, in their forties, they are too young to retire and too expensive to keep.
In the early 1990’s, the New York Public Service Commission, along with regulators in Illinois and Pennsylvania, began encouraging greater access to the “local loop,” as it is known, for upstart carriers. These included MFS Communications and Teleport, which did not have all those expensive employees or the universal service obligation.
Making matters worse for Nynex, New York Telephone has failed lately to meet the state commission’s mandated service criteria, such as reducing the number of missed repair appointments. The slack is due, in part, to setbacks from the World Trade Center bombing and disruptions from an unexpected storm last winter. But critics also blame poor management.
Whatever the cause for the setbacks, a more favorable rate structure is in doubt. On Friday, Richard M. Kessel, head of the state Consumer Protection Board, asked for a 1994 rate cut of nearly half a billion dollars.
Still, it is not all gloom and doom at Nynex. Some of its products have improved substantially. Nynex was able to win Mr. Murphy of RMJ Securities, for example, with its new network product, Enterprise Services.
For years, telephone networks, like a child’s tin can and a string, were physical structures requiring workers to cut, tie and rearrange phone lines. It might take days, or even weeks, to redo a network. Now, with what are known as software defined networks like Enterprise Services, networks can be changed in seconds with the click of a computer mouse.