Well, I finally did it! After a lifetime of using AT&T and its predecessors for long distance service I finally switched our hotels and corporate office to a competitor. Our General Managers and a few of my business associates who were well aware of my AT&T loyalty have expressed shock.

First a little background. Back when they busted up the Bell System I was responsible for buying long distance for 18 hotels. I was forced by my boss to look at over a dozen long distance carriers. Among these were little MCI and Sprint in addition to long distance companies owned by IBM and other major and minor companies. At the time most were buying in bulk from AT&T and reselling service. Set up times (the time it took operators to come on line or calls to actually start ringing at the dialed number) were horrendous because calls were being switched back and forth across the country. Because equal access was not yet the available standard, smart switches and dialers were necessary to make the process work.

Service was also unreliable from some of these companies. Some of the pricing was unbelievable. Equally unbelievable were the horror stories one heard about operator charges. Clearly in those days I painted all the non-AT&T carriers with the same brush.

Things have changed in those dozen years. MCI and Sprint are legitimate players in the long distance arena. Sprint, by way of its Sprint Hospitality, has worked hard to compete with AT&T for the hotel market. There are still hundreds of companies out there soliciting business. 

For the last six years we have bought all our AT&T long distance through aggregators or the franchisors because our size was not sufficient to get satisfactory pricing on our own. We also bought our O+ (operator) service through a telephone management company where we were paid commissions from AT&T at rates equal to or better than we could have received on our own.

Last year we were called directly by a representative of AT&T who seemed to have been assigned the job of soliciting management companies. I thought this would be a great opportunity to get out from under an aggregator and start buying service directly under one umbrella at equal or better prices. The bottom line was that this AT&T representative was preaching to the choir! All that had to be done was match my current pricing and let us deal directly with AT&T.

Unfortunately this representative didn't understand management companies, couldn't quote pricing in an understandable and measurable way and didn't return calls. He also had not bothered to research our company to see what carriers we were currently using and what hotels we had, all of which is pretty public. In other words AT&T began to spoil a reasonably good relationship. About the same time we became aware of plans being offered by the franchisors for 1 + (direct dial) service which had lower pricing than we were paying. When we discussed this with our AT&T aggregator we were told that we were being switched to a lower tariff also. Then the delays and excuses started. From month to month we watched as we lost the spread between the two rates.

Looking At Options In April I attended the American Hotel & Motel Association convention in Atlanta. While touring the trade show looking for better pay-phones than those offered by the local telephone companies (LECS) I stopped at Sprint's booth to ask what they had. At the time they weren't offering anything which applied to my circumstances, but I had a nice visit with their Vice President of Marketing for Sprint Hospitality.

His sales approach was low key. When he heard I was a loyal AT&T customer he simply asked that I keep Sprint in mind if I ever considered changing carriers. I asked what chains he had exclusive or preferred relationships with. He mentioned several, one of which was TraveLodge. I then moved on to look at pay-phones at Northern Telecom's booth. They had a nice pay-phone that I was interested in but it wasn't available to our company in all locations.

As I left the exhibit hall a little frustrated about pay-phones I ran into Joseph A. McInerney, CHA, President and CEO of Forte Hotels, Inc., the parent company to TraveLodge. I stopped to chat with him a few moments about his experience with Sprint. Joe's response was very favorable. Joe may have over 470 hotels and appear too busy for getting involved with this level of decision, but he's also the kind of person that wouldn't make a long distance decision affecting both guest satisfaction and profitability lightly. His recommendation had a lot of impact on me.

After my return from Atlanta things got a little more interesting. Apparently Sprint Hospitality had retained a new representative for the Upper Midwest and she called our company. 

In the course of that meeting I mentioned my discussions in Atlanta and she asked if we would provide information sufficient for Sprint to prepare a proposal for all of our long distance services. The end result was that a proposal was presented for everything except pay-phones but she gave us a referral to a St. Paul company for that.

I had also called Northern Telecom to pursue the advanced pay-phones I was interested in. Again, they couldn't meet my needs directly and asked what long distance carriers and LECs we were with. 

During the conversation I mentioned we were considering using Sprint Hospitality. The gentleman paused and said he'd get back to me. Shortly he called and said that they were meeting with Sprint's new pay-phone division in a few weeks. That, of course, was the first I'd heard of that division of Sprint. Remember Sprint Hospitality was even giving out independent pay-phone providers as solutions to my desire to change and hadn't heard of it either.

About two weeks later a representative of Sprint's pay-phone group in Orlando called to discuss my needs. The man said they had to start somewhere and would be glad to meet me at our Boynton Beach Holiday Inn Express to do the necessary site survey and sign contracts for all our pay-phone needs.

By this point we had decided to go ahead on the pre-paid long distance phone cards. Before finalizing the plan we wanted to decide on the long distance issue, which by this time we were seriously considering.

There were a lot of issues to evaluate. The 1+ decision was rather straight forward. Sprint Hospitality's offer would save us 10% - 15% company wide on long distance costs even after AT&T's aggregator lowered their rate, if they ever got around to it. The real decision was O+ services and commissions.

AT&T pays a commission on O+ based on each call or message. A message is any call carried over AT&T charged to AT&T's calling cards, a LEC's card, collect or any other billing method they may accept. They don't pay on calls dialed around to other carriers. The message rate ranges from $0.15 to nearly $0.50 depending on the program you are in and the term of your contract. They won't make a deal with you if you are not using them for 1 +.

AT&T claims to have 60% to 80% of the calling cards in the country. Clearly they have the majority of the cards carried by business travelers. I understand AT&T to also say that the dial around rate when they are not the selected O+ carrier to be very high, possibly 50% plus or minus 10%. This means that if one has not designated AT&T as the O+ carrier a very significant number of calls are not commissionable. Sprint Hospitality agrees that the dial around when AT&T is not the O+ provider is higher than it would otherwise be. Sprint Hospitality's commission program is different than AT&T's in that they pay a message rate of their proprietary calling cards which is lower than AT&T's. However, in addition to that, they pay a percentage of the revenue on all other O+ calls (as opposed to a flat amount per call) except those billed to a proprietary card of a competitor.

Lack of Interest 

We stopped at this point and solicited some additional information from an AT&T representative based out of Atlanta. This representative answered the question by promptly faxing us a O+ contract and graciously answering a few follow-up questions. We had clearly informed this person why we were calling. Surprisingly, when we didn't fax back a signed contract or call again, AT&T did not follow-up.

The net result is that Sprint Hospitality offered us lower commission rates on their proprietary card of which there are relatively few compared to AT&T, but they offered us more on all other calls that did not get dialed around. We were never able to figure out if the net result would be more or less commission from this source of revenue. Even if we lose half our revenue from this source it is relatively insignificant compared to the savings we expect to realize on our 1 + service.

We are most concerned about guest satisfaction. Are our guests AT&T proprietary calling card users? We don't know and have no way of finding out unless we do some kind of consumer survey or focus groups! Dial around rates are not a great indicator because, for instance, I always dialed around to AT&T even when I used my home LEC card which will work on any long distance carrier simply because I preferred AT&T and didn't want to expose myself to higher rates.

We did decide that the AT&T proprietary calling card user is probably no dummy as a regular traveler. They probably run into all the fly by night O+ pay-phones scattered across the country and are well aware of how to dial around using AT&T's 10+ATT+O (102880) and 800-321-0288. It is, after all, plastered all over the calling card itself!

Our concern then became one of insuring that our guests who wanted to use AT&T (or MCI and other carriers) could reach them easily. Sprint Hospitality offers a no cost option of their operators transferring callers to AT&T on request. We made sure that feature was written into our final contract preceded by the words, "Prompt and courteous." We are also redoing our informational tent cards adjacent to the telephones in all our guest rooms to insure that they are clear in their dial around instructions. Our Sprint Hospitality contract also clearly states that the O+ rates will not exceed AT&T's rates including time of day and other discounts. This was done to protect our guests from excessive charges.

In the end, we signed a three year Sprint Hospitality contract. We felt we would save money on our 1 + and would come out about even on the O+. We also ended up with one source for pay-phones, prepaid calling cards for our marketing efforts, and a source for ancillary services such as voice mail and others when we want to migrate to them in our guest rooms.

Both AT&T and Sprint Hospitality offer signing bonuses. AT&T offers them for the O+ service and if you sign up for their INTERLATA (local area long distance) service. Sprint Hospitality offers one based on the total volume they expect to realize from your account. 

While we were doing our reference checking with hotel managers, owners and other management companies to learn more about Sprint Hospitality we learned that a major Sioux Falls operator was switching from Sprint Hospitality back to AT&T. Their general managers were saying that they were generally happy with Sprint Hospitality and had minimal guest complaints regarding the dial around issue. Based on information we received from various sources, I believe that Sioux Falls company is making the change because AT&T is giving the company even lower 1 + rates and a sizable sign up bonus, but is also pre-paying all or a part of the O+ commissions to be earned over the life of the contract rather than waiting until they are earned!

Clearly long distance service, especially the 1+ portion, has became a commodity. There are no significant service differences among the industry leaders. By tying O+ service to the 1+ service some differentiation can be done especially if one does it like Sprint Hospitality does it.

They offer a number of additional services at no cost from their operator service centers in Honolulu and Winona (information about the hotel itself, its services, etc.) which are appealing to a hotelier. In the end, for us, guest satisfaction and the overall package drove our decision.

Another factor affecting our decision was AT&T's nonchalant and indifferent attitude towards our decision making process. We've had over 20 different hotels with 50 to 400 rooms associated with our company and have been reliable customers to them since we started. Sure, in the over all scheme of things we're a relatively small client but we'll grow! AT&T never seemed to focus on us as a single customer and I suspect there are many other small to mid-size management companies out there that they are missing also.

We're looking forward to our new relationship with Sprint Hospitality and appreciate the fact that their President, Richard Kalbrener, took the time to visit with me by telephone when their local representative was not able to resolve several technical contractual issues with us. Rich, we're going to hold you and your company to all those promises!