Looks like AOL is restarting its direct marketing campaign. I have received two AOL disks in the mail in the past week. Good news for TALK.
On Wednesday we saw that the market was not overly impressed with the TALK announcement. Today it looks like the Court's ruling that the Baby Bells can enter long distance market is driving down all the telcos. This eventuality was addressed in the TALK prospectus:
COMPETITION
The long distance telecommunications industry is highly competitive and
affected by the introduction of new services by, and the market activities of,
major industry participants. Competition in the long distance business is based
upon pricing, customer service, billing services and perceived quality. The
Company competes against various national and regional long distance carriers
and competes against the numerous companies in the long distance
telecommunications market that offer essentially the same services as the
Company. Several of the Company's competitors are substantially larger and have
greater financial, technical and marketing resources than the Company. The
Company's competitors that resell non-AT&T services do so at prices below that
which the Company can provide as an AT&T switchless reseller, although the
deployment of OBN enables the Company to be price competitive with non-AT&T
resellers at current industry pricing levels. The ability of the Company to
compete effectively in the telecommunications industry will depend upon the
Company's continued ability to provide high quality services at prices generally
competitive with, or lower than, those charged by its competitors. Although the
Company believes that gross margins will improve as more customers are
provisioned on OBN, revenues could decline if competition for long distance
service forced the Company to offer services at greater discounts.
Changes in the regulation of the telecommunications industry may impact the
Company's competitive position. The Telecommunications Act of 1996 (the
"Telecommunications Act") effectively opens up the long distance market to
competition from the Bell Operating Companies and Regional Holding Companies
(collectively, "RBOCs"). The entry of these well-capitalized and well-known
entities into the long distance market could significantly alter the competitive
environment in which the Company operates because of the established
relationship the RBOCs have with their local service customers (and the
likelihood that the RBOCs will take advantage of those relationships), as well
as the possibility of interpretations of the Telecommunications Act favorable to
the RBOCs, which may make it more difficult for other providers, such as the
Company, to compete to provide long distance services. Consolidation and
alliances across geographic regions (e.g., Bell Atlantic/Nynex and SBC
Communications Inc./Pacific Telesis Group domestically and BT/MCI and France
Telecom/Deutsche Telekom/Sprint internationally) and across industry segments
(e.g., WorldCom/MFS/UUNet) and other pending and possible deals (e.g.,
WorldCom/MCI and GTE/MCI) may also impact competition in the telecommunications
market and the position of the Company.
Although the basic rates of the three largest long distance carriers --
AT&T, MCI Communications Corp. and Sprint Corporation -- have historically
increased, AT&T and other carriers have announced new price plans and
significant simplified rate structures aimed at residential customers (the
Company's primary target audience under the AOL contract), which may have the
impact of lowering overall long distance prices. There can be no assurance that
AT&T or other carriers will not make similar offerings
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available to the small to medium-sized businesses that the Company serves.
Although OBN is expected to make the Company more price competitive, further
reductions in long distance prices charged by competitors still may have a
material adverse impact on the Company's profitability. |
