Long Distance Resale Rules Change, But Market Still Booms

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BOONTON, NJ. March 27, 1998:

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The companies that resell long distance services have found the sweet spot in the long distance wars, says a new market research report from Insight Research. While the major leaguers selling long distance can expect to see their LD revenue growth stall during the next four years, reseller revenue will climb at a compounded rate of over 13 percent through 2002. At the same time, the resale industry is starting to mature as intense competition and consolidation take hold: aggregators--the first resale segment to give LD carriers major headaches--are facing extinction in 1998.

According to Insight's report, The US Resale Market 1997-2002, the number of resellers in the United States has jumped from 500 in 1994 to nearly 1,000 by the end of 1997. But for resellers to continue making headway in the long distance battle, they must diversify their product offering to match the one-stop shopping available from the big LD carriers--even when investments in local service or Internet aren't profitable today. At the same time, consolidation among the larger resellers is making survival for the smaller resellers increasingly difficult.

"Reselling boomed over the last four years because the barriers to entry were so low," says Robert Rosenberg, president of Insight. "Now resellers are having to ante up the price of a central office switch, their customers want it all from a one-stop shop, and competition is squeezing the arbitrage opportunity. All this means a bigger overhead for the resale company, and a more risky future," Rosenberg concludes.

According to Insight, the retail value of long distance resale will reach $17.22 billion this year in comparison to the actual wholesale cost of $7.84 billion. By 2002, revenue from resale services will still be growing at 9.5 percent annually, spurred by lowered access charges, international deregulation, and reduced consumer prices.

Further insights into long distance wholesale strategies, five-year forecasts of retail revenue, and future resale trends are published in The US Resale Market 1997-2002.

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Donna Savino

at Insight Research

973-541-9600