Just treading water requires a massive sales effort. In the past the Furst Group relied on independent telemarketing contractors, whose procedures, Streep admits, were difficult to police. Today 90% of the Furst Group's sales are made by its own employees, an army of 750 telemarketers, deployed in low-rent places, among them Freemont and North Platte, Neb. Each telemarketer aims to make 200 calls during a shift. "That's 150,000 businesses we contact every day," says Streep, "750,000 businesses we contact every week, 3 million a month. We're a machine."
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When Amar Bhidé, an associate professor at Harvard Business School, looks at companies like the Furst Group, he sees a textbook example of what might be called a temporary industry -- one that develops rapidly to correct an imbalance in the marketplace and vaporizes once its job is done. Bhidé does not belittle those companies. "I think they play a tremendously important role," he says, "to the same extent that I think speculators play an important role. They attack imbalances between supply and demand."
One of Bhidé's favorite examples is the unofficial distribution network that developed in response to IBM's decision to allocate its limited supply of first- generation PCs. "Product was not being moved in an economically rational way," Bhidé says. "It was being moved where IBM said it should be moved. These people [unofficial distributors] jump in and figure out that the price in Geographic Region B is less than the price in Geographic Region A and eventually force IBM to rationalize its pricing policies." Such industries, Bhidé says, "help bring markets into proper equilibrium."
Is this, then, the fate of the Furst Group -- to play a role in rationalizing the long-distance telephone industry and then to exit the stage? Maybe not. Here are several reasons:
The major carriers are in no hurry to cut prices. If AT&T, MCI, and Sprint wanted to make the resellers disappear tomorrow, all they would have to do is begin offering all their customers the same price they already give the resellers. They won't do that, though, because resellers still control only a fraction of the $65-billion long-distance telephone market -- about 16% if you count those with switching equipment; 3% if you're talking about switchless resellers like the Furst Group. The vast majority of the 11 million businesses in America still buy their long-distance service directly from the major carriers and pay retail for it.
Besides, the resellers have become the major carriers' allies. Once upon a time, AT&T had all the customers. With deregulation it began losing market share to MCI and Sprint. But according to analyst Bolen, "AT&T's market erosion essentially stopped when it started playing the reseller game." Reselling gave AT&T a channel through which to retain its price-sensitive customers. These days, all the major carriers necessarily regard resellers the same way -- as frontline warriors in the battle for market share.
Who said there's an imbalance in the marketplace? By focusing on the smallest of small-business clients, the resellers have found a market niche that is otherwise inaccessible to the major carriers, with their huge equipment costs and overhead expenses. "The cost structure is such that you can't take a $50,000 a year AT&T marketing executive, add on overhead, and expect to sell a $100 account," says Jeffrey Villwock, an analyst with Johnson Rice & Co., in New Orleans. For that you need an outfit like the Furst Group, whose expenses practically begin and end with sales and general and administrative costs.
There will be more products and more selling. The world of telecommunications is about to get a whole lot more complicated. The federal government is about to pass legislation that will give the Baby Bells access to the long-distance market, putting them in direct competition with the resellers. "The good news," says Charlie Houser, chairman and CEO of Corporate Telemanagement Group, "is that the Bells are so poor at servicing customers that we're not afraid of them at all." Moreover, when the Baby Bells lose their monopolies on local service, the resellers can enter a market that at $90 billion is larger by half than the long-distance market they're already in.
The implications of that expanded opportunity excite Streep. He thinks about the Furst Group five years from now, transformed from a niche player into a one-stop telecommunications retailer that can offer long-distance service from a full range of carriers, plus discounts on local service, cellular service, paging systems, personal communication devices, and any other dream products the industry might create. He doesn't care what those products are, as long as he can sell them.
"Ours is a real business," he says, somewhat defensively. "It's run by a bunch of professionals, and they're good, and they do the job. It's not hype; there's no rainbow; there's no pot of gold. It's a business that's built on structure and finance and economics."
And? "And sales. Hah!"
