Clear Communications
 | |
| Public | |
| Founded | 1991 |
| Defunct | 2001 - Merged with TelstraSaturn to form TelstraClear |
| Headquarters | Auckland, New Zealand |
Clear Communications was a telecommunications company based in New Zealand. Until merging into Telstra's operations in 2001, it was the biggest rival to Telecom New Zealand.
Keeping Up With Change
In the late 1980’ and early 90’s, Telecom products were evolving and no longer based on just conventional switching and transmission systems to carry calls. Instead they were increasingly extending to what might now be called “intelligent products”. That is, features based mostly on “information”. For example, information about; a customer’s administrative structure and preferences such as bulk discounting structures, customer network usage volumes and patterns and related cost tracking needs.
In this context, Information Systems at Clear was never a “back-office” cost-reduction function - but rather a key strategic element of the business plan.
Bruce Macleod (GM - Information Systems) was given responsibility for Clear’s Information Systems from the pre-launch (Alternate Telecommunications Company) business plan, through the initial build and start-up stages, the early product launches, the rapid growth and commercial success, and the ongoing competitive differentiation. As Macleod said: “**Our business strategy required us to differentiate ourselves from NZ Telecom through our service levels. Information technology gives our staff the tools to do that job”
In this era before the internet arrived, technology use was generally limited to isolated groups of personal computers, and perhaps a departmental mini-computer or a specialized mainframe. Traditional Telecom companies were typically restricted by this inflexible “vertical silo” style of departmental computer systems.
In contrast, the IS team at Clear designed a forward-looking corporate-wide layered architecture to permit a nimble response to turning creative marketing ideas into operational product realities. Service Features were quickly created by configuring the upper layers of workflow and applications without having to rework the versatile lower layers.
Layered architecture:
A foundation layer of desktop computers for all, application servers (including mainframes), and interconnecting data networks.
A middle layer of configurable business applications and databases for Customer Service and Billing, Network Operational Support, Business Planning/Decision Support, and Financial Control.
A top overlay of operational Business Processes (incorporating both employee and customer workflows)
Upon arrival, all employees were equipped with office services such as Email, file servers, spreadsheets, and project management tools to allow them to quickly engage with the rest of the Clear team on priorities and projects. The centerpiece highly-configurable Customer Service and Billing application was acquired from Telecom USA (a recent MCI acquisition). In each other area, “best of breed” applications and any requisite hardware and software were acquired from global technology partners and locally adapted to fit needs. The “business process engineering” approach was a key factor recognized in Clear’s achievement in the “NZ Quality Awards”.
In keeping with the overall Clear culture, the Information Systems group was organizationally aligned with, co-located, and integrated into the company’s comprehensive teams. That is, IS-Product Development under Tom Barrett, IS-Network Engineering under Allison Nowlan, and IS-Business/Financial Analysis under Stan Clarke. Another team was dedicated to the design, deployment, and ongoing operation of the foundation technology platform (under Brian Speed and Vlad Ruzicka).
A common, deeply-held conviction amongst this team was that Clear was perhaps a “once in a lifetime” opportunity to “do things right” without the baggage of past sub-optimal technology decisions and entrenched thinking.
As Clear progressed from start-up to a successful self-sustaining business, the IS Team developed not only the requisite technology investments, but also the required staffing, skills, tools, and processes. The initial experienced “pioneer” North American people noted above gradually transitioned to a strong “next generation” of well-equipped NZ professionals steeped in the distinct Clear corporate culture.
** Bruce Macleod - Management Information Systems magazine, Australia, Feb 1993
Making history
The story of Clear Communications is a story about commitment. Through determination and perseverance, it made New Zealand history by establishing itself as the country's first telecommunications competitor.
From the time it entered New Zealand's previously unchallenged telecommunications industry, Clear Communications faced obstacles which had to be persistently hurdled. The opposition proved to be as tolerant of the new entrant as Islamic fundamentalists toward Salmon Rushdie.
Forget the fair and competitive environment that was supposed to result from the deregulated telecommunications industry. The war for customers was with the odds stacked in favor of the established Goliath.
Starting from scratch, virtually unknown and dependent on a capable but lean team, Clear Communications set out to show New Zealanders the meaning of quality, efficiency and value in the business of telecommunications.
Market share grew dramatically faster than predicted. The aim, three years from launch date, has been for five percent market share and a staff of one hundred and seventy five. By the close of 1993, those predictions had been significantly outshone. Market share had reached almost nineteen percent and Clear's staff numbered 500.
The way forward was both triumphant and rocky. There were frequent attempts to knock Clear's innovative marketing initiatives off their perch. Three years after the battle commenced for access to various parts of the Telecom system at a fair price, a satisfactory resolution remained elusive. The playing field was still tilted.
Undaunted, Clear Communications doubled the size of its business in the first two years of operation. A year later, it achieved the most improved turnover among New Zealand's top 200 companies.[1] The newcomer had also achieved substantial cost and service benefits for New Zealand’s telecommunications customers and was here to stay.
Clear's strength and determination was built on challenging ground. Driven by dedicated staff and customer service, its first years constitute and adventurous and productive history.
Brave new world
When the Labor government cane to power in 1984, New Zealand's tight regulated economy was in for a shock.
A vigorous new broom began sweeping through New Zealand business and by 1987, the drive toward privatization had reached telecommunications. A report commissioned by the Department of Trade & Industry in that year began the process which was to turn the country's reliable but staid telecommunications industry inside out.
In the solid old days before de-regulation, telecommunications shared the same government umbrella as the Post office and nationwide bank. Service was far from rapid and tended to reflect the attitude of monopoly car manufacture Henry Ford who told a customer he could choose whatever car he liked as long as it was black.
The government was bristling to get the liberalization show on the road. Telecom Corporation was created in 1987 and, in the same year, the firm of Touche Ross were briefed to examine the feasibility of competition in New Zealand's telecommunications industry. The detailed report came back with the thumbs up for competition. Intensive research showed New Zealanders were unimpressed by the prices they were being charged and were not happy with a generally unresponsive service.
By June 1988 the government had made up its mind. The Hon Richard Prebble, Minister of State Owned Enterprises, announced to the country the intention to de-regulate the telecommunications industry and open the door to competition for the first time in New Zealand's history. The mandate to the new state owned enterprise, Telecom Corporation, was to operate in a profitable manner in a fair and competitive environment. The free and open competition became law with the Telecommunications Amendment Act in December 1988. Full de-regulation for the telecommunications industry would be a fact by 1 April 1989.
The government chose not to follow the example of de-regulated economies overseas where regulatory bodies had been set up to ensure competition was indeed free and fair. Leaping from a government owned monopoly to open competition, the "New Zealand experiment", as it came to be labelled, created its own precedent.
"Consumers will benefit substantially from opening up the telecommunications market to competition", Hon. Richard Prebble told New Zealanders in June 1988. He noted that Telecom's competitors would be heavily dependent on it for facilities and services, giving Telecom scope to act anti-competitively if so wished. He added, however, that he had received an assurance in writing from the head of Telecom, Dr Peter Troughton, that Telecom would facilitate the emergence of a competitive market in telecommunications, and that it would provide interconnection to its facilities on fair terms and conditions.
Telecom's activities and the interconnection agreements, fundamental to the successful entry of competitors, were to be subject to the scrutiny of the Commerce Act. The Department of Trade and Industry was also to act as a watchdog to keep telecommunications on a competitive track. The Labour government which was leapfrogging New Zealand toward a free market economy deemed further regulations to be unnecessary.
Into these unchartered waters, without a regulatory life jacket and dependent upon the world of Telecom, sailed the potential competitors.
Contenders at home and abroad
The whiff of opportunity travels fast in private enterprise circles. Potential competitors from around the globe began sniffing round the deregulating telecommunications honey pot.
At home. there was a keen interest among companies such as NZ Rail, Electricorp and the Broadcasting Corporation of New Zealand who saw strong investment opportunities for their microwave, satellite or fibre optic cable capacity. The missing link was the telecommunications switching expertise.
Enter Bell Canada International (BCI), MCI (MCI Communications), Cable and Wireless, British Telecom, Telecom Australia and several other prominent and efficient overseas telecommunications suppliers with the technological digital switching expertise the New Zealand-based parties were looking for.
Bell Canada lost little time in undertaking thorough market research and business plan studies during 1988. BCI was moving back into the corporate business of telecommunications and the newly liberalized environment in New Zealand provided the opportunity. Leading New Zealand white wear manufacture, Fisher and Paykel expressed interest in a joint venture and teamed with BCI in 1989 to investigate the feasibility of an alternate telephone company. Revenues from telecommunications at the time were in excess of NZ2 billion and definitely not to be sneezed at. Market research showed that most customers would be prepared to change to a competitor if prices were 10 to 20 percent lower than Telecom's.
Having emerged in September 1988 from former Broadcasting Corporation of NZ, Television New Zealand with its micro-wave network for disseminating television signals, indicated a strong desire to be part of a BCI/Fisher & Paykel market venture.
Due to effects of a weakening economy in the late eighties, Fisher & Paykel decided to bow out. The Wellington-based Todd Corporation had meanwhile stepped into the action and was limbering up for market entry with American telecommunications giant, MCI.
Research projects and business plan studies gathered intensity. Three independently researched business plans undertaken during this first phase of investigation of telecommunications opportunities were combined and expanded upon in an Alternative Telecommunications Company (ATC) business plan proposed by Touche Ross, (for Trans Power, the bulk electricity subsidiary of Electricorp and Broadcasting Services, and BCL, the broadcasting distribution network subsidiary of Television NZ), Booz-Allen & Hamilton (for N Railways) and Charles Gilmore, ex-General Manager of Telecom (for Todd Corporation) in March 1989.
The report confirmed that viable competition required a balance of established overseas telephone company expertise, commercial experience and funds, and State Owned Enterprise transmission network infrastructure. It also confirmed that the market place was big enough for just one major competitor to Telecom.
As the various parties began to align with each other, two groups emerged. Broadcasting Communications Ltd. (BCL), the subsidiary of TVNZ, teamed with Bell Canada (BCI) to publish a market study and business plan for the establishment of and alternative telecommunications company. TVNZ was looking for the factor with would differentiate their Alternate telecommunications company from Telecom. The freshness, professionalism and customer oriented experience of Bell Canada appeared to Darryl Dorrington, Assistant Chief Executive and Director of Operations for TVNZ, to offer the vital differentiation.
At the helm of the BCI team was George Newton who had risen from telephone technician to executive level in the Canadian telecommunications giant. An able leader and a man who relished a challenge, he had been dispatched to New Zealand the previous year to check out the opportunity for fresh business. George Newton proceeded immediately to draw up the BCI/BCL business plan. With a team of fourteen to assist, he completed it on 8 December 1989, just four weeks after commencement.
By February 1990, BCL, TVNZ and BCI had signed a Heads of Agreement to work in partnership on an alternate telecommunications project. Todd Corporation, NZ Railways and American telecommunications company MCI were poised to do likewise. Both parties were aware of the need for more than one set of transmission facilities. TVNZ's microwave transmission and NZ Railway's fibre optic cable were both needed in the event of one failing. Both parties were also acutely aware that there was room for only one competitor in the New Zealand market.
The challenge
Todd Corporation had not only struck a firm association with the second largest telecommunications network in the world, MCI, and with NZ Railways, but had also been instrumental in persuading the SOEs to work together with encouraging results. Todds, therefore, was not about to lie down and roll over.
On November 29, 1989, it announced the formation of MCI Todd Communications Ltd. The new company would provide competing telecommunications services in New Zealand. Announcing the new company, John Todd, Chairman of the Todd Corporation, said it offered "a great opportunity to bring new technology and service products to the country's 2.4 million telephone users."
The international expertise and investment of MCI, together with NZ Railways fibre optic cable running along the North Island main trunk and the financial support of one of New Zealand's leading corporate s constituted serious competition. But the BCI/TVNZ/BCI boys were not about to back off.
"We weren't sure if the Todd group was serious or trying to scare us off with its announcement," recalls George Newton who was also mindful of BCI's desire, at that stage, to contain its contribution to expertise rather than cash. In fact, during the initial sizing up and courting by local entrants of foreign entrants and vice versa, Todds had met with BCI but turned to MCI as more likely provider of share equity.
"We were serious in our intentions", recalls Robert Brydon, Manager Corporate Investments for Todd Corporation... "We were prepared to take the high ground. But we knew as clearly as our rivals that there was room for only one of us. It was a case of scare then off or merge."
The question both consortiums had begun to ask was: why fight each other when the big guy to fight was Telecom? The merger option was starting to take hold in both camps.
The marriage
Both groups analyzed each other's position: Todd MCI had access to the North Island through NZ Railways' fibre optic cable. The BCI/BCL group had access to national coverage through the microwave facility. George Newton convinced BCI's principals in North America to hang in. He reasoned that his group's superior technical platform and sound business plan were strong foundations for a viable future.
The overtures commenced and, in March 1990, the contenders, TVNZ, Todds, BCI and MCI met in the latter's offices in Washington to iron out the issues. The representative chairmen and executives hit it off and the initial empathy sowed the merger seed.
Both sides had prepared details for interconnection agreements but Neil Tuckwell, an Australian competitive telecommunications expert who had been contracted to TVNZ had, together with Robert Brydon, met the Minister of Commerce to discuss interconnection. Behind the scenes, the merger interplay had been gathering strength.
In February 1990, the senior representatives of the two groups were brought together in a TVNZ anteroom - Julian Mounter, Ted Trimmer, Senior Vice President Business Development for MCI, John Hunn, Stewart Berry, Vice President Sales for Bell Canada and George Newton. They hammered out what was needed in New Zealand to set up a competitive company and agreed to work together.
On 20 April 1990, a Memorandum of Understanding to form a single organization to compete in the telecommunications industry was signed between the two consortiums. It paved the way for birth, on 1 August, of The Alternate Telecommunications Company (ATC), the four main shareholders being TVNZ, BCI, Todd Corporation and MCI. NZ Railways was to have Board representation and equity options.
The challenge was to bring two business plans together - Todd MCI's venture was going to cost $80 million. The BCI/BCL venture's cost estimate to start a competitive tolls company with basic telephone services and private line services, both domestic and international, was $125 million.
George Newton was appointed Chief Executive of the new ATC and he and Robert Brydon, Ted Trimmer, Darryl Dorrington and Neil Tuckwell got stuck into resolving a raft of agreements needed before the company could begin business. "We spent a lot of time in little dark rooms," recalls Darryl Dorrington. Each company contributed a vital ingredient and Todds kept us all honest."
The new company had to be deftly structured. There could be no frills. Among the eighteen Conditions Precedent, the main ones included a Heads of Agreement with Telecom, a service agreement with BCL and NZ Rail to provide their respective microwave and fibre optic cable facilities, an agreement with Trans Power, service agreements with BCI and MCI to contract experienced people from North America, approval from the Commerce Commission and foreign investment approval.
One of the roadblocks for new entrants had been the absence of a specific telecommunications regulatory body. Telecom had established the Permission to Connect (PTC) document, the life blood of the business. Effectively this meant that the dominant carrier was setting the rules. And since Telecom had not contemplated local service or 0800 service competition, road ahead did not promise a smooth ride. The Agreement with Telecom would provide the most difficult to achieve. Staff en route from North America to join the new ATC told Richard Prebble it had cancelled the switch order. It then agreed to defer while the Minister got Telecom to the table.
On 24 August 1990, Goliath and David shook hands. On the surface, Telecom had publicly welcomed the merger of the joint ventures and stated that competition was "healthy for the industry and would benefit all our customers."[1] A memorandum of Agreement was signed with Telecom covering toll by-pass, alternative networks, local services and 0800. A shareholders agreement, was concluded after numerous drafts were scrutinized by teams of lawyers grappling with each other's lingual nuances in New Zealand, Canada and the USA. It was signed on 4 September and shareholders funds, available for the first time, were in excess of $100 million. The four main shareholders would each have 25 percent equity.
ATC's first consignment of switching equipment arrived in New Zealand in November that year and installation commenced. Neil Tuckwell moved from TVNZ over to ATC and shouldered the load with his new chief executive. His move coincided with ATC's shift from temporary offices at Quay Tower in Auckland to permanent accommodation at 49 Symonds Street. In Wellington, the following month, ATC moved to permanent premises in Murphy Street. For Neil Tuckwell, who had helped ATC evolve from its initial, "second hand" premises in Wellington, the move to Symonds Street headquarters we a symbolic step forward. Significantly, the temporary staff who formed the nucleus of the fledgling, no-frills ATC also moved to the new premises as permanent staff. "As temporary staff they were paid to do a job and did it." recalls Neil Tuckwell. "They spread themselves as wide as we did and their commitment meant they stayed with us - people like Tessa Woolley, Claire Lambourne, Gary McMilland and Kevin Cole and others. We agreed on a course which defined our destiny and shaped our culture."
The Clear Road Ahead
"From the outset, we had to set ourselves apart from the perception of the "normal" telephone company. We set out our vision and values. We would compete on service and empower our employees to make decisions that would never give a customer a reason to leave."
George Newton spelled out the philosophy which cemented itself in the young company. Service, the only sustainable competitive advantage, became ingrained in the culture. The company labelled itself a helping company and the staff were empowered to "astound the customer" [1] with service, not just to satisfy them. New Zealand's telecommunications customers were in for a treat.
The company's General Manager Sales & Marketing David Patten charged his second in command, Sandy Fain, with coming up with the right name. Impressed with the quality of customer service offered by the advertising people at Leo Burnett, Sandy briefed them on the company's values. Twenty five names were proffered and poured over arriving at CLEAR Communications.
The name was fresh, lively and modern and held the required balance between strength and simplicity. It mirrored the company's values. The logo reflected the clean, bright colors of New Zealand.
on 14 November 1990, the first full board meeting of the new company was held with John Ede as Chairman of the Board and George Newton "a man who likes to build things" [2]
as Chief Executive. The board confirmed the name which was unveiled to staff on a plinth in the lobby of the company headquarters. Clear Communications Ltd., was born.
The company set out to live the values its new name identified. When Prime Minister Jim Bolger visited the new premises and asked one of the customer services representatives undertaking a training course if he was learning to deal with irate customers, the prompt reply was "No, sir. I'm learning to astound them."
Lift-off!
Clear Communications commenced leased line operations in January 1991. On 12 February an agreement was signed with Trans Power to use their fibre optic system in the South Island and seven days later, Minister of Communications Hon. Maurice Williamson, made the historic first call on the new network between Wellington and Auckland, using the NZ railway's fibre optic cable beside the main trunk line. The competitive advantage was not lost of the assembled media. The new entrant was able to offer toll service bills charged in steps of one-tenth of a minute. Telecom's lowest charge step was one minute,
Within six months of commencing operations, Clear attracted more than 30,000 customers. In its first year of operation, it had won nine percent of the New Zealand national toll market. The New Zealand public were responding to the Clear style of service. It was thanks to the members of the Clear team like Customer Service Manager Dan-Astound-the -customer Rogers, General Manager Finance, Keith Never-give-the-customer-a-reason-to-leave Montgomery, Marketing Manager Sandy The-future-is-now Fain, his boss David Patten and the entire staff of Clear under the stewardship and encouragement of George Newton.
It was thanks to Telecom who, on the evening before the agreed connection date, had delayed issuing the permit Clear required to link Telecom's toll system and launch its prices and toll services. The interconnection agreement for toll by-pass has been signed on March 4, although a second deal allowing Clear access to Telecom's local services was still being negotiated. Interconnection, the linchpin connecting two or more telecommunications networks, allows calls to flow between them. It is critical to the promotion of a competitive market; customers of one network need to be able to communicate with customers of the other; and customers of one network need to access the competitive services of another.
Clear's plan was to make its services available to 80 percent of the telephones in New Zealand, thus offering New Zealanders a choice of their toll service provider. It has developed two separate national toll services; Clear Business 050 to serve the needs of the business market and Clear 051 designed for the residential customer. Customers had been tested on the Clear network in April. At the eleventh hour, when Telecom had still not issued the interconnection permit, Clear took the bull by the horns, went public and got front page publicity. The breakthrough to full commercial operations offering Clear 05 and Clear Business 050 came on 7 May 1991.
The launch advertising projected the principles of fairness and value which were driving Clear. British talk show host Michael Aspen was chosen from a list of 200 to front the advertisements. He presented the right balance; he always made his guests his stars. The advertisements raised the ire of Telecom who objected to Clear's application of the word "fair". It was just the first objection from the rival to wind up in court. Two years later Telecom tried again to take Clear to court with its advertising headline: "If you want to get the best deal on tolls from Telecom you'd be a Clear customer." The Telecom number was then printed underneath inviting customers to ask for two months free tolls (to match the current Clear offer.)
The Clear message got across to the New Zealand public, however. And the message was well received.
People Power
"We hire excellent people, we train them to be even better. We empower them, they get continuous feedback. Now get out of their way and trust them to get the job done. The result with astound you. It did me."[1]
Clear grew at a steady one percent market share per month, advancing its business plan projections in compounding strides. The challenge was to sustain the rate of growth.
The kick-start to Clear's dramatic growth was due in no small part to visionary human resource management. The time it took to make decisions in the new company was greatly reduced by the innovative integration of job functions. For example, Customer service was integrated with Billing, Collections and Network Operations. The Marketing Department was integrated with External Relations, Finance, Sales, Customer Service, Engineering and Information Systems. Management was located on a middle, rather than top floor, and their efforts were focused on the standards and performance of the integrated processes, instead of the more traditional, vertical departmental structures.
Key personnel were recruited largely from the Canadian and American partners on two to three year fixed term contracts. Their job was to apply their professional skills to the task of obtaining a market share as soon as possible and to train locals to take their place. The mix of three country cultures added zest and motivated staff to go the extra mile in an atmosphere charged with energy.
Departments did not have stand-alone goals and divisional functions. The next level up was the board, the next level down was the client. Senior management were part of rather than separate from the team, all of whom had a stake in the future of Clear. The contribution of each was recognized. There was not formal recognition of a collective bargaining agent. Instead there were individual contracts of employment. The people were well remunerated ("You pay peanuts, you get monkeys"[2]) and they took the initiative.
The team oriented environment was supported by excellent internal communications systems. Every employee either had a PC on their desk or immediate access to one to tap into information they required. An electronic Email system, available to each employee, reinforced the ultimate open door policy. George Newton made it clear he was always only a few key strokes away.
A distinct set of values, rather than a rule for every situation, was the cultural stamp. George Newton discussed the company's cultural values with employees during orientation and at executive briefings. In his "fireside chats," he engendered a sense of family loyalty and pride which became pervasive. He set the cultural precedent which he urged staff to adopt and maintain "from today through to the year 2000 and beyond"[3] the careful attention paid to in-house communications was not simply to efficiently transmit information but to strengthen the team approach to business.
Clear's effective communications also helped to sustain the competitive edge of superior quality. The strategy for growth was based on building a distinctive market presence through insistence on quality in all operations and products. Within a year of its launch, the dedication to quality and service was paying off. Clear had obtained 10 percent of market share in the national and international tolls market. And it had achieved the growth despite the persistent cost and pressure of litigation with Telecom.
The people had been entrusted to make decisions that achieved customer satisfaction, to strive for continuous improvement, to be responsive and honest. "It is the culture that dictates how and employee will act when they are in a newly discovered moment of truth with a customer [4]” Clear was winning by never giving a customer a reason to leave.
Rocky Waters
Following interconnection, Clear charged ahead and opened the Christchurch sales office in June 1991. The purchase of the DMS300 switch for international service followed in July and the 10,000th customer signed up in August. Staff numbers had reached 200. Just 12 months before there had been 15 people in Auckland and four in Wellington.
By December, the company had clocked up several more milestones: the Dunedin sales office opened, the first direct international service came on line with 60 circuits on satellite, quickly followed by expansion to 120 circuits, and Clear's 30,000th customer signed up. In January 1992, Clear's network capacity to Christchurch increased with the commissioning of fibres in the Trans Power cable.
Dedication to the task spurred the growth. During the power shortages of 1992, George Newton remembered how the lights shone through the night at Clear's headquarters. And he recalled the occasion when there was no money in the kitty for another computer platform the team modified the switch and developed internal mechanisms which dealt with the challenge.
In December 1991, Clear began operating the first stage of its own international telecommunications network with the installation of a 7.5 metre Intelsat satellite dish next to Auckland's Carlaw Park. a second dish of 15.5 meters diameter was added in June 1992. Clear was now connected to the new Tasman Fibre optic cable and had direct access to MCI and other carrier networks. The company became virtually independent of Telecom's facilities for most of its international calls.
However, Telecom remained the major obstacle by remaining firm on charging what Clear considered to be less than fair and reasonable interconnection prices. Access to the local market was also stymied by Telecom who owned and controlled most of the critical inputs. Clear contended that by having to pay full commercial rates to Telecom for services provided, it was paying more for equivalent services than many of the Telecom's business customers.
The level playing field the government had envisaged was without an effective referee. Telecom was largely calling the shots by setting the rules under which competition was permitted to take place. Many of the subsidiary issues revolved around the fundamental interconnection agreement such as numbering and billing systems, cellular networks, pricing, advertising, directories and local business services.
Telecom agreed to let Clear customers have non-code access (being able to make toll calls through Clear without daily 050) when its share of the national toll market reached nine percent. Clear reached the nine percent threshold within a year of beginning operations, as opposed to the two to three years anticipated by its rival. By 1993, Clear was supplying some customers with non-code access but agreement over the cost of access had not been reached. The decision, when finally reached, would determine whether Clear could afford to extend that service to all customers.
Clear was also obliged to seek an injunction to prevent Telecom from capitalizing on a list of Clear customers supplied to Telecom for implementation of no-code access. By mid-1993, Telecom was processing Clear customers at a rate of 3000 lines a week using the list of Clear customers requiring conversations. When Telecom began writing to Clear customers as a part of marketing campaign, Clear was granted an injunction.
At the time of writing, Clear and Telecom were awaiting an Appeal Court decision over the terms for access to the local customer. The original December 1992 court decision found Telecom in breach of Section 36 of the Commerce Act, which prohibits the use of a dominant position for the purpose of preventing of deterring competition. The section underlies the government's telecommunications policy to prevent anti-competitive behavior,
The two breaches were for not supplying Clear with Direct Dial-In (DDI) numbers which would have allowed Clear to start local service operations, and for asking too much money for interconnecting Clear to its network. However, the decision also indicated Telecom's "Baumol-Willig" economic formula - whereby new entrants should compensate Telecom for lost profits - would not be anti-competitive in the future and a framework was proposed which, it was hoped by the court decision, would promote negotiations between Clear and Telecom.
Clear took its objection to this finding back to Court in August 1993 but resolution of these issues, all related to the cost and terms of access to various parts of the Telecom system, is still awaited. Telecom has argued that the prices it has charged Clear to use its network were fair because of the increments it needed to add to provide the capacity Clear requested. Clear's view has been that Telecom, in the absence of an effective referee have behaved like a de facto regulator. For example, it has practiced price bundling whereby monopoly and competitive products are bundled for an overall discount, to the disadvantage of competitors. For as long as that situation was allowed to continue, Clear has maintained that New Zealanders would not reap the full benefits of competitive telecommunications.
A national telephone survey conducted by Insight Research on February 1993 showed that 66 percent of the 750 people surveyed believed Telecom was taking advantage of its position with only 15 percent indicating that Clear was getting a fair go. At the same time, almost seventy percent of the survey participants attributed the benefits in price and service that had been achieved to Clear's competitive stance. Prices for toll calls had reduced by almost half since Clear entered the ring.
Innovation
With the rise of competition came the fall of toll prices and an overall improvement in the level of customer service.
Clear's efficient billing system was a main driver in the differentiation process. The bills went out accurately and on time. Calls not captured within a ninety-day billing period were not charged. Business customers could choose to aggregate their call volumes from multiple locations to maximize savings while still receiving separate account statements for each locations. All customers had a choice of billing cycles.
Credit was offered on a call if a customer was not satisfied. Eighty percent of inquiries were resolved on the first customer contact. Capacity was monitored on individual routes to avoid the blocking of calls. Quality control criteria were designed which were constantly monitored to ensure a standard of service equal to the best available anywhere in the world. There was a calculated risk and considerable cost in setting bold new standards of customer service. But Clear already had a nationwide reputation for trendsetting. And, in the words of Customer Services Manager Dan Rogers, “Cancellations are below expectations - but every lost customer is lost forever."
The brickbats were pleasingly few. The bouquets were many. Clear's 24 hours a day, seven days a week customer service was attracting fan mail from around NZ, from both business and residential customers. "I have been most impressed with the courtesy and professional manner that I have received from Clear...Probably the most impressive aspect I have come across as a Clear customer is the 050 0509 Customer Service Line." "I believe your staff are the most competent I have come across in New Zealand, wrote Thomas Buchanan, law student in Dunedin." " I would like to record my favorable impression of the manner in which my query was dealt. The lady who handled the query not only dealt with it expeditiously but gave the impression she really wanted to help" wrote Max Farquhar of Price Waterhouse. Dan Astound-the-customer Rogers has even received a sweater for a Customer Service Representative, knitted by a more than satisfied customer. "You need to be able to hear the smile." he says. Good CSRs, in his opinion are people who want to make the world a better place.
Innovation in marketing also gathered pace. By June 1992, ClearCard and Familiar voices were launched, followed by telemarketing and PhonePower in July. “Familiar Voices” was a value added toll system which provided call duration discounts to customers who nominated people the would be calling on a regular basis. PhonePower provided business consulting and training services to maximize productivity and profits in areas such as sales, marketing, order processing, sales support, customer service and cash management.
The marketing pitched simultaneously at national accounts (top Corporates and government), general and retail business and residential. The promise was to offer services at 12 to 15 percent cheaper than what had been available from Telecom and the promise was kept.
For calls both within New Zealand and internationally, the pricing policy was based on charging in one second increments (after the first minute). Additional benefits were call duration discounts for residential customers during off peak hours and volume discounts for business customers.
Clear was first off the telecommunications block with an automated telephone charge card service. Called ClearCard, it allowed Clear customers to make national and international toll (and local) calls over the Clear network from any telephone in New Zealand; and for calls to New Zealand from any telephone in Australia, USA and UK.
Telecom held out on providing an access code number until Clear explained what it was for. Within two months, Telecom had its own card on the market. Clear, now well practiced in the art of mounting obstacles, introduced its Toll Free 0508, an incoming tolls service that allowed customers to receive calls from anywhere in New Zealand (except for cellular or pay-phones) at no charge to the caller. The innovations, despite the interruptions and cries of "unfair" continued. The process of differentiating was dynamic.
Doubling the business and consolidating strength
By September 1992 Clear had more than 430 staff representing an annual growth of 200 jobs per annum. In the same month, auto telephone dialers were introduced to the market. They were designed to interface with Customers PAXB and TCNZ lines to ensure that all toll calls would connect to Clear.
The company had more than 14 percent of the market and over 90,000 customers by November 1992. The growth continued, despite the costly legal battles. Through interconnection with Telecom network, Clear's toll services had become available to more than 80 percent of the telephone network, Clear's toll service had become available to more than 80 percent of the telephone lines in New Zealand. Residents in Auckland, Wellington, Christchurch, Dunedin, Whanganui, Palmerston North, Nelson and Invercargill were able to access Clear services. Further locations would come on line later in the year to meet Clear's objective to making its services available to all New Zealand telecommunications users.
Clear's share of the market, by the middle of 1993, had grown to 16 percent of the national and 18 percent of the international toll market with more than 170,000 customers. The latter had increased to 200,000 by the time of Clear's third birthday on 4 September 1993, the day the shareholder's agreement was signed. The employees had grown to more that 500 in number ("We open once - we never close") [1]
The dedication to top level customer service was paying off in other ways, too. In August 1933 Clear was selected as one of the finalists for the inaugural NZ Quality Awards.
As the public continued to demonstrate its support for Clear by signing on increasing numbers, Clear began to build partnerships with the community to reciprocate the support it was receiving. The first major sponsorship was sealed in January 1992 when Clear joined six other New Zealand companies to sponsor the New Zealand Endeavour in the Whitbread race.
The two million dollar sponsorship was considerable for a small company engaged in expensive battles with the telecommunications Goliath. But the investment was designed to cement Clear's credibility. And because the race would extend over two years and be closely followed by more than 90 percent of the New Zealanders, it was a logical choice for support. Grant Dalton and his Endeavour team personified what Clear stood for - high standard technology, endurance, the courage to face the unknown in high seas and to win as a team.
Support for Crippled Children's Society was also given for commercial as well as community reasons. Clear customers were able to contribute to CCS by making calls on the Clear network as part of Friends of CCS fundraising program.e. When a customer joined the fundraising program. Clear donated three percent of his or her monthly bill to CCS
Similarly, Clear linked with the Pakuranga Rotary Club to encourage the planting of native NZ trees with the launch of a national Trees for Survival program. To support the programme, Clear offered an affiliation scheme for Rotarians so that five percent of the Clear toll account would be paid by Clear to the Trees for Survival Programme.
The important area of education was also selected by Clear for support. Observing the pressure on schools to find the extra money to undertake worthwhile projects, Clear came up with a simple but smart formula. It provided parents and members of the community who were Clear customers with a way of directly supporting the primary school of their choice. Friends of the School was launched in Wanganui in September 1992. Clear customers were subsequently able to nominate a primary school on the programme to receive five percent of their monthly clear toll payment and the Friends of the School programme has become nationwide with 1100 school participating from kindergarten through to high school.
By mid 1993, Clear furthered its commitment to education by sponsoring Spellbound, a spelling quiz that benefited schools financially and created greater awareness of the importance of spelling among pupils. An annual school essay with prizes up to $5000 was also launched to extend the supportive partnership with education.
"One of our responsibilities was to be a good corporate citizen" said General Manager Service Sales and Marketing, Sandy Fain, who had succeeded David Patten on the latter's return to the USA in August 1993. "There was not a huge amount of money to throw around. The challenge was to be a good citizen and to help the company grow. Education was felt to be important in the regard and it remains an important issue."
Expanding on the road ahead
Lower prices, better customer service and innovative new services are the welcome benefits which competitive telecommunications have reaped for New Zealand. Clear may take a large chunk of the credit for bringing them about.
Spurred by Telecom's intransigence, Clear has proved to be one of the most successful examples of a new entrant in New Zealand's deregulated economy. Managed with a high degree of professionalism, applying some of the best available systems and operated by a cross-fertilization of top caliber New Zealanders, Canadians and Americans, Clear has proves a force to be reckoned with.
It has survived despite competitive activities that, in other countries, are kept in check by regulatory controls. In the face of lengthy court battles, the company has demonstrated a tenacious grip on the long term and consummate skill in finding alternative routes around obstacles. It tailored its corporate policy and strategy to the competitive realities of what could be described as a deregulated duopoly. It set its prices consistently lower than Telecom's and completed dynamic quality service and product differentiation. "There is more than one way to skin a cat. the guerrillas will win against the conventional army in the end." [1]
The 'New Zealand Experiment' which has let the deregulated telecommunications industry rip without an effective referee has meant the playing field tilted in favour of Telecom throughout the challenging first years of Clear's growth. The rules and prices for the interconnection, fundamental to competitive growth, were set by Telecom but the undertaking to be fair and reasonable dissolved when Telecom was privatized. The question remained, as this publication went to press, as to whether the government will step in to help resolve the access battle and level playing field. Telecom, in the privileged position of de facto regulator, has prevaricated as long as possible.
However, there is now recognition that Clear is here to stay. under the direction of its new chief executive, and more efficient as a result of radical restructures. Telecom may take some of the incline out of the tilt. To facilitate an even playing field, however, Clear has consistently advocated that more is needed; either a sensible commercial negotiation between Telecom and Clear or a government appointed regulator with teeth to resolve issues. Or combination of both. Despite the benefits of lower prices and better quality services which have resulted from competition, New Zealand continues to have comparatively expensive systems for business telecommunications. Clear has argued that bull benefits to the consumer will not come about until there is full and fair competition.
Until the breakthrough and positive precognition by government and officials of the need to correct the uneven playing field, Clear remains vulnerable. But resolute. The next generation business plan, "Vision 2000" was approved by the Board and shareholders in July 1993. Clear will expand its global intelligent networks to meet the demands of the 21st century. It has purchased the equipment and it confident it will achieve its aim to be the technological leader in New Zealand. The company is on track to realize that vision with the determination and commitment that has guided Clear Communications from its first days.
The 21st century is the gateway to the future. The company, under its Chief Executive Andrew Malkin, who succeeded George Newton in August 1993, is n otrack with its original mission to gradually replace the Canadians and Americans who came to New Zealand to help set up the new company. the heavy reliance on those skilled foreigners is not shifting to New Zealanders. By the end of 1993, the North American contingent was down for the original 66 to eight.
Like George Newton, Andrew Makin, former CEO of Airways Corporation, thrives on challenge. He looks forward to building on the solid foundations that have been established and leading the company through what promised to be and exciting time ahead, both for Clear and the New Zealand telecommunications industry. He attributes much of the credit for Clear's outstanding achievements during its first three years to his predecessor George Newton and to the inspired company culture, designed to carry Clear from today through to the year 2000 and beyond. Characteristically, George Newton who finished his term four years after his arrival in New Zealand, praised the efforts of all Clear staff who, through hard work and dedication, helped build the company into an exceptional one.
The challenge ahead will be to make a good return on the investment. Clear has a much larger business base than was predicted. An overwhelming 81 percent of participants surveyed in a mid 1993 pool stated they believed telephone services had improved since 1990 and a resounding 69 percent said they believed Clear was mainly responsible for the improvement.
The endorsement for Clear is one of which George Newton, the board of directors and entire Clear team can be proud.
Business
Clear was equally owned by Bell Canada Enterprises, MCI International, Television New Zealand and Todd Corporation Ltd. Clear Communications employed approximately 1000 staff, and had invested more than $250 million in fixed assets in New Zealand.
In addition to utilizing digital microwave telecommunication links owned by Broadcast Communications Ltd (a subsidiary of Television New Zealand), Clear initially leased, then purchased, from New Zealand Rail Limited (in return for a 15% stake in the company, which New Zealand Rail then sold in 1994.[1]) fibre optic cables linking Auckland and Wellington. It also leased fibre optic capacity between Wellington and Christchurch from the Electricorp. The company also had digital microwave links with the major provincial cities of New Zealand. It installed further fibre optic capacity between Wellington and Auckland to increase transmission capacity and provide route diversity. Fibre loops and duct lines were installed in the Auckland, Wellington and Christchurch central business districts.
Two separate consortia initially began separate interconnection negotiations with Telecom in December 1989, but by May 1990 had decided to merge their interest to form Clear. By April 1991, Clear was offering domestic and international services.
Clear and Telecom had 25 actual and 19 notional points of interconnect (POI) throughout New Zealand. In the areas served by a notional point of interconnect, calls from Clear's customers were trunked to the nearest Telecom telephone exchange with billing facilities, at which point they were physically handed over to Clear. After conveying the call on its own network, Clear linked back into Telecom's network at the appropriate POI.
Clear achieved approximately 22% of market share in domestic toll services by 1993, reduced to 18% by 1999, and 20% for international toll services.
Initially Clear relied solely on Telecom for international calls, but early in 1992 it commissioned independent facilities. It had its own satellite earth receiving station in Auckland and was a member of the Tasman-2 fibre optic cable consortium linking New Zealand and Australia. It was also a member of the consortium owning the PacRim East fibre optic cable between New Zealand and Hawaii.
1994
In September 1994 Clear began to provide an 0800 freephone service in competition with Telecom. Prior to this, its freephone service had used the code 0508.
1995
In September 1995 Clear reached a new agreement on local service interconnection with Telecom which culminated in a formal local telephone service interconnect agreement in March 1996. This agreement also included new toll bypass interconnect arrangements.
1996
In March 1996, BT plc acquired Bell Canada's 25% stake in Clear. Clear launched an internet service later in 1996 and had about 10,000 customers by May 1997. It also provided the first commercial ATM service and had an ISDN offering.
1999
In June 1999, BT bought the whole of Clear.
2000
In 2000, Clear signed a deal with Vodafone New Zealand to give its customers the use of a mobile network.
Clear was acquired by TelstraSaturn in 2001 to form TelstraClear.