Increased Competition Means Growth for Toll-free Market

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Bolstered by intense competition among service bureaus and information providers and increased demand by users, the toll-free industry is high on a wave of increased growth that has yet to crest.


According to a report released by New York-based international marketing consulting company Frost & Sullivan, a 9.8 percent compound annual growth rate (CAGR) for the toll-free and 900/976 number services market is forecasted for the period 1997-2004.


The market generated revenues of $13.07 billion in 1997. Growth in the total market comes mainly from the toll-free services market, which represented 88.4 percent of total market revenues in 1997. Within the toll-free segment, the major revenue generator is the interexchange carrier (IXC) toll-free services market, which accounted for $11.26 billion in 1997. Competition is extremely intense among major players AT&T and MCI, whose revenues control more than 80 percent of the market share.


Technological improvements and bundled services -- the result of competition -- have made these services more useful and convenient.


"Following the Telecommunications Act of 1996, carriers can offer all types of telecommunications services to their customers," said telecommunication analyst Isabelle Gallo. "Combining offerings into bundled services helps service providers reduce their churn rate and increase profits.''


Since portability was introduced by the FCC in 1983, this market has not seen a downturn. New customers, such as small businesses and residential end users, are emerging as the strong U.S. economy positively affects the market. The major market drivers for the U.S. IXC toll-free services market are expected to be number portability, integration of digital technology with toll-free services, rising development and demand for call centers, new toll-free service features i.e. automatic call distributor (ACD) functions, interactive voice response (IVR), network-based voice messaging, and advanced call routing to the next available agent.


Major restraints for the U.S. IXC toll-free services market are expected to be risk of toll-free number exhaustion, FCC's plan to conserve the remaining toll-free numbers, growth in the Internet, investment in consumer educational programs to educate the public about the 888 and 877 toll-free number prefixes.


Frost & Sullivan is an international marketing consulting company that monitors the telecommunications industry for market trends, market measurements, and strategies.
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