Two giants in the telephone industry will be competing for Yellow Pages advertising for the first time in the Washington area next year when Southwestern Bell Corp. begins to compete with Bell Atlantic Corp. for one of the most profitable portions of the communications industry.
The move is part of the broader trend of the Bell operating companies leaving their own regions to compete for Yellow Pages in other territories that, in aggregate, ring up $5 billion in sales a year.
In May 1987, Southwestern Bell Publications, a subsidiary of the St. Louis regional operating company, will bring out The Washington Metropolitan Yellow Pages, targeting all of Washington, Alexandria, Arlington County, Montgomery County, and portions of Prince George's and Fairfax counties.
The Baltimore Metropolitan Yellow Pages, targeting Baltimore, Baltimore County, Howard County and the northern half of Anne Arundel County, will be out in January 1987. Southwestern also plans to enter the New York metropolitan market.
In both Baltimore and Washington, the company's new directories going to more than 1.3 million households will give "wide coverage that currently could be duplicated only through the use of several existing Yellow Pages," the company said.
Bell Atlantic's head of publishing operations, Tom Gorman, yesterday said the company is confident Southwestern Bell won't make a dent in the $592 million annual revenue it receives from 332 directories.
"The company will aggressively retain this market," said Gorman. "We have a good balance of coverage."
Bell Atlantic's only major competitor, Independent Yellow Pages Inc. of Maryland, went out of business several months ago, industry sources say. But tough competition could affect local phone rates, because profits from Yellow Pages advertising revenue reduces the need for higher local telephone service charges, Gorman said. "There is the risk that some of that subsidy could be lost and rates could be affected," he said.
Competition in the Yellow Pages business is growing by leaps and bounds because of a captive small-business audience that often advertises no place else, said Philip Verveer, an attorney with the Washington firm of Willkie, Farr & Gallagher and a specialist in communication issues.
"It is an advertising market with no substitute and is a profitable business," he said. The regional phone companies were awarded the business in the breakup of the Bell System in 1984.
Verveer is representing Donnelley Information Publishing, a subsidiary of Dun & Bradstreet, in a lawsuit over Yellow Pages between Donnelley and BellSouth Corp., the regional phone company in Atlanta.
"What Donnelley is doing is the same as what Southwestern Bell is doing is the same as what US West is doing -- they are all entering markets that have been dominated by a monopoly provider," he said.
Yesterday, BellSouth Corp. said it was acquiring L. M. Berry & Co., the second-largest independent advertising sales agent for Yellow Pages directories in the United States. Last year, Southwestern Bell acquired Mast Advertising & Publishing Inc., the nation's 12th-largest directory publisher, from Continental Telecom, and several other regional companies now publish directories.
With that entry, industry sources say advertising rates could be slashed by as much as 50 percent. But companies also concede that businesses will be deluged with a confusing array of choices.
"There will be multiple directory people coming in and selling, and advertisers will have to be more sophisticated about deciding where to spend their money," said Kenneth O. Johnson, president of Donnelley Directory, a sister company to Donnelley Information Publishing of Purchase, N.Y.
Businesses in Washington aren't all that excited about the prospect.
"It's going to make it more of a pain in the neck for us," said Diane Reardon, sales coordinator for The Bellevue Hotel of Washington. "It's one more thing we'll have to have our name in to be covered, one more expense."
The manager of Washington's Calliope Bookstore, John Hatton, said, "We're a small shop and don't have a lot of money -- I probably wouldn't advertise in another directory."
More lawsuits also will be in the offing between regional companies and competitors, because of the entry of larger players, industry officials say. "There is no question that there is definitely an effort to protect [regional phone company] markets by withholding data for a level playing field to compete," said Donnelley's Johnson. "We have several suits."
At issue between Donnelley and BellSouth Corp. is the Miami market, where BellSouth claims Donnelley violated copyright laws by using information from its directory to target clients. Donnelley has filed a countersuit charging antitrust violations by the regional company over the release of customer lists.
Donnelley Directory has a three-year contract with C&P Telephone Cos. of D.C., Virginia and Maryland to serve as a directory sales agent. But Johnson said yesterday: "We are discussing future plans . . . if we can't agree the outcome will be competition." Donnelley recently broke off its sales-agent relationship with Bell of Pennsylvania, a Bell Atlantic company, and will compete throughout the state starting in July.