Originally created 11/09/99

Priceline.com enters phone fray



NEW YORK -- Priceline.com, the Internet service that lets customers name their own prices for plane tickets, hotel rooms, cars and groceries, is moving into the long distance telephone business.

Priceline.com said Monday it will let customers bid for blocks of long-distance calling time. The service will begin early next year.

Daniel H. Schulman, president and chief operating officer of priceline.com, said replacing AT&T, Sprint and the other long-distance providers is not the goal. Rather, his company will work with those phone companies to maximize usage of their existing phone networks.

"If somebody isn't talking over that fiber, it's a waste," Mr. Schulman said. "But if you lower the cost of the call to increase demand, you have to lower it for all existing customers, destroying prices, revenue and profits."

Priceline.com seeks to bypass that restriction by letting carriers gauge demand ahead of time and lower rates only on the calls that otherwise would not be made at regular prices. Mr. Schulman predicted savings of 20 percent to 30 percent off regular rates.

Customers will name the price they want to pay for a certain number of minutes of calls to a specific domestic or international location. Long-distance carriers respond if they can meet the demand. Callers also have per-call options as well as a call-anywhere plan.

Although calls go through using Internet-based transmission schemes, which often use less network capacity than traditional circuit-switching techniques, the caller and the recipient use regular phones.

Priceline.com enters the market at a time of intense competition among big and small long-distance carriers with a variety of sometimes-confusing rates.

Callers using priceline.com will have to dial a special number, but the company promises no surcharges, hidden fees or minimum calling times. Customers can keep their regular carrier for normal calling.

Last week, priceline.com began offering grocery services. Coupled with increased demand for Thanksgiving weekend travel tickets and its own pre-scheduled computer upgrades, the company faced delays in filling orders Wednesday and Thursday.

Mr. Schulman said the problem was fixed by Friday and priceline.com will be ready to handle the long-distance business next year.