AT&T/MCI, The Long-Distance Phone Wars (A), MCI Introduces \"Friends and Family\"

In March 1991, MCI, a distant second to AT&T in the long-distance telephone market, introduced “Friends and Family,” a new approach to long-distance service. Under this plan, subscribers could set up “calling circles” in which calls within the circle were made at discounted prices – as long as both parties were MCI subscribers. Prior to this announcement, there had been an intense battle among the long-distance carriers based primarily on complicated competing discount plans. Friends and Family immediately changed the dynamic of the market, and drew a great deal of attention. The case, in three parts, describes the situation. The “A” case (8 pages), takes the story through the Friends and Family introduction, and its apparent initial success, and asks how AT&T should respond. The “B” case (3 pages) describes AT&T’s initial responses, concluding with the introduction of AT&T’s “iPlan.” It asks about the effectiveness of the responses, and the role of customer confusion in the battle for market share. The “C” case (2 pages), describes subsequent developments in the struggle.