Group seeks simpler transaction switching deals with baby bells.

The two card associations and a pair of high-profile card-processing firms have joined several telecommunications providers in a group formed to improve the network serVices that connect merchants to transaction processors.

The group, known as the Transaction Switching and Transport Services Industry Forum, aims to streamline the process by which transaction processors procure for their merchant customers new transaction switching services offered by the regional Bell operating companies.

Members of the new organization, which held what was billed as its first annual meeting in Chicago this month, include MasterCard International, Visa International, First Data Resources, SPS Payment Systems Inc., Bellcore, BellSouth, Ameritech Services, General Computer Corp., Nynex Corp. and US West Communications.

"We are trying to turn the provisioning of the [regional Bell operating company] services into a much more canned process," said John Pihl, director of information technology at SPS Payment Systems, which is based in Riverwoods, Ill.

The services to which Mr. Pihl referred include integrated services digital networks, or ISDNs, and digital data over voice, or DDOV, which are speedier and often cheaper alternatives to the dedicated communications lines that many merchants lease to support their point of sale terminals.

Unlike dedicated or private line services, in which a transaction runs directly from a merchant's point of sale terminal to the transaction processor, the solution promoted by the new forum is a switched service in which transactions may be routed over any one of a number of available lines. Since the performance on these switched systems is at least equal to those of the private lines, the service is often known as virtual private communications.

While the ISDN and DDOV technologies have existed for some time, relatively few companies have employed them. Observers said the fact that each regional Bell operating company has its own system for selling and delivering the services has hindered their acceptance in the marketplace. The forum hopes to remedy this situation by establishing more uniform procedures for ordering ISDN and DDOV services from the regional Bell operating companies.

As the ISDN services become more consistent across the country, national processing companies such as SPS and First Data will have an easier time procuring the services on behalf of their merchant customers, the processors said.

The companies also plan to explore the possibility of using the technologies for other types of financial transactions, including those from automated teller machines and from electronic benefits transfer programs.

"Many credit card merchant locations are on multi-drop private lines, and ATMs have a similar setup," said Sid Hoosein, a manager of data services concepts for Bellcore, which is the research arm of the regional Bell operating companies.

"So the same access cost reductions, performance improvements, etc., can theoretically be applied there," he added.

Since March, SPS has been running a pilot program using ISDN at one of its credit card merchant clients, Thornton Oil Corp.

Thornton replaced its leased lines with ISDN lines that allowed a reduction in telecommunications costs and a marked improvement in response time on the network, "We have found that ISDN reduces connection time at the point of sale," making customer checkout times much shorter, said Dick Snider, vice president at Thornton, which is based in Louisville, Ky. "We see ISDN as a tremendous improvement over traditional dial technology."

Thornton Oil operates more than 100 gas and food marts in six states. It is currently using ISDN to handle voice and point of sale transmissions, although a single line at each location can also handle transmissions from fax machines, lottery machines and security systems.

SPS representatives noted that the cost to adapt each merchant site to ISDN is minimal - a few hundred dollars for a device that converts analog signals from point of sale terminals into digital signals.

But the merchants most likely to implement the technology are those with high volumes of credit transactions.

With the new industry forum eager to expand, many of these large merchants may participate in the annual meeting next year, forum officials said.

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