AT&T breakup hit callers hard, study shows

July 31, 1992|By Leslie Cauley | Leslie Cauley,Staff Writer

Talk definitely isn't cheap any more, especially when it comes to local phone service.

A new study by a New York-based telecommunications consultant claims phone charges have increased an average of 315 percent since the court-ordered breakup of American Telephone & Telegraph Co. in 1984.

That huge increase includes the cost of basic phone service plus a number of other monthly charges that show up on monthly phone bills. That includes charges for things such as wire maintenance plans, 911, directory assistance and a host of local, state and federal taxes.

The study by the New Networks Institute is based on actual charges and payments of telephone bills from 1980 to 1992 and data from over 1,600 separate documents from other industry sources, including the Federal Communications Commission, the Department of Justice and the National Association of Regulatory Utility Commissioners.

The five-report study on the impact of divestiture on U.S. telephone consumers won't be finished until this fall. The complete report, which was independently funded, will sell for $15,000.

The FCC, which also keeps tabs on phone costs, doesn't take into account the extra line items when calculating the cost of phone service. Exclusive of those charges, the FCC says, basic phone-service costs have jumped 53 percent since the breakup of the phone company.

The FCC's figure isn't disputed by Bruce Kushnick, founder, president and the only current member of New Networks Institute.

But Mr. Kushnick said those fees do add up -- to approximately $125 a year -- and should therefore be taken into account when talking about the real cost of phone service in this post-divestiture era.

Before Jan. 1, 1984, when AT&T and the seven regional Bell phone companies were spun off as independent companies, many of those charges were covered by the basic monthly rate.

"The FCC figures don't include a lot of those changes, so it's not an apples-to-apples comparison," Mr. Kushnick said.

Steve Svab, an FCC spokesman, said he couldn't comment on Mr. Kushnick's study because he had not seen it.

The first phase of the Kushnick study also contends consumers are getting the short end of the stick when it comes to toll calls, those in-state calls that cost extra. Under current rules, the long-distance phone companies aren't allowed to carry those types of calls.

The upshot: Customers can wind up paying more for calls from one county to another than for coast-to-coast calls.

According to the study, toll calls handled by the Bells can run 25 percent to 250 percent more for a one-minute call than if a long distance carrier had handled it, adding up to $5.9 billion in extra charges for consumers annually.

The Kushnick study also takes aim at the Bells for spending too much time and money on developing outside businesses, including overseas markets, and not enough on their court-ordered mission: to serve local phone customers. "The regional Bells are pursuing a strategy which first serves their investors," Mr. Kushnick said.

According to the study, the Bells have spent $11.3 billion in foreign investments since divestiture, even though they haven't met their obligation to provide "equal access" -- install new digital phone switches that have the ability to handle all long distance carriers -- in all U.S. markets.

Meanwhile, according to the study, no less than a dozen states have required the Bells to spend more money on modernizing their domestic networks and beefing up customer service for local phone customers.

That foot-dragging, according to Mr. Kushnick, indicates the Bells are more interested in plumping up profits for investors than serving the needs of their monopoly phone customers. "After 10 years, the Bells are more geared to working for shareholders than providing utility services for subscribers," he said.

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