MCI asserts AT&T is using rate threats to try to retain 800-number customers

March 10, 1993|By New York Times News Service

WASHINGTON -- MCI Communications Corp. contended yesterday that AT&T is trying to prevent defections in the $3 billion market for toll-free 800 numbers by threatening businesses with rate increases if they consider switching long-distance carriers.

MCI charged that American Telephone & Telegraph Co. was threatening customers with potentially big rate increases on 800 lines if they take advantage of a recent federal policy that will make it much easier for them to change carriers.

The policy, effective May 3, allows a business to keep a particular toll-free number when it switches carriers. It means that a decision to switch will no longer wipe out all the advertising and promotion that the business may have put into a number like 1-800-BUY-THIS.

Moreover, to encourage competition, the Federal Communications Commission has ruled that customers can break their current contracts for 800 service without suffering penalties in the first three months that the rule is in effect.

MCI charged yesterday that AT&T was warning customers that it might increase the prices for clients who consider switching under the newrule, a move that MCI said would effectively derail the possibility of increased competition.

The fracas is the latest of several legal and regulatory battles among AT&T and its rivals.

Several months ago, AT&T sued MCI for patent infringement, hoping to block a proposed alliance with a big Canadian long-distance carrier, Stentor.

More recently, it went to court to force rivals to make their prices public, and it wrote to customers, warning that many contracts with MCI and a third major U.S. phone company, Sprint, were illegal secret orders, a tactic MCI called "a sleazy marketplace undertaking" in a brief filed yesterday with the FCC.

All three major carriers offer 800 numbers. In 1984, AT&T settled antitrust allegations by spinning off its local phone companies.

Since then, competitors have charged that AT&T retains an advantage because customers have not had the freedom to transfer their phone numbers if they choose to switch carriers.

The FCC agreed and ordered local phone companies to install technology that would allow 800 numbers to be "portable." This technology will officially become available May 3.

The fear of rate increases for toll-free service stems from the fact that some big-business customers say it could take many months to shift all their 800 lines to a different long-distance carrier.

If they tear up their old contracts with AT&T, however, they must still use AT&T during the transition and risk losing the big volume discounts they enjoy under the existing contracts.

Communications Daily, a trade publication, reported that the accounting firm Deloitte & Touche had estimated that customers could see their phone bills rise as much as 70 percent, or $50,000 a month, during a transition.

The matter has caused so much alarm in recent days that FCC officials have begun to mediate between big customers and AT&T in face-to-face meetings at the agency's Washington offices.

Joseph P. Nacchio, president of AT&T business communications services, conceded that some customers could pay higher rates, but he said they had been able to plan for this decision for more than a year.

"Everybody has known that 800 portability was coming on May 3," he said. "If they choose not to say, they'll have to pay what the market reflects."

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.