Dialing for dollars: Will consumers win?

Phone rate cuts: Long-distance charges will drop -- if companies pass along their savings.

June 12, 2000

WITHOUT even responding to the nickel-and-dime advertising come-ons of telephone companies, consumers soon should see lower long-distance bills.

We say should because phone companies invariably seem to find ways to jack up our bills even as they publicize lower rates.

That's what happened this month when AT&T Corp. tried to raise its per-minute rates right after it joined the Federal Communications Commission in announcing a multibillion-dollar cut in basic long-distance charges. The FCC then jawboned AT&T into withdrawing the planned per-minute hikes.

That's significant because, under deregulation, the federal agency lacks power to force carriers to pass along savings to their customers. Competition between AT&T and others is supposed to be the mechanism for reducing consumer phone bills.

Last month, the FCC and the phone industry agreed to lower access fees that long-distance carriers pay to local phone companies for the use of wire-loop connections to homes and businesses. The carriers agreed to eliminate monthly minimum-use charges (about $3) on customers.

Primary beneficiaries will be people who infrequently call friends and relatives in other states. More than 40 percent of U.S. households make less than 10 minutes worth of long-distance calls per month; they should save from $2.50 to $4.70.

Less certain is the impact on those who make more calls.

The impact on telecom providers is clear, though. Long-distance carriers gain $3 billion in annual savings. Local companies gain a more reliable flat-fee revenue stream.

And by pegging access charges more closely to costs, the FCC order also positions telephone companies to compete in the future with Internet companies.

Average residential customers have been slow to reap the benefits of nearly 16 years of telephone deregulation. Telecom companies have lagged in passing along savings to consumers from previous access-rate cuts. On top of that, they've added extra fees.

That's why some consumer advocates worry the five-year phase-in of this complicated agreement could actually raise telephone rates.

For instance, while you'll benefit from lower local-access rates, charges will increase with the length of your long-distance calls. Additionally, you'll pay more to local companies for using their lines.

Regulators must closely monitor how telephone companies implement this new system and be ready to step in if there are abuses.

Meanwhile, the FCC intends to look at consumer phone costs in two years. That may be when we see if this plan is a true breakthrough or just the same old line.

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