Dialing for dollars

Pay phones: While cellular use has cut into revenues, service providers say their machines' time isn't up yet.

April 10, 2003|By Jeannine N. Befidi | Jeannine N. Befidi,NEW YORK TIMES NEWS SERVICE

NEW YORK - BellSouth announced two years ago that it would dial out of the pay phone business because fewer people were using the phones. Since then, the coin gobblers have been relegated to a growing pile of outdated cultural icons.

It's a fact of life that the old makes way for the new. Cassette tapes were effectively wiped out by the arrival of CDs in the 1990s, and most people believe pay phones will ultimately be next, tossed to the junk heap in the explosion of cell phone use.

But not so fast, some say. The need for pay phones remains strong.

"The notion of extinction is just not in line with reality," says Bruce Renard, president of the American Public Communications Council, which represents independent pay phone service providers. "The reality is there are still millions of pay phone calls made every day in America."

Still, Renard said the number of pay phones dropped from a peak of 2.6 million in 1998 to around 1.8 million in the beginning of this year. Many in the industry attribute the decline to a combination of increased usage of wireless services, vandalism and the problem of collecting fees on calls made collect or to toll-free numbers, with credit cards and with phone cards. But far too many people rely on pay phones, insiders say, for them to become extinct.

"The economically disadvantaged, the homeless and the people who can't afford a phone in their homes often use pay phones," Renard says. "Even cell phone users run out of minutes."

But there is no denying that cell phones have a comfortable share of the phone market. About 40 percent to 50 percent of people nationwide have cell phones, says Dennis Novick, president of the Independent Pay Phone Association of New York.

According to Novick's figures, in New York City, home to 8 million people, 33,000 outdoor pay phones serve about 4 million people. That number has declined from 37,000 four years ago, Novick estimates.

"Yes, you are seeing less phones," he says, "but phones will continue to serve neighborhoods that have a large demand."

Cellular stopgap

Thousands of travelers pass through Penn Station in New York daily. Thus, the demand for pay phones is great. On a recent afternoon, college student Shweda Avvari sat on the floor under a row of Verizon phones. Avvari says she uses pay phones when her cell phone dies.

"It will take 15 to 20 minutes," she says, pointing to her charging cell phone in one hand while she holds the pay phone receiver in the other. "Then I can use it again." Avvari finds pay phones quite convenient and says that she has never had a problem finding one.

Avvari is an example of why providers keep pay phones alive. Verizon operates nearly 400,000 throughout the United States, according to Daniel Diaz Zapata, a company spokesman. "The pay phone business is not a dead industry," Zapata says. "The services are still being provided and we are still very much in it."

Of the 1.8 million pay phones around the United States, roughly 75 percent are owned by three of the largest communications companies in the nation: Verizon, SBC and Qwest. Independent owners - from barbershops to large businesses - make up the remaining 25 percent of the pay phone market, says Renard, who watches the industry closely.

Regardless of size, all providers have felt the pinch of what Novick estimates as a 40 percent drop in revenue over the past four years. Subsequently, providers removed pay phones from areas where demand slowed to a trickle. While a phone might have generated more than $2,800 a year in the 1990s, Novick says, that has fallen about $900 for each phone.

Many providers blame public policy for dwindling revenues. The Federal Communications Commission "has intentionally or unintentionally contributed to the decline in pay phones," says Mason Harris, president of the Atlantic Pay Phone Association, which represents independent owners in Maryland, Virginia and Washington.

Citing the Telecommunications Act of 1996, Harris, Renard and Novick agree that the government failed to enforce provisions for long-distance and card companies to compensate providers when callers use toll-free numbers and calling cards. This makes it hard for pay phone owners to make as much money as they should, they say.

Diversification pays

Consequently, providers are trying to find other ways to produce revenue. TCC Teleplex, one of the oldest and largest pay phone providers in New York City, introduced the first outdoor Internet pay phone in America in February 2002 in midtown Manhattan. Novick, the company's founder and president, plans to roll out 100 more this year, giving more New Yorkers the opportunity to spend $1 for four minutes of online access. The yellow boxes with smooth screens are a far cry from the graffiti-scarred phones that many people avoid.

Novick fears that the United States will fall far behind countries in Europe and Asia that actively offer similar services.

The key to success is diversification, he says: "The general perception that this is a dying business is so far from the truth."

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