Phone deregulation’s promise of lower rates not fulfilled

Consumer Action finds basic long distance rates up 55% since 2000

Contact: Members of the media may contact: Linda Sherry at (415) 777-9648

Interstate long distance basic rates at the nation’s largest long distance carriers have increased by more than 55% since 2000, according to a new survey by Consumer Action (CA). Basic (or default) rates are the rates paid by customers not on a calling plan.

The federal Telecommunications Act of 1996 opened local telephone service to competition. Most experts predicted that competition would result in lower rates for consumers, but CA’s findings disprove this theory, at least for people who are not on a calling plan.

"Savvy consumers with access to the Internet can shop around to find long distance plans that drastically undercut basic rates," said CA Editorial Director Linda Sherry, who conducted the survey. "But phone users who do not subscribe to a calling plan are paying 55% more than in 2000 when they make a long distance call from their homes."

The five carriers whose basic rates were analyzed by CA for its 2004 Residential Telephone Rate Survey are AT&T, MCI, SBC Long Distance, Sprint and Verizon.

CA has tracked a long distance calling basket of 126 minutes of basic rate calls in all rate periods for close to two decades. The totals for all five companies has jumped from $109.83 in 2000, when SBC and Verizon (then Bell Atlantic) started to compete in the long distance market, to $170.86 today.

Carrier 2000 2004
AT&T $27.93 $33.14*
MCI $28.56 $40.70*
SBC $11.34 $25.62
Sprint $29.40 $39.90
Verizon $12.60 (Bell Atlantic) $31.50

*Includes a monthly recurring charge. AT&T: $3.95; MCI: $5.

CA’s other findings include:

-- Calling card basic rates have jumped considerably in one year for AT&T, MCI and SBC Long Distance. CA compared the cost of a 10-minute weekday, daytime interstate calling card call using each company’s own card and access number. Among the five carriers, Sprint and Verizon kept the cost steady. Sprint charges $10.15 for the call and Verizon, $5. The largest per cent increase was found at SBC, which increased the cost of the call 40% in one year, from $4.25 to $5.95. MCI is charging 25% more (from $11.40 to $14.25) and AT&T’s rate has jumped 12%, from $10.15 to $11.40.

-- Collect calls: Using the same 10-minute weekday, daytime interstate call, CA compared the least expensive way to make a collect call offered by each company. Among four of the five carriers, the cost of the call increased from 7.7% (AT&T) to 32.53% (SBC Long Distance) in one year. Verizon is charging the same $12.35 for the call while the higher prices are $13.89 for AT&T, $14.80 for MCI (up 14.8%), $13.85 for SBC and $14.89 for Sprint (up 15.5%).

-- Calling plans: Of the 47 state-to-state long distance calling plans from 22 carriers, 23 (or 48%) had monthly fees, 19 (or 40%) had no fees and 5 (or 11%) had monthly minimum spending requirements. CA compiles a chart of the lowest per-minute plan rates to assist consumers in shopping for long distance service. Low rates found this year’s chart range from 2.5¢ to 10¢ per minute. Monthly fees ranged from 75¢ to $40. Minimum spending requirements ranged from $5 to $10.

"In contrast to rising basic rates, calling plans offer great bargains for consumers," noted Sherry. "The major companies have few options without monthly fees, but there are plenty of carriers who have long distance calling plans with low rates and no fees."

-- Local-long distance bundles: CA found carriers offering an unprecedented number of local-long distance bundles. A bundle is a package of services including local and long distance service, optional calling features such as caller ID and call waiting and unlimited local calls. Depending on the plan, unlimited local toll calls and long distance calls also may be included.

CA looked at 17 local-long distance bundles available from eight companies and found that monthly fees range from the $11.99 that MCI charges in some places for its bare-bones Neighborhood Standard local plan to the $64.95 charged by AT&T for the One Rate Advantage plan in some states.

"Heavy phone users and feature junkies can save money," noted Sherry. "The average long distance customer uses about 200 minutes per month. If you’re an average phone user, you probably don’t want all those features or the endless phone time, so you can put together a more reasonably priced package on your own."

Sherry noted that cell phone users may have even less reason to purchase a local-long distance bundle. "If you use a cell phone for most calls and your plan has unrestricted toll and long distance minutes, a landline bundle might be overkill."

When comparing bundles, remember that advertised prices don’t include taxes and fees of 15% or more and that your new carrier may charge a month ahead. If so, your first bill with the new provider could be a whopper with two months of charges.

 

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