Released: March 29, 2005

If history is a guide, telecom mergers will mean higher rates across the board for consumers

Contact: Linda Sherry, (202) 544-3088 or Ken McEldowney (415) 777-9648

(Note to editors: Click here for Consumer Action's complete 2005 Interstate Telephone Rates Survey.)

As mega-mergers promise to change the face of the telecommunications industry, Consumer Action's 2005 Telephone Rates Survey, released today, finds that big players -- even the so-called "Baby Bells" -- have become more homogenized in their offerings, leaving consumers with fewer choices and higher rates. In 2000, when the Baby Bells first offered long distance service, Consumer Action (CA) documented a big spread in rates among carriers. The first of the Baby Bells to enter the field were SBC and Bell Atlantic (now Verizon), and they hit the ground running, with very low basic rates that seriously challenged the dominant carriers, AT&T and MCI. As recently as last year, CA's survey still found a huge gap between the basic rates of AT&T and MCI on the one hand, and Verizon and SBC on the other. But in CA's 2005 survey -- conducted during February and early March -- the spread between the Baby Bells and the long distance carriers has disappeared. "Our surveys illustrate that rates fall when there is competitive pressure -- and they go up in its absence," said CA's Linda Sherry, editorial director and researcher for the survey. "We fear that the mergers now re-shaping the industry will result in even higher rates than we found this year." Sherry notes that by next year's survey, AT&T and MCI may be absorbed by SBC and Verizon respectively. "Telecommunications will be dominated by two new Mama Bells, leaving consumers with virtually no choice of carriers."

Calling basket increases

CA tracks a long distance calling basket featuring 126 minutes of basic rate interstate calls in all rate periods. The totals for AT&T, MCI, SBC, Sprint and Verizon jumped from $109.83 in 2000, after SBC and Verizon (then Bell Atlantic) started to compete in the long distance market, to $183.07 today -- an increase of 66.6%. (For companies with a basic rate monthly fee, the fee is always included in the calling basket total.) Basic rates are the rates paid by default by customers who have not elected to have a special calling plan. In 2004, CA found that basic rates charged by SBC and Verizon remained significantly lower than those of AT&T, MCI and Sprint. But this year's data reveals that SBC and Verizon rates have increased sharply. Verizon's calling basket has climbed 20% in one year to become the second highest in the group of five, with a total of $37.80. In 2000, Verizon charged $12.60 for the calls. SBC's rates skyrocketed by 24% in one year, with its calling basket total jumping from $25.62 to $31.92. In 2000, SBC charged $11.34 to carry the calls. CA's study also found new miscellaneous charges, including many non-government-mandated regulatory assessment fees, and much higher rates on directory assistance, collect calls and calling cards.