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New Pricing for Long-Distance Calls Proposed

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From Reuters

The Federal Communications Commission today proposed a radical new pricing system for long-distance phone calls that it said could reduce charges and make phone companies more efficient.

The proposal would place ceilings on long-distance phone prices but end legally mandated limits on profits that phone companies, including American Telephone & Telegraph Co., have traditionally operated under.

Federal Communications Commission Chairman Dennis R. Patrick told a commission meeting that “the proposal holds the vast promise to benefit consumers and industry.”

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Currently, AT&T; sets prices at a level that will cover costs and earn a fixed profit of 12.2%.

Would Go Into Effect in ’89

Under the new approach, AT&T; and others could set their own prices below an established cap and earn higher profits by being more efficient and cutting costs.

If finally adopted, the new FCC system would replace this 20-year-old “rate of return” approach that the FCC in the past has conceded encouraged phone firms to pass on costs to ratepayers and discouraged efficiency and innovation.

The proposal, if adopted, would go into effect April 1, 1989.

The FCC emphasized that companies could elect to use the new system or continue to formulate their pricing decisions on the present rate-of-return structure.

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