AT&T; to Drop Long-Distance Rates by 0.7%

Taking advantage of its newly granted freedom to set long-distance prices, American Telephone & Telegraph said Thursday that it will lower rates by $140 million a year, or 0.7%. The cuts will take effect Saturday, when the new federal regulatory policy for the company begins.

AT&T; said about $120 million of the price cuts will benefit consumers directly and the rest are aimed at small-business customers.

Under the reduction, basic long-distance prices will decline by $60 million a year, or about a penny on a typical five-minute out-of-state call.

In addition, for calls to U.S. numbers originating in Mexico, AT&T; will end its $2 surcharge. The charge applies to collect calls, uncompleted person-to-person calls, use of the company’s “Calling Card,” calls billed to third parties, and requests for quotes on how much a completed call cost.

AT&T; said it also will extend its 33% discounts to all weekdays that are celebrated as legal holidays. When last New Year’s Day fell on Sunday, for example, the company charged full rates on Monday even though it was a holiday, said AT&T; spokeswoman Daylanne Johnson.

Rates 39.8% Below ’84

The rate decrease is AT&T;’s second this year. In April, the company granted a reduction to offset a 20-cent increase in the monthly “subscriber line charges” paid by consumers, now $3.50.

Saturday’s reduction also will be AT&T;’s ninth since the breakup of the Bell System in 1984, when average interstate long-distance rates averaged 39.8% higher, Johnson said. A five-minute coast-to-coast call during normal business hours will cost $1.25, effective Saturday. While that is only 1 cent less than today, it is down from the $2.70 that such calls cost before AT&T; divested itself of its local phone business.

AT&T; is now free to change its prices without prior federal approval under a new “rate cap” regulatory policy adopted by the FCC. Under the policy, the commission removed its limits on AT&T;’s profits. Instead, it imposed a ceiling and a floor on AT&T;’s prices and freed the company to change its rates within those boundaries.