AT&T; Rate Hike Takes Aim at Businesses : Telecommunications: The proposal, which requires FCC approval, would have little effect on residential calls, but could end the industrywide price war.
Signaling a potential end to the price war in long-distance phone services, American Telephone & Telegraph on Monday announced sweeping rate increases aimed mainly at business customers.
Analysts said the increases from the long-distance market leader could spark a round of similar price hikes by competitors. Indeed, the company that started all the price cutting, MCI Communications Corp., said in a statement: “We do believe that competition has moved away from price. We think there is price stability in the industry now.”
Investors greeted the AT&T; news by running up the price of telecommunications stocks in heavy trading Monday.
AT&T;, MCI and Sprint Corp. have been locked in a ferocious, three-way battle for long-distance market share. As a result, the price of a typical long-distance call has plummeted in recent years.
That trend appears likely to be halted. Specifically, AT&T; is proposing increases averaging 3.9% for business services and less than 1% for direct-dialed domestic calls by consumers. The planned hikes, among AT&T;’s sharpest in five years, would affect the price of most AT&T; interstate and international services, 800 calling programs and data communications networks used by businesses.
AT&T;’s proposed increases were filed Friday with the Federal Communications Commission and would become effective Aug. 1, pending tariff review by the agency. Analysts said the impact of the increases is likely to be felt most sharply by small businesses that do not qualify for the high-volume discount plans offered to larger corporations.
For domestic, direct-dialed consumer calls, increases would apply only to calls made for certain distances, both during the daytime and in the evening. Rates on other evening calls would decrease.
“The betting is that other phone companies will follow suit now that the umbrella has been raised by the market dominator,” said Craig Ellis, a telecommunications analyst at Wheat, First Securities in Richmond, Va.
If true, such increases would run counter to nearly a decade of declining telecommunications prices brought on by increased competition and enormous technological advances.
Wall Street was pleased by the plan. AT&T; shares posted a record close of $64.25, up $1.25. MCI closed at a record $28.875, up 75 cents, while Sprint added 12.5 cents to close at $33.75. AT&T;, however, sought to play down the significance of the latest increases, noting that it has raised prices five times since 1988 and cut them 11 times. But the company acknowledged that the latest proposed increases are part of a larger company-wide effort “to ensure that prices reflect expenses.”
