Phone Companies Cashing In on Collect Calls
Although it’s one of the most expensive ways to make a telephone call, collect calling is as popular as ever, especially among college students and mobile professionals who are most likely to use the service.
In fact, collect calling today is less likely to be viewed as a way to make a call in an emergency than it is a tool to be used when the caller doesn’t have spare change or another calling alternative.
“It’s no longer just for occasional use,” said Jeffrey Kagan, president of Kagan Telecom Associates and author of “Winning Communications Strategies” (Aegis, 1997). “When my son goes to the pool he says he’ll call 1-800-COLLECT because he hears it on TV all the time.”
Indeed, the rush to brand collect calling that began when MCI Communications Corp. debuted (800) COLLECT three years ago has alerted consumers that they have a choice when making a collect call, analysts say.
But the deluge of marketing sparked by the release of (800) COLLECT, followed closely by (800) CALL-ATT, hasn’t persuaded consumers they should be wary of what they’re spending to call collect.
Obviously, the person placing the collect call is less likely to think about what it costs because the person on the other end will pick up the tab. This point is emphasized in a recent study by Wirthlin Worldwide, which found that three of four respondents had “no clue” what a collect call really costs.
Sprint Corp., which commissioned the study, has used the results to promote its new collect calling product, (800) ONE-DIME. The service, which debuted in September, features a flat-rate plan similar to the one Sprint pioneered in the long-distance market.
The service’s rates are 25 cents on weekdays and 10 cents a minute from 7 p.m. to 7 a.m. and on weekends--though a $1.59 connection fee for state-to-state calls raises the price considerably.
Sprint’s entry has already shaken up the market: MCI has lowered its rates to match Sprint’s. Meanwhile, AT&T; Corp.’s rates for (800) CALL-ATT--a number it also uses for other services--vary depending on time and distance.
So, for comparative purposes, a 10-minute collect call from Los Angeles to New York using AT&T;’s (800) CALL-ATT would cost $5.75 during the day, $4.65 in the evening and $4.15 on the weekend (all include an $1.60 connection charge).
The same call through both MCI and Sprint would cost $4.09 during the day and $2.59 from 7 p.m. to 7 a.m. and on weekends.
“From a revenue perspective, the collect-calling market is less than 10% of the long-distance market, but from a profitability perspective, it’s disproportionately large,” said Boyd Peterson, director of consumer communications at the Yankee Group, a Cambridge, Mass.-based market research firm. “The profits here are about 10% to 12% higher than those of regular long-distance calls.”
And when collect calls are made from pay phones without calling an 800 number, they often go through no-name long-distance carriers that charge very high prices.
Collect calling, in fact, is almost never the most economical choice. Consumers should look to prepaid calling cards or to personal 800 numbers when they need to place a call away from home, said Linda Sherry, spokeswoman for advocacy group Consumer Action in San Francisco.
Each of the Big Three offers personal 800 numbers that work when users call home and enter an access code to tap into the service. Charges for these services vary by carrier. AT&T;’s “Easy Reach” personal 800 number service has a $3.50 monthly charge (a user must be an AT&T; long-distance customer) and costs 25 cents a minute.
Consumers who subscribe to MCI One automatically receive a personal 800 number that carries a 25-cents-a-minute charge; if they aren’t MCI subscribers, there is a $5 monthly fee for the service.
Sprint’s personal 800 number service is $3 for Sprint long-distance subscribers and costs 25 cents a minute during the day and 10 cents a minute during weekends and evenings. The monthly charge is waived if customers spend more than $20 a month in 800 calls.
Another option for a personal 800 number is Call Home America, a service provided by Frontier Corp., the nation’s fifth-largest long-distance carrier. What makes this service different is that it allows consumers to attach up to 10 personal identification numbers to their personal 800 number.
Consumers use the PINs to speak with different households by calling the 800 number and punching in one PIN to ring their uncle’s house or another to call their grandparents, said Paula Stribbell, director of consumer marketing for Frontier.
The service is $3.95 a month--the charge doesn’t apply to Frontier long-distance customers--and carries a 24-cent-per-minute fee during the day and 19 cents per minute in the evening.
Consumers also can use a calling card instead of calling collect. However, the Telecommunications Research and Action Center warns that surcharges on calling-card calls, which vary by carrier from no connection fee to 89 cents, have jumped by at least 30 cents a call.
“This is a constant game the phone companies play,” Peterson said. “They dropped long-distance rates but are jacking up rates where consumers are price insensitive.”
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Times staff writer Jennifer Oldham can be reached at jennifer.oldham@latimes.com
