AT&T; Extends Minimum Fee to Customers

AT&T; Corp., the nation’s largest long-distance phone company, said Tuesday it is expanding its $3 minimum monthly usage requirement to the majority of its 70 million residential customers, beginning in June.

The move is aimed at offsetting the company’s cost of serving millions of customers who make few or no long-distance calls. AT&T; says it loses about $300 million a year on customers who spend less than $3 a month on long-distance calls. AT&T; serves about 75% of the industry’s customers with such bills, analysts say.

Under the plan, customers who make no long-distance calls or ring up less than $3 in charges in a given month will be assessed the difference. The charges, if applicable, will appear on July bills, the company said.

AT&T; said the new minimum will not apply to consumers who qualify for low-income service, customers who already pay a monthly fee and those who have been on an AT&T; calling plan since Aug. 21, 1998. The company would not say how many people will be affected by the requirement, but analysts believe the change will affect a wide swath of its customer base.

The new requirement primarily targets customers who subscribe to AT&T;’s “basic rate” prices, which apply to those not on special calling plans. AT&T; and its competitors all offer plans with per-minute rates that are much lower than their underlying “basic” prices.

Because the targeted customers rarely make long-distance calls, they have been slow to enroll in special plans.

In addition, the new minimum will apply to customers who enrolled in AT&T; plans without monthly fees after Aug. 21, 1998.

Some residential customers with a separate AT&T; billing account for a dedicated computer or fax line could also be affected.

To blunt the blow, AT&T; on Tuesday launched a calling plan it said would appeal to many customers affected by the minimum-usage policy.

Under AT&T;’s Monthly Minutes calling plan, residential customers would pay a $3 monthly fee for 30 minutes of direct-dialed long-distance service (equal to a per-minute rate of 10 cents). After 30 minutes of usage in any month, additional long-distance service would be billed at a higher rate of 20 cents per minute.

The company said it will send customers details of the changes, as well as its calling plans, in May.

Last August, AT&T; broke convention in the long-distance business by instituting a minimum-usage requirement of $3 per month for new customers who did not sign up for a calling plan.

At the time, the company said the requirement might eventually be applied to its longtime customers as well.

Many long-distance companies have charged monthly fees in conjunction with special calling plans that have low per-minute rates. So far, none of AT&T;’s rivals have instituted similar monthly minimums that apply broadly to all their customers.

Consumer groups have criticized AT&T;’s fee as a potentially precedent-setting event that could make long-distance service more like the cable and banking industries, whose customers can be charged monthly fees regardless of usage.

However, industry analysts say AT&T; has little choice but to recoup costs from low-level users if it wants to compete against such rivals as Sprint and MCI WorldCom--which typically attract customers who make more long-distance calls.

“AT&T; has the customers that nobody wants,” said Jeffrey Kagan, president of Kagan Telecom Associates, an Atlanta-based research firm. “They’re trying to squeeze out the customers that cost them the most money.”