Phone Companies Offer to Cut Bills by Combining Fees

Six of the nation’s largest local and long-distance telephone companies on Monday offered to cut consumers’ monthly phone bills by as much as $5.6 billion over the next five years.

The proposal calls for combining two charges that appear on all consumers’ monthly phone bills: “access” fees--the amount long-distance companies pay local carriers to complete a call--and the “subscriber line charge,” a minimum $3.50 fee that consumers pay to maintain a local phone connection.

The plan’s backers, AT&T; Corp. and Sprint Corp. and local companies GTE Corp., Bell Atlantic Corp., BellSouth Corp. and Pacific Bell parent SBC Communications Inc., argue that cutting access fees and consolidating them with the flat-rate subscriber fee would allow carriers flexibility to pass on savings to consumers.

But consumer groups say that even if the plan is adopted, most telephone users aren’t likely to see a rate cut, and many may find their phone bills increasing.

“I think there is some real merit in trying to simplify the myriad of phone charges on consumers bills, but . . . we would have preferred to see some real money going back into consumers’ pockets,” said Ronald Binz, president of the Competition Policy Institute, a Washington-based consumer think tank.

Previous efforts to slash long-distance access fees have had mixed results. Consumer groups say that while heavy long-distance users have seen some rate reductions, most consumers have reaped only small savings despite billions of dollars in cuts announced by the phone industry over the last few years.

“We have $5 billion worth of new charges that have been added to people’s phone bills in the last years, with virtually no sign of rate reductions for the average consumer,” said Gene Kimmelman, head of the Washington office of Consumers Union. “Consumers are getting nickeled and dimed to death by the phone industry.”

Among the many fees buried in telephone bills, long-distance access charges have long been a source of discontent because they have been inflated to help subsidize local phone service for the poor and phone users in costly-to-serve rural areas.

Under the new proposal, which was submitted to regulators last week, local phone companies would reduce per-minute charges for connecting long-distance calls from the current average of 2.3 cents to 1.1 cents per minute by July 1, 2003.

Consumers now pay an average of $1.50 a month in access fees. Under the new plan, the access fees combined with the subscriber line charges would range from about $5.50 to more than $6 a month.

The plan emerged after months of industry negotiations spearheaded by John Nakahata, former Federal Communications Commission chief of staff. It must be approved by the FCC before it can take effect.

Despite unusual support among rival phone companies, the proposal lacks backing from Baby Bells Ameritech Corp. and US West Corp., as well as No. 2 long-distance company MCI WorldCom Inc. The companies cited a variety of reasons for not endorsing it, including the lack of consumer input and fear that the plan might create more regulatory red tape.

“The current system is working well for us,” said Ameritech spokesman Marvin Wamble. “Why should we change it when we feel that competition can more than adequately set the rates in the marketplace.”