AT&T; Bows to Pressure, Reverses Hikes on Long-Distance Rates
Bowing to bad publicity and regulatory pressure, AT&T; Corp. late Wednesday rescinded a series of price hikes that increased long-distance rates for an estimated tens of millions of its customers on June 1.
The nation’s largest long-distance company had instituted the price hikes even as it promised federal regulators that it would pass along to customers the billions of dollars it will soon save in fees. The hikes were roundly criticized by Federal Communications Commissioner William Kennard and several consumer groups, and follow a string of other AT&T; fee and rate increases.
AT&T; said late Wednesday that it will roll back rates to pre-June 1 levels on Friday, and that those rates will remain in effect “until we have completed our review and inform customers of any changes to pricing plans.”
AT&T;, which continues to consider rate hikes, went on to say, “We will conduct a further review of various alternatives to restructure long-distance calling rates for customers on the basic schedule who make few calls.”
AT&T; has not yet determined whether they will rebate customers for calls made at the higher prices.
At AT&T;, customers who are not enrolled in a calling plan are assigned the firm’s “basic schedule” prices, which are generally the phone company’s highest per-minute rates. A large proportion of the customers who pay basic-rate prices are elderly or consumers who make too few long-distance calls to save money on other plans, according to consumer groups.
In rate notices filed May 31, AT&T; eliminated its $3 monthly minimum for customers who are not enrolled in a calling plan, but at the same time increased its basic per-minute prices by 11% to 150% for long-distance calls made during the week and on Saturday. The rate changes, which took effect June 1, also reduced by 40% the per-minute price for customer calls on Sundays.
AT&T; said it will not reinstitute the $3 monthly minimum fee that had been removed under the new structure.
News of the price hike drew criticism early Wednesday from Kennard, the FCC chairman, who last week promised that the agency’s move to eliminate $3.2 billion a year in phone fees would result in lower phone bills for long-distance customers.
Under an agreement announced May 31, AT&T;, Sprint and other phone companies pledged to offer at least one calling plan without any monthly minimum charges. In addition, the carriers said they would lower prices for customers--though they did not say how--in return for the FCC’s largest reduction in the access fees.
Access fees are per-minute charges that long-distance companies pay local phone companies to complete calls to people’s homes and businesses.
“AT&T; promised to pass on savings to all consumers. Their new rate plan does not do that,” the FCC chairman said in a statement. “AT&T; promised to tell their customers which plan would be most cost-effective for them. This was not done.”
Kennard added that AT&T;’s promise of consumer savings is written into the order issued last week. “I am going to enforce it,” he said.
AT&T; said Wednesday that it will make good on its promise to the FCC, and remains committed to providing low-cost calling periods without monthly minimum charges.
“Our goal is to give customers great service at a great price, whether they make one call a month or spend hours on the phone,” said Robert Aquilina, senior vice president of AT&T;’s consumer services unit. “Recognizing that this is a competitive market, if we can reconfigure our rates to give more people more low-priced calling periods, we’ll do it.”
The company added that its basic schedule prices are the lowest of all the major long-distance carriers.
Still, the now-canceled per-minute price jump comes on the heels of a string of hefty rate increases and fee hikes for operator-assisted calls, toll calls and calling card calls--all of which will boost costs for callers and increase revenue at the phone giant.
On June 1, AT&T; began charging 29 cents per minute for calls made any time Monday through Saturday. The new price is a 11.5% increase over old rates for weekday calls made from 7 a.m. to 7 p.m. (formerly 26 cents), an 81% increase over the old rates for off-peak weekday calls (formerly 16 cents), and a 150% hike from previous prices for Saturday calls (formerly 11.5 cents).
Sunday prices went down 40%, dropping to 7 cents per minute from the old rate of 11.5 cents.
ABellTolls.com, which runs a Web site that compares long-distance prices, released a quick estimate of how AT&T;’s rate affected consumers.
“For extremely low-volume users, the new rate structure will actually save them money over the old rates,” said Marc-David Seidel, an assistant professor of management at the University of Texas at Austin and co-founder of ABellTolls.com. “However, for someone that makes more than 10 minutes of weekday calls a month, the new rate plan is more expensive.”
Under Seidel’s examples, a customer who makes 50 minutes of calls a month only on Saturdays would see an increase of more than 152% from $5.75 on the old plan to $14.50 on the new plan. In contrast, a consumer who makes 10 minutes of calls a month only on Sundays would pay 70 cents and see a decrease of more than 76% from $3.
