AT&T; Eliminates Minimum Fee, Hikes Other Rates

AT&T; Corp. on Friday unveiled higher basic long-distance rates and new discount plans that consumer groups say will have a mixed effect on the 28 million customers subject to the company’s changes.

The revamped prices, which will take effect July 1, come just two weeks after AT&T; withdrew a rate increase that had infuriated consumer groups and federal regulators.

Under the new plan, the nation’s largest long-distance company will eliminate the $3 minimum monthly usage charge for customers on its “basic rate” calling plans--benefiting customers who make few if any long-distance calls--and also erase a separate line charge of $1.51 a month.

At the same time, however, AT&T; will raise its basic per-minute rates by 13% to 40% over current prices for people who do not sign up for a discount plan.

About 28 million of AT&T;’s 80 million customers are not on a discount calling plan and thus pay AT&T;’s “basic schedule” rates--typically the company’s highest per-minute prices. About 15 million of the basic-rate customers make few or no long-distance calls each month and were subject to the $3 fee.

In some cases, AT&T;’s basic-rate customers can avoid the higher rates by choosing one of three new basic discount plans. But those plans typically carry reduced rates on one day of the week or during a certain time slot, and sharply increase prices for calls made at other times.

The company will send letters to all basic-rate customers describing the plans and rate changes.

“This is a step in the right direction compared to the rate increases AT&T; adopted two weeks ago,” said Gene Kimmelman, co-director of Consumers Union in Washington.

AT&T; came under fire for enacting sharply higher basic long-distance rates on top of the eliminated $3 minimum charge without advance notice to the tens of millions of customers who would pay the new prices.

The move particularly irritated members of the Federal Communications Commission. The AT&T; increase came just as the FCC was promising lower prices for consumers as a result of a newly announced $3.2-billion reduction in the access fees long-distance carriers pay to local phone companies to connect calls.

Feeling the heat of bad publicity and regulatory wrath, AT&T; immediately rescinded the basic-rate hike but said it would probably submit plans for different increases.

The FCC has no authority to regulate long-distance prices, but as a practical matter, analysts believe, AT&T; will try its best to keep regulators happy since they rule on many matters key to its future.

On Friday, however, it was unclear whether the redesigned rates would appease regulators.

While FCC Chairman William Kennard on Friday gave cautious praise to AT&T; for responding to the public outcry, Commissioner Gloria Tristani was blunt in expressing her displeasure.

“With its latest tariff filing, AT&T; has failed to deliver the consumer benefits it promised. . . . By increasing per-minute charges for the same consumers for whom it committed to eliminate minimum-usage charges, AT&T;’s new rate plan at a minimum violates the spirit of the reform package,” Tristani said in a statement.

An AT&T; spokesman said the company has not reneged on its pledge to pass to customers the $1.6 billion a year it will save on access fees. In fact, the company said it expects that the changes will cut its earnings this year by 1 or 2 cents a share.

Company spokesman Mark Siegel said the price increases in other areas--including for calling-card calls and operator-assisted calls--will only partially offset the revenue it loses by not charging the affected 15 million customers the $3 minimum monthly charge.

AT&T; shares lost $1.69 to close at $34.38 on the New York Stock Exchange.