AT&T; Will Raise Rates on Long-Distance Calls

AT&T; Corp. said Friday that it will raise its basic long-distance calling rates as much as 11% in an effort to stem a decline in consumer long-distance revenue.

The rate increase, which affects 28 million of AT&T;’s 60 million residential long-distance customers, will take effect July 1.

AT&T; competitors MCI WorldCom and Sprint Corp. said Friday that they have no plans to match the rate hike with increases of their own. But analysts said it is probably only a matter of time before the other companies follow AT&T;’s lead.

“I certainly expect them to look for any opportunities to bring in more revenue from the pricing plans they have,” said Mel Marten, senior telecommunications analyst with Edward Jones in St. Louis. “This provides cover for them.”

AT&T; will boost its weekday calling rate 2%, from 29.5 cents to 30 cents a minute, and its weeknight rate 11%, from 22.5 cents to 25 cents a minute. On weekends, daytime rates will rise from 14.5 cents to 16 cents a minute, a 10% increase.

The price hikes aren’t likely to stem a long-standing decline in AT&T;’s consumer long-distance revenue, analysts said.

“This one act itself won’t make a significant difference to AT&T;’s revenues,” Marten said.

AT&T; said in January that it expects to see a percentage drop in its consumer long-distance revenue this year in the “mid- to high teens” as customers adopt lower-priced calling plans, use prepaid cards, make more calls on wireless phones and switch to new long-distance services being offered by Baby Bells such as SBC Communications Inc.

“A whole variety of marketplace forces played into this decision” to raise basic rates, AT&T; spokesman Mark Siegel said.

“We’re always evaluating our pricing strategy.”

This is the third time AT&T; has raised its basic residential long-distance rates since October 1999 and the first rate hike in a year. The new rates will be as much as 38% higher than in November 1997, when the company began a series of rate reductions.

Siegel noted that while some rates have increased in recent years, the “general trajectory” of long-distance prices has been declining.

Since Congress eased regulations on phone companies in 1996, a host of telecom start-ups have entered the market, offering long-distance prices as low as 2 cents a minute.

But now that most of those start-ups have gone out of business, big players such as AT&T; have begun to restore their higher prices, Marten said.

Consumer advocates decried the price hike and said it was designed in part to drive away customers who don’t bring in much money for the company.

“This is clearly a sign that competition is not working to bring down prices for the majority of consumers who do not do a lot of calling,” said Gene Kimmelman, co-director of the Washington office of Consumers Union.

All three major long-distance companies saw their shares rise Friday. On the New York Stock Exchange, AT&T; gained 32 cents to close at $21.49 and Sprint jumped 65 cents to close at $20.96. WorldCom shares rose 23 cents to close at $18.07 in Nasdaq trading.

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Going Up

After several years of stable or declining rates, AT&T; has been gradually raising its basic long-distance rates. Here’s a look at per-minute prices for domestic long-distance calls made during weekday peak periods.

AT&T; Basic Peak Rates

July 1: 30 cents

Source: Times research