Originally created 01/27/99

'Cheap' calls may not be



WASHINGTON -- Alexander Korogodsky of Scotch Plains, N.J., saw an ad promising deeply discounted long-distance rates if he dialed a string of numbers before making a call. Instead, he was billed $2.35 cents for a one-minute call from his home to New York.

The total bill for three months of calls came to $720.12. "My wife said, `Did they forget to put a period in the right place?"'

Korogodsky wasn't charged the low rate promised by "dial-around" service 10-321, now 10-10-321, operated by Telecom USA, a subsidiary of MCI WorldCom. Instead, a technical glitch caused his dial-around call to be billed at MCI's highest rate.

Even though the problem that affected many others as well was a fluke, Korogodsy's experience illustrates the confusion some people endure when they turn to dial-around services to save money. Korogodsky spent days trying to reach Telecom USA to fix the charges, which he paid in full. Nearly a year later, he's still waiting for MCI to reimburse him.

Facing a growing number of complaints, the Federal Communications Commission is looking into how such dial-around services are advertised and whether consumers get enough information about rates, restrictions and where to call with a billing problem.

"Consumers should not get the runaround on dial-around," said FCC Chairman Bill Kennard.

The agency is checking into three areas, according to officials who spoke on condition of anonymity:

-- Whether consumers realize that some services charge monthly fees, per-call fees or have minimum talk times;

-- Confusion over the discount: for instance, 20 percent cheaper compared with what price?

-- Difficulty contacting the company with problems.

Two big marketers of dial-around services -- MCI and AT&T -- say their ads are clear.

"There's been some criticism, but I will let our ads stand on their own," said Howard McNally, president of AT&T's Lucky Dog Phone Co., which runs 10-10-345. "If you look at our TV advertising, look at our direct mail, we think our pricing is very, very clear."

Like many other companies, MCI and AT&T purposefully keep their corporate names out of dial-around ads. That's done to create a separate brand identity for a service that targets customers looking for a bargain.

But that means consumers should do their homework, calculating the math and reading the fine print -- even if it's just flashed at the bottom of a TV ad, said Samuel Simon of the Telecommunications Research & Action Center, which monitors phone rates.

"There's already a huge amount of consumer confusion out there about getting the best deal for phone service -- and ads for dial-around services have added to that," Simon said.

Callers need not switch from their current long-distance carrier to use a dial-around. They can just dial a seven-digit access code. The charges from the dial-around company usually show up on the customer's regular phone bill.

Navdeep Singh of Dallas said he's sworn off all dial-arounds after a problem with 10-10-297. Singh says he was promised one rate in writing, and was charged another. Although the overcharge only amounted to about $15 for three months, the aggravation of trying to get the problem fixed drove him to complain to the FCC.

Dial-around is small but growing: It's projected to be a $3 billion business by year's end.

Kennard says he finds "particularly galling" an ad saying a consumer can make a 20-minute call for 99 cents.

That ad is for MCI's 10-10-220 service. One newspaper ad says: "Time can be expensive." It says a 20-minute cab ride costs $19 and a 20-minute tanning session costs $20. "Or, time can be cheap," the ads says, showing a telephone with the message "20-minute phone call 99 cents."

Kennard said, "Consumers know that's 5 cents a minute and that's a pretty good rate." But if the consumer is on the phone for less than 20 minutes, they still must pay the full amount, Kennard notes.

The ad does say: "only 99 cents for all calls up to 20 minutes," but Kennard doesn't think it's clear enough.

MCI's Burns defends the ads, saying they're clear. More than 85 percent of MCI's dial-around users are repeat customers, he notes. The typical call on 10-10-220 lasts 15 minutes, he says, making the per-minute charge 6.6 cents.

In a TV ad for AT&T's 10-10-345, viewers are told: "It's always 10 cents a minute." But small print that quickly disappears says there's a 10-cent connection charge. That means the first minute is 20 cents.

Information on some dial-around services

Background and consumer information on some dial-around services:

-- 10-10-321 owned by MCI WorldCom's Telecom USA; number to call with problems or questions about the service 1-800-621-4230; Advertises discounts of up to 50 percent; minimum talk time 10 minutes to receive the discounts; no monthly fees; no per-call fees.

-- 10-10-220 owned by MCI WorldCom's Telecom USA; number to call with problems or questions about the service 1-800-540-3598; Advertises 99 cents for all calls up to 20 minutes; minimum talk time is 20 minutes to receive the advertised rate; Each minute over the 20 minutes is 10 cents a minute; No monthly fees; No per-call fees.

-- 10-10-345 owned by AT&T, under the name of Lucky Dog Phone Co.; number to call with problems or questions about the service 1-800-317-2657; Advertises 10 cents a minute; also has 10 cent per-call fee; no monthly fees; no minimum talk times.

-- Other providers include Excel Communications' Telco Choice's 10-10-297; Qwest Communications' 10-10-432; and WorldxChange Communications' 10-10-502.

-- Many dial-around company print ads -- and the TV ads, for a split second -- include the Internet Web site addresses where consumer information is available.