Originally created 09/22/99

Consumer groups: Low-volume callers pay more for long-distance



WASHINGTON -- Residential customers making an hour of long-distance calls a month are paying on average 20 percent more on their total bills than they did two years ago, despite cost savings to phone companies during that time, consumer groups say.

The report by Consumers Union, the Consumer Federation of America and the Texas Office of Public Utility Counsel says long-distance providers have targeted their price breaks at customers who make a large volume of calls.

Long-distance companies contend that low-volume customers also have benefited from cost savings and note that low-volume customers are not necessarily from low-income households.

The report says consumers who call less frequently have seen their phone bills go up. Residential long-distance customers who make fewer than 50 minutes of calls a month are paying $2 billion more than they were two years ago, according to the groups, who say this encompasses the majority of long-distance consumers. The report is based on numbers from the Federal Communications Commission.

This increase is primarily because of fixed charges added to bills, the groups say. Those include monthly minimum usage fees assigned by some major carriers to recoup money on people who make few calls, along with fees the companies add to defray their own costs of government rules.

The increase comes even as long-distance companies have saved billions from government-ordered cuts in fees they pay local phone companies to connect calls, said Gene Kimmelman, co-director of Consumers Union's Washington office.

"It's clear that the bottom half of the long-distance market is not competitive," Kimmelman said. "As costs to the long-distance companies come down, prices are rising." He said customers adversely affected by the pricing policies tend to be from middle- or low-income households.

The groups planned to submit their analysis Wednesday to the FCC, which has opened an inquiry into the impact of the flat-rate charges on consumers who make few or no long-distance calls.

Long-distance carriers say consumers have plenty of choice for cost savings in the market, such as AT&T's 7 cents a minute plan or MCI's weekend and weekday nighttime rates of 5 cents. Those plans come with a monthly fee.

"It's very important for consumers in this very competitive environment to evaluate their calling patterns and figure out where they are calling and when," said MCI WorldCom spokeswoman Claire Hassett.

"There is a price war going on," said AT&T spokesman Jim McGann. "It makes one wonder what the consumer leaders feel is a problem here."

The long-distance companies say some line-item charges are the result of breaking out subsidies once built into telephone rates. Long-distance providers like AT&T say low-income customers can be exempted from minimum usage charges.

The consumer groups want the FCC to prohibit all minimum monthly charges. They also recommend eliminating or lowering the $3.50 a month "subscriber line charge" that covers the cost of the phone line from the local phone company into the home.