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How Phone Rates May Soon Drop

FCC cuts long-distance firms' fees

Many long-distance telephone customers will see their bills drop - at least slightly - under a plan adopted by the Federal Communications Commission yesterday.

The plan cuts fees that long-distance carriers - primarily AT&T, MCI, and Sprint - pay to local phone companies for access to local telephone lines and customers starting July 1.

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AT&T, the first to announce how it would pass along the savings, says it will offer long-distance discounts of 5 percent for day and evening calls, and 15 percent for night and weekend calls. The discounts apply only to basic service. They would not affect the company's existing flat-rate discount service plans, which consumer experts say still represent the best long-distance telephone value for customers.

Gene Kimmelman, co-director of the Consumers Union in Washington, says the AT&T effort more than offsets telephone rate increases by the company last year. Rather than passing savings on to preferred high-volume customers, he says, average consumers are set to benefit. "It is giving the little guy a break."

It was unclear whether MCI and Sprint would pass on any of their expected savings to their long-distance customers.

The fees long-distance carriers pay to local phone companies are estimated at $23 billion a year. These fees would be cut by $1.7 billion.

The reduction marks a fee cut of $900 million for AT&T, of which the company has pledged to pass on savings of $450 million to its long-distance customers.

The access fees were set artificially high to permit the phone companies to maintain and upgrade their local telephone lines.

The long-distance carriers have long complained that the access fees are too high. The local phone companies counter that the fees are necessary to keep their expensive networks in top working order.

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The result adopted by the FCC is seen as a compromise between the two positions.

The access-fee issue is one of the hottest issues in the telephone industry, because of the large amounts of money at stake. "All industry segments are not in agreement. There is a sort of battle of titans going on behind the scenes," says Ruth Holder of the Alliance for Public Technology, a Washington-based interest group.

But not everyone will benefit from the FCC's actions yesterday. It also approved a plan to spend $2.25 billion to begin wiring all of the nation's schools and libraries to the Internet.

To pay for the program the FCC has suggested charging higher telephone rates for second lines to houses and for multiple lines operating at businesses.

The suggestion has sparked protests from the owners of small businesses who complain that they are being singled out to bear too much of the burden of funding the Internet wiring program.

The big question, according to observers like Ms. Holder, is whether affected groups will take their gripes to court. Any litigation could postpone the FCC plans indefinitely and hold up the expected long-distance discounts.

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