Fcc Approves Landmark Overhaul Of Phone Charges

Regulators Wednesday approved a landmark overhaul of domestic telephone charges that they said will lower costs for residential and business customers who make plenty of long-distance calls.

Federal Communications Commission officials said basic local phone rates will stay the same. But consumers and businesses will pay more for extra phone lines and would see their bills rise if they seldom dial long distance.

The FCC also voted to set aside about $2.3 billion a year to wire the nations schools and libraries to the Internet at discounted rates. Another $400 million a year will be used to connect rural hospitals to the global computer network.

 

The new rates stem from last years communications law and generally were praised by consumer advocates.

Regional Baby Bell phone companies criticised the rules. And small-business advocates complained they will receive higher phone bills. The matter is expected to land in court.

According to the FCC, the overhaul will mean that:

Residential customers with one phone line will see their long-distance bill drop to $20.65 a month from $22.50 by 1998, on average.

A couple with two phone lines in Charleston, S.C., and a long-distance bill of $60 a month, under a special calling plan, would save a total of about $2.50 a month.

But a funeral-parlour operator or other small business with three phone lines and just 15 minutes in long-distance calls would see their phone bill rise about $13, to $170.

This is the single best day that business and residential customers have had since the (1984) breakup of AT&T, said FCC Chairman Reed Hundt.

We are not raising local rates. We are not making it a necessity to raise local rates, he added. Long-distance prices are going down.

But BellSouth Corp. warned that the rules would lead to higher local rates. It and other Bells said the FCC went too far in ordering cuts in the $23 billion that long-distance carriers pay for access to their networks each year.

AT&T Corp. called the plan a good compromise. But No. 2 long-distance carrier MCI Communications Corp. said the FCC did not cut access charges enough. The carriers have vowed to pass on rate reductions to their customers.

Wall Street analysts, meanwhile, disputed the impact on Baby Bell and long-distance phone stocks.

The overhaul, in particular, will:

Keep the monthly subscriber line charge customers pay the local phone company at $3.50. Boost the line charge for household customers with more than one line to $5 a month per additional line from $3.50, and to more than $7.50 from $6 for multi-line businesses.

Further increases will be capped at $9. But the average is expected to be below that ceiling. The average residential fee is expected to be no more than $7.60.

Impose a new monthly charge on long-distance carriers that is expected to be passed on to customers. The charge will be $1.50 a line for multi-line residential customers and $2.75 a line for businesses with more than one line.

Cut by $1.7 billion the $23 billion in annual charges long-distance carriers pay local companies to access their networks, effective July 1.

Reduce access charges by a total of $18.5 billion over the five years.

In a move that broke a logjam at the FCC, AT&T promised to pass on the access-charge reductions to customers through long-distance price cuts of 5 percent to 15 percent. Other long-distance carriers have signalled they will follow suit.

Debra Berlyn of the Competition Policy Institute, a consumer group, praised the FCC for its resolve to avoid any increase in basic local phone rates.

But few carriers were happy with the plan possibly a sign that the FCC had achieved the balance it was seeking.

MCI called the $1.7 billion access-charge reduction a first step. Much more needs to be done, MCI President Timothy Price said.

GTE Corp. which filed suit against the FCCs sweeping rules last fall to pry open local phone monopolies said: It is difficult to understand public policy which penalises consumers for hooking up to the information superhighway by increasing the price of second lines.

Analyst George Reed-Dellinger at HSBC Washington Analysis predicted the FCCs decision would benefit long-distance phone stocks and hamper local phone stocks.

But analyst Scott Cleland of Schwab Research Group said: There was a lot of huffing and puffing, but this is incremental change and not revolutionary change.