The Federal Communications Commission is expected to be sharply divided today on an issue that could raise costs for companies competing with American Telephone & Telegraph Co. and drive up rates consumers pay for alternative long-distance service.
The agency is expected to decide today whether to allow local phone companies to charge long-distance competitors of American Telephone & Telegraph Co. on a per-minute basis rather than a flat monthly charge to complete long-distance calls. AT&T already pays local telephone companies on a usage basis.
At stake are rising costs for long-distance companies such as MCI and Sprint, which put through large volumes of long-distance calls. If the new plan is approved by the agency, "It will have a significant impact on long-distance companies," said Jerome Lucas, president of TeleStrategies Inc., a McLean telecommunications consulting firm.
"It could increase access costs by 50 percent for the larger carriers. That means the long-distance competitors to AT&T will have to raise their rates to recover those increased access fees," he said.
Competition also may be impeded as the agency adds costs onto companies trying to compete with AT&T, according to analysts. "The residential marketplace will be tougher to compete in, and you will have less competition," Lucas said.
Currently, long-distance competitors of AT&T pay a flat rate to local telephone companies for 9,000 minutes of usage -- whether they use more or less than that amount.
In the long run, under the "equal access" process, all companies will pay on a per minute basis. The process, which eliminates the lengthy codes consumers have to dial to reach MCI or other AT&T competitors, is being phased in slowly and will not be complete for two more years.
The crux of the issue is when the agency will cut the umbilical cord of regulatory protection it has provided for AT&T's competitors during the transition to outright competition. Asking long-distance companies such as MCI and Sprint to pay for connection to local phone networks on a usage basis may be too much too soon, say the companies.
"We are going to be unhappy if we have to pay more money for access to the local phone system," said a spokesman for MCI. "It doesn't seem like the FCC is interested in promoting competition."
"Any action that the FCC takes to raise costs is going to make it very very difficult for the unprofitable companies" as well and could lead to many smaller companies folding, the spokesman said.
An FCC official, who asked not to be identified, said that if the commission approves the new pricing plan, there would be a mixed impact on companies.
"It clearly does not help a carrier that has very large usage," the official said. "But the charges would have different effects on different companies."
Smaller new entrants, for example, would benefit from such a new pricing rule because they would not have to pay a flat rate for an amount of time they do not use, he said. Likewise, the existing scenario allowing larger users of the local network to take advantage of the existing flat charge by using more than 9,000 minutes of time would be eliminated.