AT&T proposed to cut long-distance telephone rates by $1.5 billion yesterday, including reductions ranging from 2.7 percent to 11.4 percent for residential customers.
Many of the benefits of the proposed rate reduction, which goes into effect June 1 unless disapproved by the Federal Communications Commission, are aimed at business customers, and still others are offset by increased charges to customers by local telephone companies for access to service. Even so, according to one consumer activist, the proposed rate cut may mark the turning point at which most residential customers begin to reap the benefits of the breakup of the telecommunications monopoly on Jan. 1, 1984.
"Including this reduction, there's been about a 20 percent decrease in long-distance rates over the last three years," said Sam Simon, spokesman for the Telecommunications Research and Action Center. Those cuts may now exceed the costs to customers for the "consumer access line charge," which increases from $1 a month to $2 a month as of June 1, the effective date for the proposed rate reduction.
"For even the small residential user, there now may be a slight net benefit" from the new, deregulated environment, he said. "This may be the beginning of better times."
The rationale in seeking the breakup of AT&T was the government's belief that all consumers would benefit from competition in long-distance telephone service, where new technology had eliminated AT&T's dominance. Since the breakup, however, business customers generally have benefited more than residential customers.
In addition to providing reductions for AT&T's 80 million residential and 7 million business customers, yesterday's proposed rate restructuring also may touch off reductions by AT&T competitors, who may set rates without going to the FCC. "It's going to take days, literally, to match them up with our rates and decide what we're going to do," said Gary Tobin, spokesman for AT&T's chief competition, MCI Communications Inc. "We will do something," he said, adding that the company would try to act by June 1.
AT&T said that the proposed reduction, which amounts to an overall decrease of 9.5 percent for AT&T Long Distance Service, is the largest ever proposed on a percentage basis. The reduction results from a decline in charges to AT&T for its connection to local phone systems (made possible by the increase in the consumer access charge), which it is mandated to pass on to its customers.
The biggest reduction proposed is 11.4 percent for long-distance calls made between 8 a.m. and 11 p.m., Monday through Friday. Business users are more likely to be the beneficiaries rather than residential customers, who tend to call long distance more late at night and during the weekend, according to Simon and Gene Kimmelman, legislative director for the Consumer Federation of America.
Late night and weekend rates will be reduced by 2.7 percent and would reflect a smaller discount for calls made during those hours than is now in effect.
AT&T spokesman Herb Linnen said charges for a one-minute call from Washington to New York would drop from 51 cents to 46 cents between 8 a.m. and 5 p.m. Monday through Friday and from 30 cents to 27 cents from 5 p.m. to 11 p.m. on weekdays. The late-night and weekend charge of 20 cents would remain unchanged.
The average residential user of AT&T's long-distance services is billed for $15.50 a month.
Rate reductions for Maryland and Virginia customers would be offset to some extent by another change proposed by AT&T in its filing with the FCC. AT&T proposes to shift the cost of taxes that it pays on gross receipts to customers in the nine states, including Maryland and Virginia, which charge those taxes. Currently, the cost of those taxes is borne by all of the company's long-distance customers, nationwide.
AT&T spokesman Steve Cross said that the proposed change would increase the long-distance bills of Maryland customers by 0.4 percent and would increase Virginia customers' bills by 1.6 percent. "They would still be saving a lot of money" as a net result of the proposed changes, he said.
The proposed changes also include a 12.8 percent decrease for AT&T's WATS service for calls placed during the day and evening hours and a 5 percent reduction for calls during late-night and weekend hours. However, subscribers to that service would pay $55 per month for each line, up from $31.65.
Subscribers to AT&T's 800 Service would receive a reduction of 9.8 percent in rates for calls during the day and evening hours and a 2 percent reduction in rates for calls during late-night and weekend hours. The charge per line for the 800 service would be increased from $36.80 a month to $40.
One consequence of the proposed rate reduction is that it will make it harder for customers trying to sort out the costs and benefits of competing long-distance services, said Simon.