Rates that millions of Americans pay to lease telephones will rise by about 20 percent this spring, American Telephone & Telegraph Co. announced yesterday. It will be the first increase in two years.
Under the plan, the monthly rate for a traditional, no-frills rotary dial phone will rise from $2.25 to $2.70. The traditional Touch-Tone phone will go from $3.55 to $4.25, while Princess and Trimline rotary phones will rise from $4.60 to $5.50.
The Consumer Federation of America condemned the increase, saying that it was too high and would make it harder for the poor and elderly to afford telephone service.
AT&T said the new revenue it will collect will be used in part to fund new services for those who lease phones. These include free overnight delivery during emergencies of replacement sets to customers whose equipment breaks down and the addition of 75 service centers to the approximately 1,000 it operates now.
"We're making a long-term commitment to the leasing business and reinvesting in it," said Douglas Quinn, vice president for product management of AT&T's leasing services wing. " ... This is all based on research with our customers as to what they'd like to see available."
For many years during AT&T's long monopoly of the nation's telephone system, customers were not allowed to own phones and had to lease. The company argued that the attachment of "foreign" equipment to its network would degrade its technical quality, and federal regulators acquiesced.
Residential customers were allowed to buy home equipment in the 1970s in one of the first gusts of the competition that has since blown through the industry.
In 1984, when AT&T spun off its collection of operating companies to settle an antitrust suit, leased telephones in homes stayed with AT&T. That was because the local companies were forbidden to manufacture equipment, and leasing seemed to be a logical extension of that activity.
Leasing today continues to decline. But AT&T still manages a healthy business in it. The company will not provide specific numbers, saying only that it has "millions" of customers who lease.
AT&T disputes the contention that customers who lease are predominantly the elderly and people too poor to afford to buy. Surveys show that leasing customers correspond roughly to general income and age patterns for the country as a whole, it said.
The Consumer Federation of America, however, says its research shows the opposite.