The Federal Communications Commission late yesterday declined a request from AT&T Corp. to increase the fees it charges its residential long-distance customers by 51 cents a month and launched an investigation of the company's prices.
AT&T said it needed to increase its fees in order to comply with a recent federal court decision in New Orleans as well as action last week by the FCC that increased subsidies for rural telephone carriers. Those two actions effectively increased by about $500 million charges paid by long-distance carriers to a federal fund that subsidizes telephone service for low-income people, schools and libraries, and for rural areas where service is costly, according to FCC sources.
"The burden fell more on interstate carriers, including us," said Jim McGann, an AT&T spokesman. "That's the main factor."
But the FCC Common Carrier Bureau, which regulates phone service, eyed suspiciously a rate increase proposed by AT&T late yesterday. It would have increased from 99 cents to $1.50 a month the fees it applies to residential long-distance customers' bills to recover the charge.
The increase would have gone into effect on Monday, if the bureau had not stepped in. The bureau also announced plans to investigate how AT&T handles the fees it collects for the federal funds.
AT&T's increases were larger than those proposed by the other long-distance carriers in reaction to the recent events: Sprint Corp. upped its fee by 18 percent, and MCI WorldCom Inc. left its unchanged, FCC officials said.
"This really seems out of line in terms of what the other companies are doing," said Lawrence E. Strickling, chief of the Common Carrier Bureau.
The FCC's action drew praise from a leading telephone consumer advocate, Gene Kimmelman, co-director of Consumers Union, who has long accused telephone companies of over-charging their low-volume customers--generally, lower-income people who make fewer calls--effectively subsidizing costs for higher-volume customers, for whom competition is fierce.
"This is an enormous and unfair shift of cost," Kimmelman said. He cited a study released by his office that purports to show that, despite the outbreak of the long-distance rate war, low-volume callers have borne some $2 billion in increased costs in the past two years.
Strickling said low-volume callers were much on the bureau's mind as it denied AT&T's application. While AT&T applies a 6 percent fee to its business customers, it has collected the 99-cent flat fee from residential customers, and that's far more than 6 percent on a small telephone bill.
McGann, the AT&T spokesman, expressed confidence that regulators would reconsider their decision, after company officials have a chance to sit down with the commission.