Almost everyone has seen the ads touting ways to "dial around" the long-distance telephone companies and save dollars. As the most ubiquitous spot beckons, you could dial 10-10-220, connect with a friend far away for up to 20 minutes and pay only 99 cents.
Divide 20 into 99 and it seems like a good deal: less than 5 cents a minute. But the details, as more than one consumer has discovered, are more complicated. Hang up after one or two minutes and you still pay 99 cents. Not a good deal. And you're not dialing around a major company--the service is really from MCI WorldCom Inc.
Federal regulators say dial-around ads are rife with misleading claims and shy of needed qualifiers. So today, the Federal Communications Commission and the Federal Trade Commission will jointly convene a public forum in Washington on the advertising that lures long-distance customers.
Dial-around services have grown rapidly, accounting nationally for nearly $3 billion worth of calls a year. The regulators hope strong words from the commissions plus testimony from regulators and consumer advocates will prompt companies to make their ads more explicit. If not, the carriers could face new federal rules or enforcement action.
"If we can get the companies to be more responsible, sort of trim their sails on some of the more aggressive claims, that's the quickest way to achieve results," said FTC Chairman Robert Pitofsky in an interview. "My hope is that by putting a spotlight on it, we can immediately tone down some of the advertisements. And if we don't succeed, we'll proceed with law enforcement."
FCC Chairman William E. Kennard said the commission has "some ongoing investigations right now," though he declined to name companies. "This is not just an education campaign."
The companies behind the services say they are being unfairly blamed for a problem that doesn't exist. The very popularity of the services is proof that they are good value, the companies say.
"More than 85 percent of our customers on a monthly basis are repeat customers," said MCI WorldCom spokesman Brad Burns. "You have to dial a seven-digit code to use the product. If you're a repeat customer you obviously have to be satisfied with it."
But federal authorities say they have been inundated with complaints from dial-around callers who say they did not fully grasp the costs until the bill arrived. The FCC has fielded nearly 3,000 complaints since January of last year.
Charles S. Harris, a retiree in Ooltewah, Tenn., began using 10-10-220 in January to call his daughter in Atlanta and his son in Jacksonville, Fla. He figured he was beating the 8.9 cents charged by his regular carrier. More than two dozen times, he left a short message on an answering machine. When the bill arrived, each of those calls cost him 99 cents.
"I said, 'Oh crap,' or stronger words to the effect," Harris recalled. "You basically feel like you've been taken advantage of."
His complaint found a sympathetic ear at the FCC. "That has galled me," Kennard said of the 10-10-220 ad. "Nobody should be paying 50 cents a minute in this marketplace."
Though the dial-around world includes many obscure companies, it remains dominated by MCI WorldCom and, to a lesser extent, AT&T, which operates 10-10-345. For those companies, the major motive is reaping profits from the 63 percent of consumers who don't belong to the discount call plans offered by carriers as part of their regular service. These people generally make too few long-distance calls to cover the costs of billing them as regular customers.
"Our ads are looking for people who are looking for an unbranded product," said Howard McNally, president of AT&T Transaction Services. "Our ads are clear and concise."
Dial-around callers are billed on their local phone bills, meaning the long-distance carriers don't get involved in that paperwork. Maintaining a billing relationship--that is, paying billing staff, printing and sending invoices, hiring collection services and marketing--can cost a company $3 to $5 per month, according to Fred Voit, a telecommunications analyst at Yankee Group in Boston.
"You really don't want them as customers," Voit said. "But if you can get them just when they're making phone calls, life is good."
Linda F. Golodner, president of the National Consumers League, said many advertisements sound better than they are, loudly offering low per-minute charges while hiding the fact that connection charges apply or a minimum number of calls may be required.
"The print that explains the details is often so small that people can't pick up what the ad is about," said Jeffrey Kramer, legislative representative for AARP.
THE GROWING DIAL-AROUND MARKET
Since 1993, "dial-around" services have grown 30-fold, now accounting nationally for nearly $3 billion worth of calls . . .
1993: $96 million
Today: Nearly $3 billion
. . . but they still are just a fraction of the overall long-distance market.
Long-distance market: $40 billion
SOURCE: Federal Communications Commission