"Shush, it's long-distance!"
For decades, that phrase was part of the fabric of American life. A long-distance call was something special -- and expensive. It could instantly quiet a dinner-table conversation and infuse a household with an aura of anxiety or romance.
Over time, long-distance became cheaper and more routine. And now it appears close to disappearing entirely as its own category, thanks to the popularity of unlimited telephone packages. For millions of people, it no longer makes a difference if they call across the country or across the street.
What began as a slow change has been accelerating in the past year or so, upending an industry long viewed as a steady utility. A combination of deregulation and new technologies has spawned a sometimes bewildering choice of pricing plans for consumers from different players -- traditional phone giants, wireless firms, cable systems and Internet companies. Most of them offer connections for much less than what separate local and long-distance used to cost.
One victim of the changes is AT&T Corp., the dominant phone carrier for a century, which last month made the historic announcement that it was no longer marketing long-distance service to consumers. Meanwhile, local phone companies such as BellSouth Corp. and Verizon Communications Inc., which were spun off from AT&T two decades ago, have been freed to sell long-distance service in many states. Now, Verizon, BellSouth and SBC Communications Inc. each have more long-distance customers than either MCI Inc. or Sprint Corp.
People who never expected to change their phone habits have learned to love the new world. Many have switched their long-distance calling to their cell phones, which often have packages allowing unlimited usage in the evenings and on weekends. Others, like Jeane-Louise Turner, have bought bundled service from land-line companies.
Turner, 61, used to wait until Sunday nights, when rates were cheapest, to call her son in Brooklyn, N.Y. They kept conversations brief, aware that each ticking minute would show on her bill.
"Now I call him several times a week and we talk for 45 minutes to an hour," said Turner, a District resident who subscribes to a local and long-distance package that costs $49.75 a month. "I could talk for five hours on each call and it's still the same price."
Turner says that she also holds marathon conversations with an old friend in Ellicott City: "It's so cheap, I don't care."
Turner gets her service from ACN Inc., one of dozens of companies offering the all-you-can-talk plans that are quickly making per-call charges obsolete.
In 1920, a 10-minute call between Los Angeles and New York cost $26.17 -- the equivalent of almost $250 in 2004 dollars. By 1998, the price of that same call had fallen to 50 cents, said A. Michael Noll, professor at the Annenberg School for Communication at the University at Southern California.
Noll no longer tracks the per-minute cost of a long-distance call. "The problem now is that I can't do my study anymore because with all the flat-rate plans it doesn't make any sense," Noll said.
The biggest impact on the long-distance industry has been the entry of giants such as Verizon and SBC. In many markets, the Baby Bell is now the leading long-distance provider.
"The biggest reason [AT&T is] getting out of the retail market is that [it is] getting clobbered by the regional Bell companies," said Stephan Beckert, an analyst with TeleGeography Inc.
Neither MCI nor Sprint is marketing long-distance to residential customers as a stand-alone service. Unlike AT&T, neither company has called attention to the change, although executives confirmed it.
The regional phone companies have the advantage of being able to include a pitch for their bundle of local and long-distance service in every monthly phone bill. They also are big enough to afford to cut prices to keep residential and business customers and to attract new ones. "They are pricing their services much more aggressively than I expected," said Beckert.
That turned out to be good news for Anthony Loiacono. He uses an unlimited calling plan from Verizon for his media planning firm in Brooklyn.
When he moved into the building four years ago, Verizon offered him little flexibility beyond call-waiting and call-forwarding. But just about the time he began hearing from Verizon's competitors, he also heard from Verizon. It was eager to keep him as a customer even though he had only 10 employees and spent between $1,000 and $2,000 a month on his phone bill -- a pittance compared with Verizon's largest business customers.
The Verizon representative told Loiacono, "We want to bring down your rates." Verizon offered him a flat-fee package that cut his average bill to about $500.
Until last month, AT&T had been fighting a rear-guard action by offering its own bundle of local and long-distance service. Because AT&T has no local network of its own, it had to lease lines from rivals such as Verizon and SBC. But last month, the Federal Communications Commission changed rules that allowed AT&T and other firms to lease local lines at deeply discounted rates. AT&T chief executive David W. Dorman cited that change as the key factor in his decision to stop chasing consumers.
Further roiling the industry, consumers have begun to embrace a technology that allows them to make calls over their high-speed Internet connections instead of phone lines. Such services are driving prices down further, although they are still working out some kinks when it comes to reliability and sound quality. McLean-based Lingo.com gives users unlimited local and long-distance Internet calling for $19.95 a month -- including unlimited calling to Western Europe.
The technology has been waiting in the wings for several years but has begun to take off now that 25 percent of the nation's homes have subscribed to a high-speed Internet service. In the past few months, Verizon, AT&T and other large telephone companies have introduced their own Internet-based offerings.
The technology is already popular with businesses that have been able to cut their long-distance bills by as much as 50 percent. American West Transportation, a furniture shipping company in California, used to pay $30,000 or more as it kept in touch with customers and employees all over the country.
But in December, American West signed a contract with Covad Communications Group Inc. to move all of its telephone traffic onto the Internet. Now American West's monthly long-distance bill is around $20,000, and when the transition is complete -- sometime next month -- costs should drop to about $15,000, said Curt Scott, who is in charge of American West Transportation's phone system. The company's $75,000 investment in new equipment will pay for itself in the first year.
Noll believes that the falling cost of long-distance calls is directly related to new technologies and the growing capacity of the long-distance networks, rather than the forces created by competition.
For instance, in 1946, a 10-minute call between New York and Los Angeles cost $5.50 -- about $50 in 2004 dollars. At the time, AT&T's network could handle only 1,800 simultaneous conversations. Callers had to request a long-distance line from an operator and then wait several hours for the operator to call back with an open circuit. That was true in some places into the 1950s, Noll said.
Network capacity expanded steadily until Congress passed the deregulatory Telecommunications Act of 1996. Eager to cash in on the newly opened market, dozens of companies spent billions of dollars laying new long-distance lines across the country and around the world. The huge oversupply led to the demise of some high-flying firms, including WorldCom Inc. and XO Communications Inc.
The sudden surge in capacity sent wholesale rates plunging. The cost of a link capable of carrying 2,000 simultaneous calls has fallen from $155,000 a month in January 2000 to $6,200 now, according to Beckert of TeleGeography.
Beckert sees no end to the oversupply of long-distance network capacity. Less than 4 percent of the long-distance lines now in the ground are being used, he said.
For the foreseeable future, that means customers such as Turner and Loiacono can feel free to continue talking as long as they want.