This is the latest in what is regrettably becoming a series of columns on how long-distance phone companies rip off consumers, in this case, me. Long-distance companies have multiple "rate plans." Any sensible consumer will insist on the lowest available rate. But many end up inadvertently paying higher charges.
AT&T, MCI and Sprint all offer discounted rate plans that typically charge a flat 10 cents a minute plus a small monthly fee. Some plans also offer five-cent rates on evenings and weekends. By contrast, AT&T's "basic" (undiscounted) rate is 28 cents a minute, and Sprint and MCI are comparable. About one-quarter of AT&T's phone traffic still is billed at the maximum rate, which means tens of millions of AT&T's 70 million customers are paying far more money than they need to.
Some customers may choose the higher rate knowingly, because they make too few calls to justify the $4.95 monthly fee. (With as few as 29 minutes of long distance calls per month, you're better off with the rate plan.) So millions pay excessive long-distance charges out of their own innocence, giving phone companies windfall profits.
Here is one consumer's story (mine): Several months ago, I temporarily shut off one phone line. AT&T used this as a pretext to drop me from the discount plan on both my lines. The result: about $600 in long distance overcharges. My local carrier, Bell Atlantic, which collects long distance fees for AT&T, began sending threatening notices. I phoned AT&T to complain, and I finally got a supervisor who apologized for the excess billing and agreed to restore my discount plan on both lines retroactively. But a month later, exorbitant bills still were piling up. When I phoned AT&T again, I was told that this apology and re-billing decision had been reversed at a higher level.
My next call was a three-way summit conference with a Bell Atlantic supervisor and yet another AT&T supervisor. Bell Atlantic agreed that AT&T's reasoning was preposterous and also agreed to stop dunning me for charges that AT&T had levied improperly. But the AT&T supervisor refused to relent. According to AT&T media spokesman Mark Siegel, "It is not our policy to remove customers from rate plans without their consent." (Maybe this premier communications company could communicate internally?) I wrote a similar column in 1998, when AT&T pulled a similar stunt. I can't believe I am the only consumer in America to have experienced this bait-and-switch routine, let alone twice.
In the new world of phone competition, long-distance companies play pricing games because they are all selling essentially the same product -- a dial tone. If they didn't resort to complex rate plans and selective gouging forays, consumers easily could compare costs, drive down rates, and profits would tumble. Sprint, for example, has about a dozen rate plans, each with near-incomprehensible price variations. Long distance companies offer so many "choices" not to customize service to the consumer but as creative obfuscation. How can consumers protect themselves?
First, demand the lowest available rate. Second, carefully review bills every month. Third, scream bloody murder when your long-distance carrier plays cute with your rates. Finally, shop around among competing companies every few months -- and fire your carrier when you get fleeced. Of course, all of this eats up time, and the phone companies count on harried consumers just giving up. Alas, despite the new "competition," the discounted rate plans of the big three long-distance companies are nearly identical. (If you have high call volume and are really pushy, Sprint will give you a slightly cheaper unpublished rate, but you need the temperament and persistence of a camel-trader.)
Given that nobody has infinite time for this largely futile comparison shopping, haggling, monitoring and complaining, there is a pretty good case that we were better off under regulation. There was one simple monthly bill, and rates were government-guaranteed. Long-distance calls are certainly cheaper today, but that's thanks to technology, not competition. In fact, technical innovations pushed down long-distance charges at a faster rate during the era of the regulated Bell monopoly. But that's another story.
In the meantime, I await a callback from AT&T's super-supervisor -- before I switch, without much enthusiasm, to Sprint.
Robert Kuttner is co-editor of the American Prospect.