The FCC, which seeks favorable publicity the way Mark McGwire lusts for belt-high fastballs, started the week by overhyping savings that customers would get from regulatory changes that cut the charges long-distance carriers like AT &T pay to local phone companies. The FCC presented the potential savings –which amount to maybe 3 percent –as a World Series triumph for consumers. Enter the clowns. The very same day the FCC took victory laps for phone rates’ going down, AT &T quietly raised its basic rates, which cover 30 million of its 60 million customers. Oops. When news of the increase broke, the FCC was caught off base. It blasted AT &T, which countered by letting it be known that it had told the FCC long ago that it was planning to “restructure” its rates. The FCC’s legitimate gripe –that AT &T had promised to send affected customers a letter telling them they might save money by switching calling plans, but raised rates before the letter went out–was lost in the uproar.
AT&T, meanwhile, managed to hit into a double play: getting trashed on Main Street as being too greedy for the same changes that got it trashed on Wall Street for not being greedy enough. You’re supposed to talk rich on the Street and poor at regulatory proceedings, but AT &T mixed up its game plans. The Street trashing that killed AT &T’s stock came on May 2, when it announced that profits and revenues for the year would be lower than forecast. A major factor: rate changes that cut revenue from people who use little or no long distance.
While AT &T, the No. 1 long-distance company, drew boos from the bleachers and suspended its rate increase, No. 2 WorldCom was sitting fat and happy. (As was Consumers Union, which helped guide some reporters to AT &T’s new rate schedule, which was on AT &T’s Web site and in the FCC’s files.) WorldCom’s MCI long-distance company had raised its basic rates in May with nary a peep from the FCC. The FCC’s explanation for not attacking MCI: the company had raised its rates before the aforementioned regulatory changes took effect. And that unlike AT &T, MCI hadn’t promised to cut rates, because it wasn’t part of the group that negotiated the changes. Thus, MCI gets to keep its share of the savings: it gets the gain without the pain.
Ironically, despite the uproar over AT &T’s supposedly gouging small, defenseless long-distance users, the smallest users benefit substantially from the changes, despite possibly ending up with higher per-minute long-distance rates. That’s because as part of the deal with the FCC, AT &T gave up its $3 minimum charge, which affects about 15 million AT &T customers who make less than $3 worth of calls a month. As for AT &T recouping from big customers to get back the revenue: good luck. Most of them are sensitive to price and can easily change carriers. Thus, they’re much harder to gouge than the price-insensitive types that use the nondiscounted rate.
What is astounding here –in addition to the utter foolishness of the FCC and AT &T –is how millions of people are paying much more for long-distance service than they have to. Pay attention to the game, fans. Paying the full basic rate to AT &T or anyone else makes sense only if you make almost no long-distance calls or you have a vacation home that’s vacant most of the time. The typical peak rate for a basic plan is around 30 cents a minute. Paying that is like letting a bunt go through your legs. You can buy prepaid phone cards that are cheaper. Or you can use so-called dial-around services: companies like AT &T’s Lucky Dog that make you dial seven digits before the area code and number. But read the fine print: you’ve got to be careful not to get picked off by hidden fees.
Two final points. First, I relied heavily on background interviews because no one wanted to say anything useful on the record. Second, in an age of celebrity spokespeople, hiring Casey might have helped head off this major-league debacle. He was famous for double-talk –how else do you make a team that loses 120 games lovable? Confronted by all this phone gobbledygook, Casey would have said something that made no sense but would have made you chuckle. That’s a lot better than AT &T and the FCC have done for us lately.
