The
By Chris
O'Brien
A handful of telephone companies have stopped bickering
long enough to propose a sweeping change in consumers' phone bills they say
will boost competition while guaranteeing affordable service for rural and
low-income customers.
The companies said their plan, which would be phased in
over five years, would cut long-distance rates by $5.6 billion annually while
increasing local telephone charges by that same amount.
While the companies hailed the proposal as a potential
boon for competition, a major consumer group said such a change would boost
phone bills for consumers who don't make many long-distance calls, saddling
them with a greater responsibility for subsidizing rural and low-income
residents.
``The only one who comes out behind in this is the
consumer,'' said Gene Kimmelman, co-director of the
The proposal was made to the Federal Communications
Commission last week by an unusual consortium of long-distance telephone
companies -- AT&T and Sprint -- and local carriers -- Bell Atlantic,
BellSouth, GTE Corp. and SBC Communications Inc., which owns Pacific Bell. In
recent years, local and long-distance companies have bickered about a host of
issues related to whether the other side had fulfilled its obligations to open
markets for competition.
The groups set aside that rancorous debate to deal with
a thorny issue known as ``universal service,'' a program designed to make phone
service available and affordable everywhere.
The problem is that in sparsely populated areas,
providing phone service is expensive and unprofitable.
To subsidize that service, local carriers currently
charge residential customers a flat $3.50 fee each month to help pay for the
subsidy. The local phone companies also bill long-distance carriers a separate
``access charge'' for connecting calls. The long-distance companies, in turn,
pass that along to consumers.
Those access charges are usually collected on a per-call
basis and for the average customer add $1.50 to each month's bill. The FCC has
raised the amount it wants collected for the universal service fund, so the fee
is going up next month by about 50 cents for the average telephone customer.
This represents a major chunk of the $3.6 billion
collected last year from communications companies for the universal service
program. Of that amount, $1.7 billion was for high-cost areas, $494 million for
low-income customers, and $1.4 billion for a subsidy to pay for Internet
service for schools, libraries and rural hospitals.
As competition for telephone services drives down
prices, consumer advocates have worried that the money for subsidizing
universal service would dry up. The telephone companies, calling themselves the
Coalition for Affordable Local and Long-Distance Service, have proposed solving
this by reducing the long-distance access charge by more than half.
That amount would instead be added to the $3.50
consumers already pay on their local bills, creating a $5.50 flat monthly fee.
Over the next five years, the group estimates that fee would climb to $6.15.
The coalition said in the highly competitive world of
long-distance service, companies would quickly pass their savings on to
consumers.
``From a consumer perspective, that means you're going
to get lower long-distance bills,'' said John Nakahata,
a former FCC chief of staff who helped broker the deal. ``And there are
protections for low-income consumers.''
Local phone companies also like it because they believe
it will simplify billing and make it clear what customers are being charged and
why. They hope that will help them clear another hurdle on the road to creating
competition for local phone service. Local and long-distance carriers argue
that the current system of subsidizing some local service is too complex to
encourage competition.
``We don't think anybody's phone bills are necessarily
going to go up,'' said David Schlosser, an SBC spokesman. ``We think we're
bringing a lot of simplicity to consumers. And you'll create competition that
should drive prices even lower.''
Kimmelman, of the Consumers Union, doesn't buy
it. He said his group plans to lobby against the proposal when it comes before
the FCC because there's no guarantee that the long-distance savings will be
passed along to consumers.
And even if those rates are lowered, only customers who
make large volumes of long-distance calls will see any noticeable savings.
Folks who make little or no long distance calls will just see their local bill
rise.
The proposal is in the hands of FCC officials who must
decide what to do next. The coalition hopes the FCC will approve it before the
end of the year.
In an interview with Bloomberg News, FCC Chairman
William Kennard said he would seek comments from consumer groups.
``It can't just be an industry proposal,'' he said. ``We
have to have the participation of consumer advocates in the mix as well.''