AT&T INCREASES UNIVERSAL SERVICE FEE BECAUSE OF ‘LAG’ PROBLEM
As it warned in ex parte filing Dec. 13, AT&T raised monthly universal service line-item fee for residential customers to 11.5% starting first of year, from 9.9%. AT&T had asked Commission for permission to change formula used to determine contributions to Universal Service Fund (USF) because falling revenue had skewed it. It said problem was that FCC determined how much a company should contribute to USF using revenue from 6 months ago. When company’s revenue is falling, as AT&T’s is, using that contribution factor on lower current revenue results in larger per-customer fee, company said. It had asked for permission to base its contribution factor on projected revenue rather than 6-month- old revenue and had offered to true up contributions if there were shortfall once actual revenue total was available.
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“The continued existence of a 6-month lag between the assessment and recovery of carriers’ universal service contributions, coupled with AT&T’s sharply diminishing interstate and international telecommunications revenues, requires this precipitous increase in its residential line- item USF charge,” AT&T Vp Robert Quinn said in ex parte filing. If AT&T could use revenue estimate that was closer to real thing, it actually could reduce residential USF fee to 9%, he said. AT&T has been lobbying Commission for more than year to eliminate “6-month lag” problem or to establish different way of recovering USF costs.
AT&T’s line-item increase is unrelated to plans by all 3 major long distance companies -- AT&T, Sprint and WorldCom -- to raise some rates for their basic calling plans. Officials of all 3 companies acknowledged that price increases reflected change in way carriers looked at competition. While competition once resulted in price wars, it appeared that companies now were trying to recover their costs more directly to place themselves in better position for competition from other sources such as Bells and wireless providers. Basic plans, used by customers that didn’t subscribe to discount calling plans, tended to be more expensive to administer and generally attracted low-volume customers, they said.
Sprint is trying to “rebalance” rates to make sure high- volume users aren’t subsidizing low-volume users such as those subscribing to basic rate plan, spokeswoman said. Those on basic rate plan are “smallest segment of our consumer market,” she said. Company in Feb. will increase price of Saturday calling for subscribers of basic weekend calling plan and also boost by 10% cost of using basic Dial-1 service, which hasn’t been marketed to consumers in last 2 years, spokeswoman said. “The competitive landscape is changing,” she said. “We want to make sure costs are recovered in a way that’s fair.” For example, customers who sign up or are billed electronically save Sprint money so company offers them more cost savings, she said. Low-volume long distance users have other options such as prepaid calling or dial-around services, she said.
WorldCom’s prices increased Jan. 1 for one of its nonbasic discount calling plans -- monthly fee for subscribing to 7 Cents Anytime plan will rise to $4.95 from $3.95. However, company also instituted what one official called “modest increase in basic rates.” Basic rate for daytime calling, Mon.-Fri. rose to 35 cents per min. from 30 cents and evening and Saturday calling to 30 cents from 25 cents but Sunday calling rates remained at 10 cents. “The reality is that there are other options” for low-volume users, WorldCom spokeswoman said. “Rates reflect demand and volume of long distance traffic,” she said.
AT&T plans to raise basic daytime calling rates 17% starting next month, somewhat along lines of WorldCom’s increase -- 35 cents for daytime, up from 30 cents; evening rates to 29.5 cents from 25 cents; weekend rate to 18.5 cents from 16 cents. AT&T spokesman said that while company had largest share of basic-rate subscribers, about 23 million, they accounted for only 15% of min. of traffic. AT&T is offering new plan that might encourage some of those subscribers to leave basic rates, he said, by offering 10 cents per min. with consumer commitment to spend $5 per month. He said $5 wasn’t fee but rather was minimum usage requirement. In highly competitive long distance market, “you can’t subsidize any customers any more,” AT&T spokesman said. “You don’t have loss leaders.”
Consumer Federation of America Research Dir. Mark Cooper said basic rate increases were regrettable but also expected because FCC Chmn. Powell had taken more relaxed attitude about business operations. Powell has “declared the candy store’s open and these guys have showed him how quickly they can empty the shelves,” Cooper said. “They know the cop is not on the beat.” He said actions by AT&T and others reflected another truism as well: “The only people who raise prices in the middle of a recession are people with monopoly power.”