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AT&T Plans to Cut Its Long-Distance Phone Rates 4.8%

May 14, 1987|Associated Press

WASHINGTON — American Telephone & Telegraph announced Wednesday that it plans to cut its long-distance rates by about 4.8% on July 1 to reflect a government-ordered increase in another charge paid by phone users.

The cut would bring AT&T's rate cuts to nearly 16% so far this year and to nearly 34% since the Bell system was broken up three years ago.

The latest reduction results from a Federal Communications Commission order that increases the $2 subscriber line, or access, charge by $1.50 over the next two years, beginning July 1.

The subscriber line charge helps pay the cost of the wire that connects a customer's telephone to the phone company's central office. The cost has been subsidized by long-distance rates, so when the subscribers' share is increased by a higher line charge, the long-distance subsidy is reduced.

The initial step of the three-stage $1.50 increase will save AT&T about $590 million in lower costs, and the company is proposing to pass along that savings, dollar for dollar, to customers by reducing long-distance rates.

"Today's action is more good news for millions of callers who use AT&T long-distance service," said Randall L. Tobias, AT&T vice chairman.

The company will file its proposed rate reduction with the FCC on Friday.

Since the subscriber line charge was initiated at $1 in 1985, long-distance rates have dropped about 30%. During that period, local charges have increased but the FCC maintains that the overall phone bill for most customers has dropped. Consumer groups complain that customers who make few or no long-distance calls have not benefited by the FCC's strategy.

Customers who make less than about $9 worth of long-distance calls a month are probably worse off now than at the beginning of 1984, according to a study by Mark Cooper, research director of the Consumer Federation of America.

MCI and US Sprint, AT&T's biggest competitors, said they would respond to AT&T's latest cut once it is approved by the FCC, though they said the size of their reductions was uncertain.

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