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Dialing for Dollars : Deregulated Pay Phones Spawn Consumer Gripes, Promise New Services

June 18, 1989|BRUCE KEPPEL | Times Staff Writer

Airline pilot Bill Conrey routinely stays at hotels along his flight path, regularly phoning home to Tennessee and charging the calls on his AT&T "Calling Card." He considers such expenses unavoidable in his line of work, and normally is a good judge of what hotel calls cost.

So Conrey was stunned when he spotted a $50 charge on his phone bill for a call from Washington that he had expected to cost about $25. Moreover, the charge wasn't from AT&T, but from a long-distance company he'd never heard of.

When Conrey investigated, he learned that the hotel had changed management, and the new team had cut a deal with another long-distance carrier that offered to pay more to handle the hotel's phone service.

"It's not like a legitimate long-distance company," Conrey complained. "They're just providing a service where they can bill you twice as much as AT&T!"

Conrey is not the only telephone customer outraged by unexpectedly high bills for calls made from hotel rooms or from coin-operated phones. Deregulation of the pay-phone business, a byproduct of the 1984 breakup of American Telephone & Telegraph, has brought forth a legion of new pay-phone entrepreneurs, looser governmental oversight--and a flood of consumer complaints.

The nature of the complaints has changed somewhat over the five years since private investors--not just AT&T and local phone companies--were allowed to buy, install and operate pay phones and to handle phone service in hotels, motels and hospitals. Poor service and simple mechanical breakdowns on private pay phones remain problems, but these are diminishing as technology improves. Meanwhile, regulatory reform has reduced complaints in some parts of the country, including California, about high charges from little-known phone companies on calls from private pay phones at shopping centers, restaurants, bars and other high-traffic sites.

But room-phone service remains exempt from regulation and continues to draw heavy fire from consumers. "They are totally unregulated," said John O'Keefe, president of the California Payphone Assn. and a former Pacific Bell executive. "The burden is really on the consumer."

Not everyone is suffering under pay-phone deregulation.

Innkeepers, restaurateurs and convenience-store operators are benefiting from the commissions they receive for allowing private pay phones to be installed on their premises. New enterprises, as well as vending firms that have added pay phones to their other coin-operated machines, maintain the phones and share the revenue with the property owners.

And the pay-phone business is getting even better these days, thanks to so-called alternative operator services--new companies that provide credit-card and collect-call service for pay-phone owners and long-distance carriers that have no operators of their own. These operator-assisted calls produce hefty revenues that once eluded owners of private pay phones. Previously, their customers could dial an AT&T or local operator for nothing and charge their calls, providing revenue for the operator's company but nothing at all for the phone's owner.

Price Gouging

It's another story, however, for consumers such as Gayla Daugherty, who sells insurance in Oklahoma City. Daugherty said she placed an early-morning call home from a hotel room in Las Vegas and, like Conrey, used her AT&T Calling Card. Only later did she learn that the operator who handled her call was not an AT&T employee, as she had assumed, but worked for an alternative operator service allied with another long-distance carrier. As a result, her call was billed at more than $1 a minute at an hour of the day when AT&T would have charged about half that.

"I was livid," she said.

The lodging industry insists that price gouging on room phones is the exception, not the rule--certainly among those hotels catering to repeat customers, particularly business travelers and affluent vacationers. Michele Kelley, spokeswoman for the American Hotel-Motel Assn., said innkeepers also have a right to recover the cost of their investment in telecommunications equipment, especially in view of demands by guests for such new services as electronic checkout.

Still, unexpectedly high tolls charged by unfamiliar companies are only part of what galled Daugherty and Conrey. How was it possible, they wondered, that another carrier could take their business when they had charged their calls--or thought they had--to AT&T?

The answer goes back once again to the 1984 breakup of the Bell System.

Before AT&T and its local phone companies were forced to go their separate ways, it was the subsidiaries, the so-called Baby Bells, that issued telephone charge cards. Their customers could use these to make local and long-distance calls while away from home. When AT&T and the locals parted company, however, AT&T had to develop its own card and, in doing so, used subscriber data maintained by the Baby Bells.

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