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MCI Seeks OK to Offer Lower Rates

September 28, 1996|JUBE SHIVER Jr. | TIMES STAFF WRITER

WASHINGTON — MCI Communications Corp. filed a request this week to undercut a 15-cents-a-minute long-distance rate unveiled Tuesday by rival AT&T Corp., but at the same time the No. 2 long-distance carrier announced higher fees on calling card services.

Analysts said the moves are in keeping with recent efforts by major long-distance carriers to boost fees on ancillary services even as they promote a variety of discount calling plans. And a major price war is nowhere in sight.

"Margins are already thin, and now would be a particularly inappropriate time for a price war with the [imminent] entry of the regional Bell telephone companies into the long-distance business," said Boyd Peterson, a telecommunications analyst at the Yankee Group in Cambridge, Mass.

While smaller carriers have been using aggressive pricing to gain market share, the big three long-distance firms have quietly been boosting fees on a variety of key services. For instance, rates on long-distance directory assistance have skyrocketed to 95 cents on MCI, AT&T and Sprint, compared with the 64 cents charged by LDDS Worldcomm, the nation's fourth-largest long-distance carrier, according to Telecommunications Research and Action Center, a Washington-based consumer group.

Long-distance carriers had in recent years enjoyed a respite from a decade-long price war that had driven long-distance rates down by nearly 60%. The three major carriers turned to telemarketing and plying customers with rebate checks to switch long-distance service. But then Sprint, the No. 3 long-distance company, unveiled its "dime-a-minute" plan in January 1995.

Soon, other, smaller long-distance companies, some of which had offered low-cost plans for years, stepped up their marketing campaigns and slashed prices.

AT&T offered its 15-cents-a-minute flat-rate plan beginning this week. MCI has filed for authorization to offer a 14.5-cents-a-minute plan. Executives close to MCI said it is unlikely the company would actually offer that rate unless challenged by AT&T. "Part of this is a marketing ploy by MCI--a dare, to see what (AT&T Executive Vice President) Joe Nacchio is going to do," Peterson said.

Certainly Wall Street is in no mood for a price war. MCI shares fell 50 cents to $25.125 on Friday; AT&T dropped 62.5 cents to $51.375, and Sprint fell 75 cents to $38.875.

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