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Long-Distance Firms Feel Pinched, but They're Still Plenty Profitable

November 09, 2000|ELIZABETH DOUGLASS |

The nation's largest long-distance carriers all have unveiled wrenching reorganizations to help protect their fast-growing Internet, data and broadband units from the downward drag of their traditional consumer long-distance businesses.

Certainly, this much is true: AT&T Corp., Sprint Corp. and WorldCom Inc.'s MCI unit are all suffering through a steady decline in consumer long-distance revenues--a drop accelerated of late by increased competition, lower per-minute prices and the shift of some calling to the Internet and wireless phones.

But don't cry for the market's big three. The long-distance business is very, very profitable, thanks to the millions of customers who are not on the lowest-priced calling plans and who pay ever-larger fees and surcharges for things such as directory assistance, calling card calls and operator-assisted and collect calls.

Consider the profit margins. AT&T, the company most loudly lamenting the decline of its consumer long-distance operation, is booking profit of more than 40% on that business.

The profit margins at MCI and Sprint are not quite so large. Still, most consumers are paying more than they should for long-distance services.

Here's another example. MCI just raised the price of directory assistance requests. Beginning Nov. 1, in-state directory assistance will cost users $1.99 per call in California and 22 other states, up 33% from $1.49. Given the increasing amount of automation in such services, how much of that do you think is profit?

Backup plan for 310 code

State regulators have formally adopted a backup plan for the 310 area code that would split the region, leaving 310 numbers serving West Los Angeles, Santa Monica and nearby communities, and assigning a new area code to phone numbers serving the South Bay, including Avalon, El Segundo, Hawthorne, Redondo, Compton, Gardena, Torrance, Lomita and San Pedro. It will be enacted only once the state's mandated phone number conservation measures are exhausted and there is a verifiable shortage of 310 phone numbers.

Sprint ION expands

Earlier this year, Sprint started offering Los Angeles, Orange County and San Diego residents packaged services that include high-speed Internet access, multiple phone lines and local and long-distance calling.

While Sprint ION is the company's flagship effort to give local phone companies serious competition, the starting price was so steep that its appeal was limited.

Recently, the company added slimmed-down packages. For $149 a month, customers can get fast connections to the Internet using digital subscriber line technology, four phone lines with add-on features, unlimited local calling and 750 minutes of domestic long-distance calling per month. A $119.99 version includes DSL, two phone lines, local calling and 400 long-distance minutes per month. Sprint's lowest-cost ION offering is DSL only for $44.99 a month.


Staff writer Elizabeth Douglass covers telecommunications for The Times.

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