On Sept. 1, AT&T Inc. will cut the number of free 411 calls offered to customers each month to one from three. At first glance, that seems like a fairly small thing.
But it reflects a bigger trend -- a systematic stripping away of phone services that once were provided free or for a nominal charge, and a steady increasing of fees for other services.
A couple of years ago, state regulators granted phone companies the freedom to price services pretty much as they pleased. The rationale officials gave at the time was that a competitive marketplace would keep prices low for consumers.
In fact, the California Public Utilities Commission's Division of Ratepayer Advocates found in a report last month that "significant rate increases" have occurred since then and recommended a return to price controls until more research could be done.
From 1984 to 1998, Pacific Bell (which would become SBC, which would become AT&T) allowed five free 411 calls per month. All additional calls were 25 cents each.
In 1998, the monthly allowance of free calls was reduced to three, and the charge for each one after that went to 50 cents.
"The price increase is necessary to cover the cost of doing business," a company spokesman said at the time. "Directory assistance has historically been priced below cost."
Not anymore. AT&T now charges $1.50 to look up local numbers and $1.99 for all others.
"The marketplace changes and you have to change your offerings," said John Britton, an AT&T spokesman.
He declined to elaborate on how the changing marketplace has forced AT&T to further reduce the number of free 411 calls customers get.
Perhaps he was referring to the fact that Verizon Communications Inc. used to offer four free 411 calls monthly, but in April it cut that to zero. Verizon charges 95 cents to look up local numbers and $1.50 for all others.
Whatever else, the changing marketplace has been lucrative for Verizon and AT&T.
Since price controls were lifted in 2006, the Division of Ratepayer Advocates found, AT&T has increased the average price of three-minute daytime local calls by 34%, evening calls by 92% and nighttime and weekend calls by 233%.
AT&T's fee for call waiting is now 86% more expensive, and the charge not to have your name printed in the phone book has gone up 346%, the agency found.
It said similar rate hikes were imposed by Verizon and smaller rivals Frontier Communications and SureWest Communications.
The consumer price index went up just 8.1% over the same two-year period, according to the Department of Labor.
"There is no indication of any change in the near future regarding the current state of competition," the agency's report concluded. "Market forces have not yet met the challenge of controlling price increases."
In a recent briefing for investors, AT&T boasted that its average monthly revenue per primary household line "ramped steadily over the past several quarters," to $60.16 in the first quarter of 2008 from $57.08 a year earlier.
The company pocketed $11.95 billion in profit last year, up more than 62% from a year before.
AT&T's Britton said consumers who don't want to pay to call 411 can turn to a variety of free services.
The best of the bunch is offered by Google ( GOOG-411), which, unlike most such services, doesn't require callers to listen to an ad before getting the desired number.
AT&T's version, 1-800-YellowPages ( 935-5697), includes at least two revenue streams for the company.
When I called for the number of a Westside pizza place, first a recorded voice told me that the service was sponsored by a loan company.
Then, before I got the number for the pizzeria, an ad played for another restaurant and I was given the option of getting that number instead.
Sure, I saved $1.99. But I had to sit through two plugs for companies I had no interest in.
"It's a new, emerging business model," Britton said. "We're testing it to see if it meets the needs of consumers and advertisers."
At least one of those groups is happy.
A quiet rate hike
Speaking of AT&T, the company raised the rates of 2.5 million Californians in April without providing required notification and will now have to credit customers for the higher charges.
This news was contained in a memo sent recently to Public Utilities Commission staffers, a copy of which made its way into my hands.
It says "human error" was to blame for the failure to give customers 30 days' notice, as required by state regulations.
Gordon Diamond, an AT&T spokesman, confirmed the contents of the memo. He said regulators had approved a 25-cent increase to the previous $10.69 flat rate for the company's 8 million residential lines statewide.
But he was unable to explain why millions of customers were left in the dark about the rate hike.
Households that didn't get notices will receive refunds in their November or December bills.
In most cases, the refund will be less than $2, not even enough for latte at Starbucks. But for AT&T, that's a more-than-$4-million mistake.
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