Tuesday August 10,,,Long-Distance Price War Heats Up
NEW YORK (AP) -- The nickel-a-minute rates on nighttime calls introduced by MCI WorldCom and Sprint will probably mean better deals for all long-distance consumers.
But that doesn't mean that market leader AT&T (NYSE:T - news) and other long-distance companies will match the rate cuts to hold onto customers and attract new ones.
Instead, the latest price battle in long distance may hasten the shift toward selling consumers a package of phone, television and Internet services.
AT&T, stressing its plan to use its new cable TV empire to bundle all those services, said Monday it has no immediate plans to cut its nighttime calling rates.
And Qwest, the fourth largest long-distance company after No. 2 MCI WorldCom and No. 3 Sprint, unveiled a new package today with 250 minutes of calls and unlimited Internet access for $24.95.
Sprint started the price war last month with a ''Nickel Nights'' plan charging 5 cents per minute on long-distance calls between 7 p.m. and midnight. Calls at other times are 10 cents a minute and there's a monthly fee of $5.95.
MCI WorldCom responded on Monday by extending its popular ''5 Cent Sundays'' plan to the entire weekend and weekday calls made between 7 p.m. and 7 a.m. Daytime calling rates on weekdays are 25 cents per minute for customers paying a monthly fee of $1.95, or 10 cents per minute with a monthly fee of $4.95.
AT&T's most prominent calling plans charge 15 cents a minute around the clock with no monthly fee or 10 cents a minute with a $4.95 fee.
For MCI, which has focused on high-paying business customers, the new calling plan was a sign that the nation's second-biggest long distance company values its share of the consumer market, which is seen slipping to 11 percent by year end.
''The consumer market is nothing to sneeze at,'' said Rex G. Mitchell, an industry analyst for Banc of America Securities in San Francisco, estimating that consumer long-distance revenues will total $41 billion in 1999.
AT&T's share of the market, which began the year at more than 60 percent, has been steadily declining and is expected to total just 56 percent by the end of 1999. Sprint's is expected to be 6 percent, Mitchell said.
Steep price cuts may not hurt long-distance companies if customers make more calls and talk longer.
When MCI introduced ''5 Cents Sundays'' in 1997, the average customer spent twice as much time on the phone on Sunday, said John Donoghue, MCI WorldCom's senior vice president of consumer marketing.
Long-distance companies are less worried about floods of new callers clogging their lines because phone calls put little strain on the huge fiber-optic networks now being built to carry floods of Internet traffic.
The expense of carrying phone calls on such networks is so small that companies may choose to use long distance less as a revenue producer and more as a marketing come-on for bundles of phone, TV and Internet services.
Long-distance companies are also benefiting from a government-mandated reduction in the fees they pay to local Baby Bell monopolies for connecting long-distance calls to the nation's homes.
Another concern that may be prompting the long-distance rate cuts is the prospect of new competition from the Baby Bells.
In order to get government permission to sell long-distance service, the Baby Bells still need to prove that their markets are open to competition for local service. Some industry analysts expect this will happen in certain states within a year.
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