56 Million U.S. Households Urged to Declare Independence
From $2 Billion Phone 'Rip-Off'
PR Newswire - July 03, 1997 12:14
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WASHINGTON, July 3 /PRNewswire/ -- Nearly 56 million American households
-- three out of five homes in the U.S. -- pay $2 billion a year too much as a
result of relying on sky-high "basic" rates for long-distance calls, according
to a major new study released today by the nonprofit United Homeowners
Association (UHA), which presented specific data for all 50 states and the top
25 metropolitan areas in the U.S.
Concerned that most media and consumer group attention focuses on the less
than one-third of U.S. households who move between long-distance providers,
UHA commissioned University of Georgia economics professor Dwight R. Lee to
determine exactly how many U.S. households are still paying basic rates for
long-distance and how much they could save by using a discount plan. Dr. Lee
found that savings for typical long-distance users now paying basic rates
would range from $30-$75 per year.
United Homeowners Association President Jordan Clark said: "What our
study shows in terms that any consumer can understand is that switching from
basic rates to a typical discount savings arrangement would mean three months
of 'free' long-distance service, based on what basic-rate households now pay.
The truth is that if you are making even limited long-distance calls and
paying basic rates, you are ripping off yourself. The fact that it is legal
for AT&T and others to charge so much more for exactly the same service
available elsewhere for dramatically less does not make this any less of a
problem for consumers. That's why we are encouraging basic-rate payers to
take advantage of this July 4th to declare independence from basic rates for
long-distance telephone calls."
KEY STUDY FINDINGS
The UHA study, CHARGING FOR RESIDENTIAL LONG-DISTANCE SERVICE: WHO IS
PAYING TOO MUCH?, was conducted by Dr. Dwight R. Lee, a University of Georgia
economics and private enterprise professor. Approximately $70 billion a year
is spent on long-distance calls in the United States, with the breakdown
between commercial and residential expenditures being about $40 billion and
$30 billion respectively.
In the study, Dr. Lee concludes: "Both high- and low-volume American
households, about 56 million of them, could be realizing total savings of
nearly $2 billion a year by taking the easy step away from basic rates for
their long-distance charges. These customers are allowing certain long-
distance companies (primarily AT&T) to profit handsomely by charging them
higher rates than others are being charged for the same service."
The major conclusions of the UHA-commissioned study are as follows:
Who pays basic rates? The latest data indicate that 60.1 percent of
American households continue to pay basic rates for long distance, compared to
38.2 percent who take advantage of various long-distance savings arrangements,
including traditional subscription plans and so-called "dial-around" services,
which do not require switching and instead rely on consumers to punch in a
five-digit code (e.g., Dial & Save's 10457) before the "1" and the seven-digit
number when placing a long-distance call. Given that there are a total of
98 million households in the U.S. with telephones and that 5 percent of those
households do not make long-distance calls, there are almost 56 million basic-
rate payers in America.
Who are least likely to pay basic rates? Those who spend the most on
long-distance are most likely to take advantage of available discount
arrangements. Approximately 30 percent of U.S. households spend $25 or more
each month on long-distance calls and account for about $20 billion of the
$30 billion in annual residential expenditures. About 80 percent of these
high-volume callers are taking part in a discount arrangement of some type.
Who are most likely to pay basic rates? Lower-volume callers.
Approximately 70 percent of households making long-distance calls, but
spending less than $25 per month (which represents over 60 percent of all
Americans), fail to take advantage of any discount arrangement.
How much could basic-rate payers save? Given that discount arrangements
exist that allow callers to receive savings of 25 percent from the first call
by simply dialing a few extra numbers, with no need to switch companies or pay
a monthly charge, real savings are available even to low-volume callers.
Based on 1) the pattern of long-distance spending by American households and
2) a conservative estimate of 25 percent potential savings off basic rates,
Dr. Lee estimates that current basic-rate payers could save almost $2 billion
a year by switching, or the equivalent, based on current rates, of three
months of "free" long-distance per year. For a low-volume household, the
estimated annual savings would be $30. High-volume households still paying
basic rates would save $75 a year by taking advantage of a typical discount
arrangement.
Which company profits most from basic-rate customers? An estimated two-
thirds of AT&T's long-distance revenues come from residential customers, who
are predominantly lower-volume callers (those spending $25 or less each month)
and pay the basic rates. By contrast, the second largest long-distance
company, MCI, derives only 40 percent of its revenues from residential
customers, with four out of five getting discounted rates. AT&T benefits
enormously by being able to charge different rates for the same service
because of a large customer base (about 40 million households) that continues
to pay more via basic rates.
On June 30, AT&T announced that it is moving ahead to lower its basic
rates 5 percent during daytime and evening hours and 15 percent during night
and weekend hours. The UHA study took these widely anticipated cuts into
account by ignoring AT&T's substantial basic-rate increases during the last
18 months. (For example, the steep 5.9 percent basic-rate hike imposed by
AT&T on the eve of Thanksgiving 1996 more than wipes out its June 30th "cut"
of 5 percent for daytime/evening hour calls, which is when most consumers
place long-distance calls.)
HELP FOR CONSUMERS
UHA released its own free "tip sheet" giving basic-rate customers samples
of representative savings plans that may make sense based on high- and low-
volume calling patterns. The consumers tips are available to the public by
mail, on the Web (www.uha.org), and on America Online (keyword UHA). The
feisty UHA has a long history of battling AT&T over practices that take
advantage of consumer ignorance. In mid-1995, UHA took the lead in attacking
the phone leasing practices of AT&T and others that result in steep charges to
millions of older consumers in the United States. In December 1996, UHA
joined the United Seniors Health Cooperative to urge the Federal
Communications Commission (FCC) to protect consumers by restoring AT&T's
dominant carrier status.
UHA emphasized that it is in no way endorsing any particular long-distance
savings arrangement. Examples cited for the benefit of consumers are meant to
be illustrative. The Association emphasized the consumers should do their own
research before making a final decision about any long-distance service.
-- UHA TIP SHEET --
DECLARE INDEPENDENCE FROM
LONG-DISTANCE "RIP-OFF" RATES!
Today, there are about 1,000 savings alternatives to basic rates for long
distance telephone service, according to a new study from the United
Homeowners Association (UHA). "But this is not as formidable a decision as it
may at first appear, since consumers can save money on almost any discount
arrangement," said UHA President Jordan Clark. "While some deals are better
than others, almost any deal is better than basic rates. Given that many
people may fail to dump basic rates because their minds are boggled by all the
alternatives, our advice is simple: Get off basic first and then, once you've
made that crucial first step, keep exploring your options and, if necessary,
switch again. But the first step is to declare independence from basic!"
What are some alternatives that basic-rate payers may wish to explore?
Without offering its endorsement, UHA points to the following as typical of
some of the long-distance discount arrangements available to consumers:
FOR LOW-VOLUME CALLERS (under $25 a month in long-distance)
Dial & Save (No subscription call needed)
No switching required/no monthly fees. To start using immediately for a
25 percent discount off AT&T basic rates, dial 10457 + 1 + long-distance
number. No monthly fee or minimum.
Sprint Sense 1-800-877-4646
10 cents a minute 7 p.m.-7 a.m. weekdays and all day on weekends. 25
cents a minute 7 a.m.-7 p.m. on weekdays. No monthly fee or minimum.
LCI Flat Rate Plan 1-800-860-2255
15 cents a minute 24 hours a day seven days a week. No monthly fee or
minimum.
FOR HIGH-VOLUME CALLERS (over $25 a month in long-distance)
MCI One Rate 1-800-444-3333
12 cents a minute rate for $25 or more a month in billing. Cash-back
bonus of 20 percent after one year.
Dimeline (No subscription call needed)
No switching required/$5.00 monthly "activation fee." Minimum three-
minute billing increment. To get 10 cent a minute rate, dial 10811 (in most
states and D.C.) + 1 + long-distance number. Charges show up on local phone
bill.
Long Distance Wholesale Club (No subscription call needed)
No switching required/$4.95 monthly fee. To get 9.5 cent per minute rate
on all state-to-state calls, dial 10297 + 1 + long-distance number.
CONSUMERS MAY WRITE FOR THE FREE TIP SHEET AT:
"LONG DISTANCE"
UNITED HOMEOWNERS ASSOCIATION
1511 K ST. N.W.
THIRD FLOOR
WASHINGTON, DC 20005
FOR A CHART SHOWING ESTIMATED NUMBER OF BASIC-RATE PAYERS
AND POTENTIAL SAVINGS BY STATE AND
TOP 25 METRO AREAS, CALL 703-276-1116
SOURCE United Homeowners Association
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