Musings on AT&T and phone rates:
Bowing Out Gracelessly
Scott Woolley, 04.15.02
The long-distance industry's last gasp: If you're going down, take some customers with you
Pity the nation's big three long-distance carriers. Despite shrinking operating costs and increased competition from local and wireless phone companies, AT&T, MCI and Sprint have all but given up trying to find new customers, opting to raise "basic" rates instead.
Why would anyone think to raise prices in such an environment? Simple, says J. Gregory Sidak, of the American Enterprise Institute. The big carriers enjoy a loyal core of customers who pay escalating basic rates and rarely ask for discounts.
The industry's new strategy is to milk those chumps for all they are worth. In February AT&T's new basic daytime rate jumped 17% to 35 cents per minute. Calls costs AT&T less than 2 cents to deliver.
Why do 25 million customers stay true to companies charging them seven times what they'd pay with a competitive rate? Most don't realize they are being taken to the cleaners. According to Sidak, who just coauthored a study correlating phone rates with demographics, the less money and education callers have, the higher their rates tend to be. (Sidak has consulted for local phone companies, rivals to long-distance carriers.) An AT&T spokesman insists that all classes of consumers are equally likely to pay basic rates.
Don't expect higher prices to save the big three, whose long-distance revenues declined 15% last year. To lure investors, MCI--now a WorldCom tracking stock--pays a fat dividend. After its recent plunge, the stock yields an astounding 27%. The message: The market doubts the erstwhile telecom kings can survive much longer.
It's hard to know who to feel sorrier for: the dying phone giants or the customers they're fleecing.
forbes.com
$0.15 a minute in a hotel doesn't sound all that bad in light of the foregoing. |
