[at the moment, at&t's move out of consumer wireline service is more significant that verizon's move into voIP; wholesale prices needed to go up to keep the players in business, and that's what the FCC decision re allowing baby bells to charge verizon and at&t more to carry calls over their lines amounts to. It's the traditional telecom carriers that are feeling the pressure, as their businesses are washed out. IDT may be getting some of the same wholesale tarring at the moment, but IDT has ntop and has wi-fi.]
AT&T move signals shift in market
By Kristen Gerencher, CBS.MarketWatch.com
Last Update: 4:46 PM ET
July 22, 2004
SAN FRANCISCO (CBS.MW) - AT&T's plan to discontinue marketing its long-distance service shows how consumer-telephone services are fast-evolving.
AT&T's move isn't seen significantly affecting long-distance rates due to continued competition from cut-rate wholesalers offering 3-cents a minute plans to growing popularity of Web-routed service called voice over Internet protocol, or VoIP.
"I don't think it's going to be a big mover one way or the other for rates," said John Oldshue, vice president of SaveOnPhone.com, a consumer resource Web site that tracks long distance rates and gets paid for some referrals.
But Consumers Union, publisher of Consumer Reports, viewed AT&T's (T: news, chart, profile) retrenchment as negative in the long term.
"This is the end of an era," said Gene Kimmelman, senior director of public policy. "The old AT&T, renown for quality long distance service and the biggest name trying to come in and compete against local telephone monopolies, has just pulled the plug on serving consumers.
"The elimination of AT&T as an aggressive player in the consumer market means we will see inflating local and long-distance prices over time."
Consumers have been receiving 20 to 30 percent discounts in markets where AT&T has offered local and long-distance service, causing baby Bells such as Verizon (VZ: news, chart, profile), Qwest (Q: news, chart, profile)and SBC to slash their rates, Kimmelman said.
The discounts are likely to disappear because MCI is weak and emerging from bankruptcy, he said, and cable companies' burgeoning efforts are currently too expensive for many people.
AT&T wants to expand into the VoIP. See full story. That market is now occupied largely by upstart firms like Edison-based Vonage, though Verizon launched its long-awaited broadband service VoiceWing Thursday.
Vonage offers flat rate packages ranging from $15 to $30 a month, after a $30 initial fee and $10 shipping and handling for phone attachments, spokeswoman Brooke Schulz said. The firm has 210,000 North American customers.
The $30-a-month unlimited calling plan that operates through a high-speed Internet connection allows free calls in the U.S. and Canada, while the $15 package allows 500 minutes of free calling, with a 3.9 cents per minute charge thereafter.
Such tiered costs for the new technologies turn consumers off, Kimmelman said. "The alternatives are at a much higher price point, which is the last thing you need when you're trying to get lower prices. This (AT&T announcement) is a big blow for consumers."
Competition may have mitigating effect
AT&T's decision not to spend money marketing to new long-distance customers won't cause rates to rise at SBC (SBC: news, chart, profile), spokesman John Britton said.
"SBC is facing tremendous competition in the marketplace, and competition and prices are being driven not just by traditional wireline carriers, but by wireless in particular," Britton said.
Unlike AT&T, which faces union restrictions and pension obligations, many long-distance wholesalers have the ability to be nimble, leading to better deals for consumers, Oldshue said.
"Most discount carriers don't have a monthly fee or minimum charge, and they have 6-second (billing) increments. AT&T does it at 60-second increments," he said. "You start to get an idea why they're having problems in residential long distance. They're between a rock and a hard place. They have huge fixed overhead costs and don't know what to do."
U.S. long-distance customers on average are paying about 5 to 6 cents a minute, Oldshue said. By comparison, ECG Communications charges 2.75 cents per minute, Cognistate is at 3.45 cents and Pioneer charges 3.5 cents a minute, he said.
Said Oldshue: "They just discovered the secret ... 'If we priced things below AT&T and don't put restriction charges on, people eventually find us,' and that's what happened." |
