Two PRs Below Re: AT&T To Charge $3 Monthly Minimum
[All, T seems to be walking in the opposite direction of conventional wisdom. I think that we saw this coming when they announced their motivations for going into the prepaid VoIP trials, i.e., that the price sensitive low-volume users who would use it were just burning up cash in the mail room department, "bill processing and customer
service," and that prepaying by that class of user would avoid some of those costs. This is sure to have a form of shock impact on the subscriber churn/abandonment rate . Who'll pick up the slack? Frank C.]
August 17, 1998
NEW YORK - The Associated Press via NewsEdge
Corporation : AT&T Corp. plans to start charging
long-distance customers a minimum of $3 a month, even
if they don't make any long-distance calls.
The minimum bill takes effect Saturday for new AT&T
customers who sign up for discount calling plans, and a
week later for all new customers. Starting Jan. 1, all
current AT&T customers who switch to a discount plan
also pay the minimum.
AT&T says it needs the money to cover the costs of
serving infrequent callers. But consumer groups said the
charge will hurt those customers least able to afford it.
Up to now, long-distance companies limited their
minimum charges; AT&T, MCI and Sprint now charge
some consumers minimum fees for plans that give
discounts for calls during off-peak hours.
''The new ethos is, If you're not making a lot of calls, go
away,'' said Gene Kimmelman, co-director of Consumers
Union, a Washington, D.C.-based consumer group.
AT&T, the nation's largest phone company, contended
the charge was needed to cover the $300 million a year it
loses on customers who spend less than $3 a month.
That applies to 15 to 20 percent of AT&T's 70 million
customers.
AT&T took pains to avoid describing the plan as an
attempt to push away unprofitable customers. It said it
would exempt people from the minimum fee who show
they are low-income consumers; to qualify, customers
must be enrolled in a state telephone assistance
program, call a toll-free AT&T number and provide proof
of eligibility.
''Being fair to all customers is important to us,'' said
George Burnett, vice president in AT&T's consumer
markets division.
But some said the various steps could prove difficult for
some low-income people to figure out. ''This is part of
an on-going trend of loading costs on low-volume
consumers,'' Kimmelman said.
Moreover, AT&T's announcement Friday seemed to
strike a raw nerve. Phone service, like gas and electric
utilities, has been accepted as a way of life open to all
people, no matter how many calls they make.
The AT&T charge is ''an unconscionable abandonment
of residential telephone customers,'' said Samuel Simon,
chairman of the Telecommunications Research and
Action Center, a Washington, D.C.-based consumer
group.
The minimum fee stems from a broader cost-cutting drive
by AT&T chairman C. Michael Armstrong, hired last
year to try to revive lackluster revenues in the
company's consumer and business telecommunications
services. Moreover, AT&T needs to invest billions of
dollars to upgrade the cable-TV lines it's acquiring in a
merger with Tele-Communications Inc.
''AT&T doesn't want to be the service provider for little
old ladies with tennis shoes,'' said Brian Adamik, an
industry analyst with the Yankee Group, a Boston-based
research firm.
''They want to be the company that provides a wide
range of services to profitable customers,'' he said.
AT&T is saddled with a disproportionate share of
low-paying customers, analysts say, a holdover from its
Ma Bell heydey as originator of nearly all U.S. phone
calls. The company estimates 15 percent of new
customers spend less than $3 a month. The costs stem
from such expenses as bill processing and customer
service.
AT&T customers will pay the minimum charge only for
those months when their long distance charges amount
to less than $3. For example, someone spending $2.50 in
a given month would pay 50 cents more to meet the
minimum.
=============================
AT&T to charge $3 minimum for long distance
August 17, 1998
NEW YORK (Reuters) - Reuters [BR] via NewsEdge
Corporation : AT&T said Friday it will begin charging all
new residential customers a monthly minimum of $3 on
long-distance service as of Aug. 15 to cover the $300
million the company loses a year on customers who
spend less than that amount.
The telecommunications giant said in a statement the
charge will not apply to its existing and low-income
customers and to users who spend more than $3 a
month on long-distance calling.
A company spokesman said AT&T does not expect to
make any money from the new charge, which will help
cover a variety of fixed costs associated with offering
long distance.
The spokesman said the company incurs costs such as
maintaining billing records, mailing bills and answering
customer service calls that are not fully covered if
customers spend less than $3 monthly on long distance
service.
The company said current customers are exempt from
the minimum, even if they move, unless they change
their calling plans on or after Jan. 1, 1999.
The company said existing and new low-income
customers will also be exempt if they enroll in a special
company program that establishes their low-income
eligibility.
Customers subject to the minimum will have to pay the
charge only for the months when their long-distance
charges are less than $3, the company said. The
company will only charge customers the difference
between $3 and the amount they spent on long distance,
the company said.
AT&T said customers who choose any residential
calling plan with a monthly fee will also be exempt from
the minimum requirement, even if spend less than $3 on
long distance in a given month.
The company, which has about 70 million residential
customers, said that based on current levels, it expects
only 15 percent of its customers to be affected by the
minimum.
REUTERS@
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