Long-distance fees scrutinized

WASHINGTON (AP) — The government decided Monday to take another look at federally regulated fees that make up a big portion of long-distance bills, raising the possibility of savings for customers.
Specifically, the Federal Communications Commission will be reviewing the “access” fees that long-distance companies pay to local phone carriers to connect calls. Those fees, which are passed along to long-distance customers, make up about 40 percent of the average $22.50 monthly residential long-distance bill.
The FCC said it will seek public and industry comment on the amount of fees now charged.
The commission didn’t say what, if anything, it intends to do about them. But its action raises the possibility of additional cuts to the fees, which would lower long-distance bills if reductions are passed along to customers.
It is unlikely the commission, under pressure to keep phone bills stable, would raise the fees because that would make bills go up.
The FCC’s biggest recent cut in the payments occurred in May 1997, when it reduced the fees by $1.7 billion to better reflect local phone companies’ costs to connect long-distance calls. The payments total about $23 billion.
Still, consumer groups and long-distance companies have been pushing regulators for billions in additional cuts, saying the current fees are artificially high.
Local phone companies say more government-ordered cuts would either lead to decreased investment in their networks or force them to go to state regulators and seek local rate increases. But some local phone companies want the FCC to give them the flexibility to lower their fees to respond to competitive factors.
“With the help of commenters we will decide who’s right and make any necessary adjustments,” said FCC Chairman Bill Kennard.
Further complicating the matter: Part of the fees — and there’s a dispute over how much — goes to make local phone service affordable to low-income consumers and customers living in rural and other high-cost areas.
Bill McCloskey, spokesman for regional phone company BellSouth, said, “The commission really has a balancing act to do.” If the FCC doesn’t do it right, he said, “then either local rates will go up or service will deteriorate.”
The Consumers Union, the Consumer Federation of America, the National Retail Federation and the International Communications Association, which represents big telecommunications users, have together asked the FCC for more cuts in access fees. But they have not proposed a specific figure.
“This is a clear signal the FCC acknowledges that there is substantial fat in access charges and consumers deserve significant rate reductions,” said Gene Kimmelman, co-director of the Consumers Union’s Washington office.
Meanwhile, MCI and AT&T, which also have been pushing for cuts, welcomed the FCC’s action. Last week, AT&T Chairman Michael Armstrong, in a speech, said they should be cut “at least $10 billion annually.”
Separately, the FCC, in a move to keep phone bills from going up, is delaying by six months an increase in other fees that consumers and businesses now pay. They will now increase next July 1, rather than Jan. 1, as originally scheduled.
Kimmelman said this would save consumers about $500 million. “The FCC’s pricing policies have been a colossal disaster,” he said.