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Phone rates to be cut
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May 31, 2000: 5:26 p.m. ET
FCC announces cuts in long-distance access fees, monthly usage charges
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NEW YORK (CNNfn) - Federal regulators and U.S. telephone companies agreed to a package of fee cuts Wednesday, an agreement expected to reduce long-distance phone bills for millions of U.S. consumers.
Under new rules announced by the Federal Communications Commission, local phone companies will reduce the per-minute access fees charged to long-distance carriers. Those savings should total about $3.2 billion - the largest access charge reduction in FCC history, and are expected to be passed on to consumers.
Two long-distance carriers, AT&T (T: Research, Estimates) and Sprint (FON: Research, Estimates), also have agreed to eliminate monthly long-distance usage fees of about $3 per month for low-volume callers, the FCC said. A third long-distance company, MCI parent Worldcom Inc. (WCOM: Research, Estimates), was not part of the negotiations and has not said if it will reduce or eliminate monthly usage fees, the FCC said. The company did not immediately respond to a request for comment from CNNfn.com.
The plan also will consolidate some charges on residential phone bills, resulting in additional savings, the commission said.
"In a nutshell, it's very, very good news," FCC Commissioner William Kennard said at a Washington news conference. "This reduction means that all Americans -- business, residential and particularly low-volume users of the telephone, should see reductions in their phone bills."
The new rates will go into effect July 1. Consumers should begin seeing savings in their phone bills beginning in July or August, according to the Coalition for Affordable Local and Long Distance Service (CALLS), an industry group that worked with the FCC in forging the new plan.
 The FCC decision "paves the way for even lower long-distance rates by significantly reducing carrier access charges and will bring the industry to a new regulatory environment that will close the digital divide and encourage growth of the Internet," AT&T Vice President Joel Lubin said in a statement.
The access rate cuts will reduce a low-volume caller's long-distance bill by about $2.52 per month, or $30.24 annually, the FCC said. The FCC described a light user as a caller who makes about 10 minutes of long-distance calls per month.
For people who make even fewer or no long-distance calls, the elimination of monthly minimums by Sprint and AT&T plus the access rate cut will result in phone bill reductions of about $4.71 a month, or $56.52 each year, the commission said.
But it was unclear whether the FCC order would force long-distance carriers to pass on savings to customers. AT&T's Lubin, speaking during a conference call after the FCC announcement, said, however, that the long-distance company had made a "series of commitments" to regulators to pass on savings.
"We made a series of commitments, and we will honor those commitments," he said.
Government regulators are moving toward deregulation of the phone industry and are encouraging telephone rate cuts driven by heightened competition. Kennard said that previous access fee reductions have led to fierce price wars by long-distance carriers, leading to the lowest long-distance rates ever in the United States.
"Thanks to today's reductions it will be cheaper to do business," Kennard said. "The cost of long-distance calls is already at an all-time low and it is plummeting further."
With the $3.2 billion reduction in long-distance access charges, the overall reduction for such fees now totals about $6.4 billion over the past four years, the FCC said. The biggest previous access charge reduction, totaling $1.7 billion, occurred in 1997.
While local carriers will lose billions in local access fees, they say they hope to recoup the revenues through greater volume and cost cutting.
The FCC plan also calls for the preservation of a $650 million universal service fund to pay for telephone services in rural and other hard-to-serve areas. Under new FCC rules, revenue from the fund - which has traditionally been collected through interstate access charges -- will be available to any carrier serving customers in high-cost areas rather than local phone companies only. 
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