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AT&T sets minimum charge
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August 14, 1998: 11:01 a.m. ET
Fee for new residential long-distance customers will be at least $3 a month
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NEW YORK (CNNfn) - After nearly losing its voice convincing regulators that its recent spate of partnerships and acquisitions will translate into cost savings for customers, AT&T Corp. said Friday it will begin charging new residential customers a minimum $3 a month long-distance usage fee.
The long-distance titan will begin implementing the new minimum Aug. 15.
Existing customers are exempt from the fee unless they change their calling plan after Jan. 1, 1999.
"Being fair to all customers is important to us -- new, current, high-volume customers, occasional callers, and those with low incomes," said AT&T vice president of consumer markets division George Burnett. "We believe today's action, which has customers pay their share of costs, is the right approach for AT&T's consumer business and the company as a whole."
The company estimates roughly 15 percent of its customer base make payments of less than $3 a month.
Customers subject to the fee will pay the charge only during the months when their long distance charges are less than $3. The company stressed they will pay only the difference between $3 and what they spend during the months.
At the same time, customers who choose a residential calling plan that already has a monthly fee are exempt from the minimum requirement.
According to the company, AT&T loses $300 million serving customers who spend less than $3 a month. The new fee is designed to help the company recover that loss.
In June, AT&T announced plans to acquire cable giant Tele-Communications Inc. (TCOMA) for $48 billion in stock and debt. The transaction would give AT&T direct connections to 33 million U.S. homes through TCI's owned and affiliated cable lines, allowing the company to break back into the $100 billion local telephone market.
"We expect some excellent revenue and cost savings from this and they are going to more than pay back quickly that premium," the company said in a statement.
The deal, AT&T said, will bring in about $2 billion in synergies over the next three years in both cost savings and revenue gains, despite an unspecified dilution of profits in the near term.
Investors, however, reacted negatively to the news, fearing the phone company may have underestimated TCI's debt load and its ability to turn the company around.
AT&T is about to close an $11.3 billion deal, unveiled in January, to buy local phone service provider Teleport Communications Group Inc. from TCI and other cable companies.
And last month, AT&T and British Telecommunications announced they are creating a $10 billion joint venture to provide businesses with international telephone service. 
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