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Press Release August 13, 1998 |
Contact: 202/462-6262 |
WASHINGTON – Two of the nation’s leading consumer groups held a news conference Thursday asking federal regulators to engineer a multi-billion dollar rebate on consumers’ long distance bills.
"Federal regulators gave long distance companies a great price break in charges they pay to use local phone equipment, but we can’t find any evidence that those savings are being passed on in an even handed way to all residential consumers," said Gene Kimmelman, co-director of the DC office of Consumers Union. "In addition, carrier line charges and universal service charges now showing up on the bottom of phone bills need to be stamped out. To offset current overcharges, payments already made should be returned to consumers’ pockets."
Consumers Union, publisher of Consumer Reports magazine was joined by Consumer Federation of America in seeking public intervention by the Federal Communications Commission (FCC) to restore fairness to the way long distance companies calculate their phone rates. A simple shift in accounting rules could result in a credit to consumers in the amount of $3 billion ($2.50/month per household) by the end of 1999, the groups say.
Both Kimmelman and Mark Cooper, Research Director of Consumer Federation of America, were pessimistic that the FCC would respond favorably to their plan, and noted that Congress has also missed opportunities to cut the fat out of long distance pricing. But they stressed that a rebate plan was a simple response to a legitimate consumer gripe which would have wide appeal.
"So far, policymakers have failed to do the modest surgery on the law that would stop consumers from hemorrhaging. This is no more than a simple accounting change," said Cooper.
Since January 1998, long distance companies have been required to pay substantially less on a per-minute basis to connect calls to the local phone companies. Yet these so-called access charge rate reductions have not been passed onto the vast majority of consumers who purchase long distance from the basic schedule or more popular calling plans. Long distance companies have long complained that these costs which allow them to access local phone equipment, account for about half of their costs.
This problem of increased fees and unrealized savings is expected to get worse next year when new long-distance phone bill charges allowed by the FCC kick in. Residential per-line fees will increase fifty cents a month for the primary line and $1.00 a month for additional lines beginning in January, 1999.
This year alone, residential access fees will cost consumers $675 million, while universal service fees will cost about $500 million. Long distance companies charge different amounts for these fees:
To illustrate the scope of what a $3 billion rebate would mean for consumers, the consumer groups’ press conference featured a display for everyday consumer goods. Calculations of how many of each of these items could be purchased for $3 billion showed the following:
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Finally, the groups calculated that a $3 billion pay-out could underwrite a trip to Washington D.C. for the entire population of both Iowa and Tennessee and give vacationers $250 million in spending money.
