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Press ReleaseWednesday, September 22, 1999 |
Contact: Mark Cooper (CFA): 301-384-2204 |
CONSUMERS ASK THE FCC TO PUT AN END TO
LONG DISTANCE PRICE DISCRIMINATION
Households making less than 50 minutes a month in interstate long distance calls
have been saddled with a net annual increase of $2 billion
WASHINGTON, D.C. - Consumers Union, the Consumer Federation of America, and the Texas Office of Public Utility Counsel today filed formal comments with the Federal Communications Commission (FCC) urging the FCC to take immediate action to stop price discrimination against residential consumers who make few long distance calls.
While the ads for the new "nickel and cents per minute" plans create the impression rates are dropping for everyone, the reality is that over half of all residential long distance users are paying more than they were just two years ago. This joint filing reveals that over 50 percent of consumers - estimated to be 56 million people -- are paying more for interstate long distance service. For those making less than 50 minutes of long distance calls per month, the net annual increase is estimated to be around $2 billion.
The majority of the burden falls on modest to lower-income households since they are most likely to be low-volume users. These rate increases are hurting those consumers who can least afford paying higher prices. There is a strong correlation between income and long distance usage. Empirical data in the joint filing indicate that over 50 percent of households making no long distance calls in a given month have incomes below $20,000 and as many as 75 percent of households that make no long distance calls in a given month have incomes below $30,000.
The analysis in the filing also shows that households making around 25 minutes of long distance calls faced a 27 percent increase and those making around 50 minutes of calls have paid 18 percent more for interstate long distance service.
"The Commission just does not seem to understand what has happened to low volume consumers in the long distance market; there is no competition, and there is very little prospect of competition for this segment of the market," notes Laurie Pappas, Deputy Public Counsel of the Texas Office of Public Utility Counsel.
In 1997 the FCC reduced the amount of access charges paid by long distance carriers by $1.7 billion and required long distance companies to cut basic long distance rates by around 7%. This reduction has since been erased by the imposition of monthly minimum fees and the pass through of the PICC (pre-subscribed inter-exchange carrier charges) and universal services costs.
"If the Commission had remained vigilant and continued requiring similar cuts to basic rates with each successive regulated reduction in access charges, consumers would have saved around a half a billion in basic rates - a substantial amount for the residential low-volume long distance callers," adds Olivia Wein, a fellow at the Washington DC office at Consumers Union.
"This Administration has devoted much attention and concern over the 'Digital Divide', but the FCC's stewardship of the long distance industry has deepened the economic divide between lower income/low-volume and high-volume users of long distance services," concludes Gene Kimmelman, the co-director of Consumers Union's Washington office.
The Texas Office of Public Utility Counsel is the Texas state consumer agency designated specifically by state law to represent residential and small business consumer interests of the State. The agency advocates those interests before Texas and Federal regulatory agencies as well as the courts.
Consumers Union is a nonprofit membership organization chartered in 1936 under the laws of the State of New York to provide consumers with information, education and counsel about good, services, health, and personal finance; and to initiate and cooperate with individual and group efforts to maintain and enhance the quality of life for consumers. Consumers Union's income is solely derived from the sale of Consumer Reports, its other publications and from noncommercial contributions, grants and fees. In addition to reports on consumers Union's own product testing, Consumer Reports with approximately 4.5 million paid circulation, regularly, carries articles on health, product safety, marketplace economics and legislative, judicial and regulatory actions which affect consumer welfare. Consumers Union's publications carry no advertising and receive no commercial support.
Consumer Federation of America is the nation's largest consumer advocacy group, founded in 1968. Composed of over 250 state and local affiliates representing consumer, senior citizen, low-income, labor, farm, public power, and cooperative organizations, CFA's purpose is to represent consumer interests before the congress and the federal agencies and to assist its state and local members in their activities in their local jurisdictions.
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