DESPITE promises, phone savings difficult to find

Tuesday, July 17th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ The government and telephone industry promised Americans lower rates and more choices last year. Yet this month, callers will pay 65 cents more on their local bills. And if phone users want to offset the increases, they will have to do some homework to find new savings.

The Federal Communications Commission signed off last May on a five-year program crafted by major local and long-distance players with a promise of customer benefits. With the plan now in its second year, the savings for consumers are getting harder to pinpoint.

As of July, local phone companies are boosting one of the fees on consumer bills _ the subscriber line charge _ from $4.35 to $5.00 a month. At the same time, long-distance companies that had pledged to trim their rates are leaving it up to residential customers to figure out how to save money.

Now, both agency and company officials say most of the gains for residential callers came at the outset of the initiative.

In its second year, local companies must take the money from the higher customer fee _ about $1 billion industrywide _ and use it to reduce the amount they charge long-distance carriers to complete calls, mostly calls to businesses with multiple phone lines.

The higher fee means savings for long-distance carriers and some of those companies said last year that this would trickle back to customers. In a letter to the FCC, AT&T said ``it will, over the life of the plan, flow those savings through to residential and business customers.''

At the start of this month, however, when the local charge officially went up, none of the three major long-distance carriers announced reductions in their residential calling plans. In fact, AT&T, the nation's largest provider, announced that it was boosting rates for half of its 60 million residential customers by 11 percent.

``Long-distance companies are padding their pockets and consumers are getting stuck with higher bills,'' said John Emra of SBC Communications, the nation's second largest local phone business, which helped craft the plan along with other major local carriers. These included Bell Atlantic and GTE, which subsequently merged to become Verizon, and BellSouth, as well as long-distance carriers AT&T and Sprint.

But long-distance companies, battered by price wars and new competition from mobile phones with national calling plans, argue that they are bringing the benefits to consumers by offering innovative calling plans and prepaid cards that could reduce monthly rates for different types of users.

The long-distance industry is watching its revenue fall and ``part of this is certainly due to consumers taking advantage of better pricing plans,'' said AT&T spokesman Jim McGann.

Verizon, the local phone company that is now one of the top long-distance providers, said it shaved the costs on its most popular plans earlier this year in anticipation of the drop. Sprint spokesman James Fisher said his company also factored in the July savings when it came up with plans earlier this year.

But drawing a direct correlation between the plans and what long-distance carriers save is difficult, he said.

``There isn't an immediate action-reaction to this particular change that anybody could describe,'' Fisher said.

No. 2 carrier WorldCom, which did not endorse the plan but still gets the savings, said it was evaluating the impact of the latest round of cuts.

Consumer advocate Gene Kimmelman took aim at the long-distance companies' defense, saying phone users shouldn't have to hunt for a calling plan that saves them money when they are paying 65 cents more each month.

``It's just logical that if all consumers are paying more in a competitive market, the companies would pass along these savings to the most broadly used consumer long-distance plans and they're not,'' he said. ``The companies presented this as though there would be ongoing consumer benefits over five years.''

FCC and company officials say that consumers will continue to benefit from the initial savings announced at the start of the plan.

In the first year, regulators slashed by $3.2 billion the amount long-distance businesses paid local companies. Consumers saw immediate savings: AT&T and others got rid of the $3 minimum monthly fee and another charge _ averaging about $1.50 _ was removed permanently from local phone bills.

But unless consumers do their homework and select a new long-distance plan, they may not see new reductions to the bottom line of their bills, say consumer groups.

The commission adopted the industry-crafted overhaul last year in an effort to make the telecommunications market more competitive and make the subsidies people pay more explicit.