He may not have long to wait. Last week, giant AT&T announced a new offensive: by paying a flat fee of just $5.95 a month, customers can make long-distance calls round the clock for seven cents per minute. AT&T’s move comes a month after rivals MCI/WorldCom and Sprint began letting customers yak on nights and weekends for just a nickel. Long-distance rates have been falling since the Feds busted up the phone monopoly in 1984, but deep cuts still win business: by last week more than a million customers had signed up for one of the three new plans. For consumers with long memories, the change seems revolutionary. A generation ago many families used egg timers to ration those 50-cents-a-minute calls to Grandma. Today an hour of cross-country calling costs less than a bagel and coffee.
How low can they go? Try zero. It sounds farfetched, but here’s why free calling may happen. When you make a long-distance call, the main costs to the carrier are access charges, the three or four cents companies like AT&T pay local telcos to complete a call. At five cents a minute, there’s hardly any profit margin in this business, but they’re making it up on volume (cheap rates make us talk more). Other profit sources include expensive international, collect and calling-card calls, along with the monthly fees levied under the new discount plans. Industry execs say that despite the price cuts, their overall profits are holding steady; that’s one reason AT&T’s stock finished up for the week. As access fees fall further, telecommunications analyst Jeffrey Kagan says it’s only a matter of time before one of AT&T’s rivals will offer a zero-cents-a-minute plan to win customers, the same way grocery stores use heavily advertised, low-profit loss leaders to woo shoppers. Profits would come from “bundling” the free minutes with more profitable services, like cell phones or Internet access.
Until then, even cheap phone calls carry a downside: figuring out which long-distance plan is the best deal requires sorting through old phone bills and crunching numbers. Experts say customers who make few calls shouldn’t sign up for any plan that requires monthly fees. AT&T’s any-time rates are great for talkative types who like to chat while the sun shines; more disciplined callers who can wait until after 7 p.m. will do better with Sprint or MCI. Be aware that switching companies may not be necessary: AT&T will match MCI’s offer, and Sprint is quietly matching AT&T’s. Nonstop gabbers should consider paying higher fees for lower rates. For $9.95 a month, AT&T offers five cents a minute, any time; Sprint sells weekend minutes for 2.5 cents if you buy 1,000 minutes a month. “If people are spending that much time on the phone, I would suggest they get a life,” says Linda Sherry of Consumer Action, a San Fran-cisco advocacy group. Until then, dial on. Talk has never been so cheap.
