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AT&T, MCI boost long-distance fees

Another year, another rate increase. Customers of the long-distance giants can expect higher phone bills, and Sprint plans to join the fray Feb. 1.

Long-distance giants AT&T and MCI rang in the new year with higher phone bills for customers, and Sprint plans to do the same.

AT&T raised its universal services fund (USF) fee from 9.9 percent of the customer's monthly long-distance charges to 11.5 percent, a fee increase of 16 percent, according to a company representative. The fund subsidizes Internet access in schools, libraries and underserved populations.

"Part of the reason why we are charging more than the FCC (Federal Communications Commission) requires is to make up for declining revenue in the long-distance market and administrative costs," said AT&T spokeswoman Claudia Jones.

The FCC mandates that all carriers pay an amount equal to about 6.8 percent of their revenue over the past six months. Carriers have been generating less money from their long-distance business, and Jones says AT&T needs to raise the fee to make up for the sluggish market.

For example, revenue in AT&T's consumer service unit, which includes long-distance calls, fell nearly 4.4 percent from the first quarter to the third quarter of last year.

The fund, created as part of the Telecommunications Act of 1996, has so far contributed approximately $7.7 billion to help subsidize Internet access, according to an FCC representative.

The USF gets its money from phone companies, which pass the expense on to their customers.

Jones says AT&T has worked with the FCC for several years to review its fund policy and has gained some response.

The FCC used to levy its fees based on industry revenue over the previous 12 months, but it changed to the current six-month program to more accurately mirror business conditions within the industry.

"We think the industry is changing, and...there needs to be a new way to assess fees," Jones said.

AT&T sent a letter to the FCC on Dec. 13 asking the government to base USF fees on company projections over the next six months, rather than on company performance during the previous sixth months. Jones said AT&T could lower its fees to about 9 percent under this plan.

AT&T will also raise rates Feb. 1 for some of its 60 million customers who do not use its featured calling plans. The company will increase its basic-rate plan to 35 cents a minute from 30 cents a minute for calls made between 7 a.m. and 7 p.m. on weekdays, and it will increase nighttime calls to 29.5 cents from 25 cents per minute. Weekend calls will also cost more, rising to 18.5 cents from 16 cents a minute.

AT&T spokesman Gary Morgenstern said the company's 23 million basic-rate customers account for about 15 percent of the total minutes on AT&T's network.

MCI, the consumer unit of WorldCom, also raised rates Jan. 1 but still charges customers a 9.9 percent USF fee and does not plan to change. The monthly charge for MCI's 7 cents Anytime Plan increased to $4.95 from $3.95. The daytime rate for the company's 5 cents Every Day Plan also climbed to 10 cents from 9 cents, but the nighttime 5 cents-a-minute rate and the monthly fee of $5.95 will stay unchanged.

Sprint will join the phone-bill bonanza Feb. 1 and double the rate on its Standard Weekend Calling plan to 20 cents and institute a 10 percent increase on the Basic Dial-1 service plan, which bills by distance. Both plans charge no monthly fees, unlike the majority of Sprint's advertised plans.

Sprint spokeswoman Angie Makkyla said the plans are geared toward occasional callers who use a very small percentage of the company's network. She added that Sprint has no plans to change its 9.9 percent monthly universal services fee.

"Now that you have less competition in the market than a year ago, it's a lot easier to raise rates," said analyst Cary Robinson of U.S. Bancorp Piper Jaffray. "Carriers can economically justify a rate hike because long-distance is just not profitable enough at lower rates."