For Whom Bells Toll - SBC Communications raising pay phone rates - Company Business and Marketing

Industry Standard, The, July 23, 2001 by Alexei Oreskovic

An army of service technicians began upgrading pay phones across the country after SBC Communications, the No. 2 local phone company, announced last week it was raising the price of public telephone calls from 35 cents to 50 cents.

SBC, which has 414,000 pay phones in 13 states, claims the rate hikes (made possible by the 1996 Telecommunications Act) are necessary to cover the increasing costs of a business under siege by cell phones and calling cards. "Over the last many years, wireless phone use has increased," says SBC spokesman Kevin Belgrade. "As a result, pay phone use has gone down. Simple economics tells you the cost goes up."

According to the Cellular Telecommunications Industry Association, a wireless trade group, the number of Americans carrying cell phones rose from about 33 million in 1995 to more than 109 million -- nearly 40 percent of the U.S. population -- at the end of last year.

SBC is not the first pay phone operator to take a hike on public phones. In May, Qwest jacked up its pay phone rates to 50 cents, while BellSouth left the business altogether in February. Both telcos cited similar economic pressures.

But the cell-phone-is-stealing-our-lunch argument is undermined by one fact: Many pay phone operators are also wireless carriers. SBC, for instance, owns 60 percent of Cingular, the nation's second-largest wireless company. And while SBC's pay phone sales declined $124 million in 2000, its wireless subscriber revenues for the year increased by a whopping $1.17 billion.