Getting the message straight: changes in telecommunications laws have opened up the telephone service marketplace - finding the right service - Consumer Report

Black Enterprise, Feb, 1997 by Keisha Anderson

Changes in telecommunicattions laws have opened up the telephone service marketplace. But how do you know which service is best for you?

HAVE YOU BEEN BOMBARDED AT home by telephone calls from telemarketers trying to get you to switch your long-distance or regional phone company? Or, maybe your mailbox has been stuffed with offers from unknown companies who say they're now able to provide "low-cost" phone service--local, regional or long distance--to "select customers" in your area--and, of course, you just happen to be one of those customers?

AT&T True Reach Savings, MCI One and Sprint Sense are but three of the many calling plans offered by telephone companies whose aggressive sales pitches are aimed at getting consumers to switch their local, regional and long-distance phone service. This scramble for your telephone dollars is just the beginning. The Telecommunications Act of 1996, passed in February, allows just about any company--major as well as independent player--to provide phone service to businesses and consumers as long as they comply with Federal Communications Commission rules.

With the forced breakup of the AT&T monopoly in 1984, the eight regional Bells became the billing agents for most long-distance service within a local area. Since then, the Baby Bells have dominated this market, controlling more than 75% of the $101 billion industry. Recently, the FCC again saw fit to intervene and now requires the Raby Bells to offer equal access to all long-distance carriers who want to provide local and regional service. In turn, these regional Bell companies will be permitted to provide their own long-distance service. The hope is to create a competitive environment benefiting both phone companies and consumers.

Indeed, both large and small phone companies will benefit from deregulation, but will consumers? Not initially. According to Gail Lawyer, editor of the Local Competition Report, local charges will increase in the future for a number of reasons. She feels that prices will go up, at least initially, because there will be fewer regulations and price restrictions and more pricing structure changes placed upon local and regional companies in this new environment. There will be more competition in large metropolitan cities, soon resulting in better pricing structures, while residential customers in smaller cities will see rates increase. Businesses in major metropolitan centers that make a large volume of calls and use a variety of telecom services will reap the biggest benefits, however, "It may take up to 10 years for residential customers to experience the benefits of competition," says since deregulation leaves price setting each state, there's no accurate way to tell what the average cost for local service will be.

Deregulation may also have a potentially negative impact on African Americans, Asian and Latinos. "I think there will be growing areas of marginalization," says Ken McEldowney. executive director of Consumer Francisco-based consumer advocacy group. The reason? Smaller phone companies, which may offer inferior technical and customer service, will target lower-income groups, particularly in the inner cities, that are looking for the cheapest rates. They'll also target foreigners who may not understand exactly what they're paying for. There'll probably be mare calling plans featuring price breaks or incentives, especially for those making international calls. But at tire same time, McEldowney warns, there may also be increased marketing and sales fraud because of these language barriers.

Sifting through the marketing ploys and seemingly endless choices can be confusing and tedious. But there'll be price breaks, says McEldowney, for phone users who make an abundance of long-distance calls or who "bundle" services, combining their home phone, cellular phone, pager, fax machine and Internet access under one carrier. They'll see bigger price breaks because they'll generate greater revenue for the phone company and get higher discounts overall--leaving those who just want basic local or long-distance service with higher monthly bills.

But there are other issues you should consider, pointers to remember and tactics to employ to determine and choose the best deal for your phone dollars.

GET THE 411 FIRST

When long-distance service was divested in 1984, various new companies began competing for customers, both residential and business. To businesses, these companies offered contracts guaranteeing service at fixed rates for a specific length of time. For residential consumers, an all-out pricing war began with long-distance telephone companies offering everything from fixed and cheap rates to rebates--paying consumers to "switch" carriers. Many consumers began shuttling back and forth between carriers and plans gaining extra cash, while ideally lowering their telephone expenses.

About 2% of all consumer expenses are devoted to telephone service, according to an FCC report. Since virtually all African Americans with incomes between $60,000-$74,999 have telephones (about 2% more than whites and 5% more than Hispanics with the same incomes), it's critical that consumers do the dirty work of making sure they're getting their money's worth.