AT&T USING CALLING PARTY PAYS WITH 500 CODE

Mobile Phone News, May 4, 1998

The number of wireless phone users who don't know their own number or who don't regularly give their number to others could shrink from the nearly 50 percent cited in a recent survey if more carriers offer the calling party pays option that AT&T Wireless Systems [T] has initiated in Minneapolis.

AT&T last month began offering its "Caller Pays" service in the Minneapolis market using "500" area code numbers as a free option to new subscribers as well as to existing customers who have their numbers changed to 500 numbers, which are controlled by the parent AT&T. Most calls made to AT&T customers with the option are billed at a flat rate of 39 cents per minute, regardless of long distance or roamer charges; calls made from other AT&T Wireless subscribers are billed at the calling subscribers' normal rates. A pre-recorded message advises callers of the charge, which can be billed to a credit card or an AT&T calling card or to the caller's phone bill.

Analysts at Merrill Lynch & Co. reported that AT&T's Caller Pays service could be an example of a significant change to the industry. "In our view, if we could really achieve a world with calling party pays in the next two to five years, we think that it could have a material effect on wireless growth rates and valuations," the analysts explained.

A recent survey of cellular and PCS users by the Strategis Group indicated that if wireless carriers expect to increase consumers' usage of their service, they apparently must find how to convince subscribers to let more people know their cellular phone number. More than 45 percent of all users do not know their wireless phone number without looking it up, which impacts the amount of people to whom users give their number.

Among all users, over 80 percent have given their wireless phone number out to 10 people or less, according to Strategis. Personal users, the majority of wireless phone users, have given their wireless phone number to an average of four people. The average monthly bill for wireless users varies from $32 (for those who do not give out their number) to $128 (for those who have given their number to at least 11 people).

Michael Broom, director of corporate communications for AT&T, said the carrier's Caller Pays option in its Boise, Idaho, and Phoenix markets--both in service about a year--do not include the 500-number service and do not offer flat-rate charges for incoming calls. And unlike the Minneapolis customers with Caller Pays, the service in Boise and Phoenix applies only to calls made through the local exchange carrier. "When somebody calls the Minneapolis customers, no matter where they are, Caller Pays works," Broom said.

He added that the Caller Pays option in Idaho and Arizona is producing the expected results. "We've certainly seen evidence in our trials in Boise and Phoenix where the number of minutes and the number of inbound calls have increased," Broom said. "We think that Caller Pays gives customers a new level of control. They've been telling us all along that they would like to have greater accessibility and a more affordable wireless service."