AT&T Puts Rate Hike On Hold

Actor Andy Dick gets carried away at the premiere of "Employee of the Month" by actor Harland Williams on Sept. 19, 2006, in Los Angeles. Both men appear in the film. GETTY IMAGES/Kevin Winter

Telecommunications giant AT&T said Wednesday it is deferring its decision to raise its long distance telephone calling rates.

The company, which made the announcement after federal regulators said they were dissatisfied with the No. 1 long distance carrier's plans, also said it was immediately scrapping a charge on customers who did not meet a minimum usage requirement.

AT&T said it would put off its decision on raising rates until it completed a review of alternatives to restructuring long distance calling rates for low volume customers.

AT&T's plan to raise rates came shortly after the Federal Communications Commission said it would cut for five years as much as $3.2 billion in access charges that long distance companies pay to connect to local networks.

In turn, AT&T and Sprint, the nation's No. 1 and No. 3 carriers (along with Bell Atlantic, BellSouth, GTE and SBC), had formally pledged to pass along these reductions to consumers.

But according to its most recent rate changes, AT&T intended to increase its per-minute rate for basic schedule customers Monday through Saturday.

Under the existing basic rate, the company had charged 26 cents per minute during weekday peak times, 7 a.m. to 7 p.m., and 16 cents per minute during off-peak times, or 7 p.m. to 7 a.m. Under the planned increase, customers on the basic schedule would have paid 29 cents a minute all day Monday through Friday.

Under the existing rate, the company had charged 11.5 cents a minute on Saturday and Sunday. Under the planned increase, customers would have paid 29 cents a minute on Saturday. But on Sunday, the rate would have dropped to 7 cents a minute.

Even though it is putting off its planned rate hike, AT&T said it is immediately eliminating the minimum $3 monthly fee for those who make few or no long distance calls.

From the start, consumer advocates voiced doubts that the promises made by the phone companies and the commission would materialize into real benefits for consumers.

Wednesday, consumer groups chastised AT&T, saying that the company is trying to recuperate its costs for dropping the $3 monthly minimum fee by raising per-minute rates.

The companies "have learned over the years that if you change two numbers at one time, the FCC gets confused," said Mark Cooper, research director for Consumer Federation of America.

FCC officials said last week they were confident the access fee reduction would trigger a rate war to bring down consumer phone bills. FCC Chairman William Kennard said at the time that, "everyone is going to benefit from this plan."

Wednesday, the agency toughened its stance and said it would enforce the pledge of AT&T and others to pass through savings to consumers.

"AT&T promised to pass on savings to all consumers,"> Kennard said. "Their new rate plan does not do that."

Not long after the FCC spoke, AT&T capitulated and called off the rate hike, at least temporarily.

Shares of AT&T closed up 5/16 at 36-7/16 on the New York Stock Exchange Wednesday, just above their year low of 33-5/8. Its year high is 60-3/4.

  • CBSNews.com staff CBSNews.com staff

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