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AT&T Holds Off on Plans for New Fee during Regulatory Battle with Verizon

Posted on: Saturday, 14 June 2003, 06:00 CDT

Jun. 14--RICHMOND, Va.--AT&T will delay plans to impose a new $1.95 fee on its customers as long as Virginia regulators are still trying to resolve a battle between AT&T and Verizon Communications over the rates AT&T pays to access Verizon for long-distance calls.

Every time that an AT&T customer makes a long-distance call within Virginia, AT&T pays Verizon 3 cents a minute for each end of the long-distance call or 7 cents a minute if both ends of the call are in Virginia. AT&T claims these charges are too high over Verizon's costs.

AT&T filed a complaint with the Virginia State Corporation Commission last month, asking the regulator to force Verizon to cut the fees at least in half. Verizon filed an answer last week arguing that the fees are fair.

Other landline long-distance companies like Qwest and MCI also pay the charge in Virginia and would benefit from a ruling in AT&T's favor. Consumers also might benefit in the form of lower long-distance offerings.

Reducing these charges creates a long-term problem, said Verizon-Virginia President Robert Woltz, that the commission must address. Verizon's charges are set to subsidize the high cost of serving customers in rural areas and low-income customers who get discounts on phone service.

But since local phone service was deregulated in 1996, companies like Cavalier Telephone and wireless companies have taken Verizon customers, primarily in urban areas where Verizon made its money rather than in rural areas where Verizon says it loses money. Therefore AT&T is requesting lower charges while Verizon is left with a higher proportion of customers who cost more to serve.

The commission created a five-year plan in 2000 that would reduce access charges every year in 2001 through 2005. Now AT&T is trying to change that binding order halfway through, Verizon said.

Long-distance companies argue that Verizon can offer cheaper, more profitable long-distance because access charges go to itself, AT&T said.

Verizon disputes this, saying its long-distance affiliate is a separate company from its local one and can fail or succeed regardless of what the local company does.

Federally regulated wireless companies also have the advantages of paying a fraction of a penny in access charges to Verizon to connect a long-distance call in Virginia for a call that would cost AT&T 7 cents a minute in charges.

Despite AT&T's statements that the access fees disadvantage landline long-distance carriers, they are offering plans that include unlimited local and long-distance with other extras for about $50 a month about the same as Verizon and competitive with wireless plans.

In fact, AT&T started offering local service in Virginia and one of these $50 packages days before last month's filing with the commission said Verizon.

AT&T has changed its tone from last month, when it said that if the SCC didn't quickly consider the AT&T request to reduce the access charges, it will impose the new $1.95 in-state connection fee that AT&T imposes in 13 other states where the access fees are too high.

AT&T does not plan to charge these fees to its local or Lifeline customers. Verizon said AT&T is using the charge to its "competitive advantage" by exempting AT&T local customers, making AT&T's long-distance customers consider adding local service.

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(c) 2003, Daily Press, Newport News, Va. Distributed by Knight Ridder/Tribune Business News.

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