SBC's entry into the state long-distance market means more competition, not necessarily savings
<<<...MCI, a subsidiary of scandal-plagued WorldCom, which is operating under bankruptcy protection, started the spate of price increases when it raised rates on several residential plans. For instance, the in-state long-distance rate for MCI's Anytime Advantage calling plan will increase next month from 7 cents to 9 cents a minute. The monthly fee increased from $3.95 to $5.95 in December. AT&T followed suit, albeit with more limited increases. The monthly fee for AT&T's One Rate 7 Cents is going from $3.95 to $4.95. The long-distance carriers had to raise prices, said Jeff Kagan, a telecommunications analyst. "Prices fell too low to sustain a healthy competitive environment," he said. "That's why we are seeing prices rising." The long-distance industry has been decimated by the price wars of the 1980s and 1990s, with prices dropping from 40 cents a minute in the early '80s to just pennies a minute today, he said. In the past six years, the average price for long-distance service has dropped by 17 percent, according to industry surveys. The price wars, along with increased competition from wireless phone companies, have had a devastating effect on long-distance carriers' earnings. Increasingly, consumers are making long-distance calls on cell phones because the calls are included in the monthly fees. Long-distance companies have also faced increased competition from local phone companies. The 1996 Telecommunications Act required local phone companies to open their networks to competitors. In return, local phone companies were allowed to offer long-distance service. Increasingly, local phone companies have been getting approval to offer long-distance service in various states, and they've proved to be quite successful in signing up customers. Just last week, it was revealed that Verizon, the country's largest local phone company, had overtaken Sprint as the No. 3 long-distance carrier. "That's amazing," Kagan said. "That's the kind of threat SBC also poses to the long-distance companies." Because SBC is a local phone company, it has different pricing dynamics. It can offer long-distance as an add-on service, and it can afford to have slimmer margins on long-distance than its competitors, Kagen said. Still, industry watchers say SBC's entry doesn't necessarily mean a new price war will break out. The big boom of telecom competitors has already happened, said Rich Sayers, editor of 10-10 Phonerates.com, a price comparison Web site. There are hundreds of companies competing on price, and SBC's entrance into the long- distance market is focused more on convenience and marketing power...more>>>