Now Talk Is Really Cheap

Janice Martin remembers when she'd time her chats with her family back in her native England to keep costs in check. These days, the Washington hair-salon administrator is gabbing with abandon. Her international phone bill is down 33% after switching to an AT&T savings plan in January. "I can call home as cheaply as if I were talking to California," she says.

Martin is a beneficiary of a global long-distance price war. The price of calls abroad from the U.S. fell 25% in 1997, and may drop another 20% a year through 2000. "Everyone's playing the rate game," says John Taylor, senior vice-president at LCI International in McLean, Va., the seventh-largest U.S. long-distance carrier.

SLEW OF RIVALS. Behind the rate war is a big decline in the settlement fees overseas phone companies charge U.S. counterparts to connect calls. Meanwhile, deregulation in the U.S. has allowed thousands of long-distance carriers and resellers into the business, prompting fierce competition.

While you may find slightly better prices with tiny niche resellers, the telecom giants offer similar rates and attractive options. AT&T, MCI, and Sprint each charge $3 a month to sign on to their international calling plans (table). But per-minute rates in these programs are so much lower than the carriers' basic rates that you should consider signing up if you make more than a couple of overseas calls a month. Under AT&T's One Rate International Plan, a call to Japan from the U.S. costs 48 cents per minute, compared with the basic rates of $1.10 to $1.52.

Each of the Big Three's plans has a wrinkle or two that makes comparison shopping worthwhile. Sprint Sense International discounts off-peak calls. So if you're willing to wait until Sundays to dial Britain, say, you'd pay 10 cents a minute, against 12 cents anytime with AT&T and MCI. If you're a traveler, you might like MCI One International. MCI guarantees you the plan's low rates even when you use your calling card in the U.S. or abroad or call collect. MCI rates apply 24 hours a day, too, so you'd save money with this plan over Sprint if you make most calls during peak hours.

AT&T offers several programs. In January, the company introduced its $4.95 monthly Easy Reach 500 plan. You set up a number with a 500 area code, and calls can be forwarded to you around the globe. If callers charge the call to your 500 number, or if you use it to phone home from abroad, you pay low rates. AT&T has also started an Internet billing service, One Rate Online. Right now, it only offers cheap domestic calls. But it's expected to go international by summer. Register at

Smaller carriers may offer better deals than the majors. LCI, which doesn't charge a monthly fee, guarantees its lowest international prices to all users. It also bills calls in seconds, not minutes, to shave more off your tab. Other carriers advertise low rates, but be sure the savings are significant. Sometimes they forgo services such as foreign-language operators.

Even with all the new discount plans, some international calls remain pricey. It costs $3.31 a minute to dial North Korea under AT&T's international plan, and that's about $2 less than the basic rate. Still, phone price gouging will be the exception as most of the world moves toward deregulation and lower settlement fees. "Rates will continue to come down," says Peter Hayden, AT&T's director of global consumer marketing. That's good news for long-distance dialers.