Picking A Phone Plan For Savings

New fees make it a good time to shop around again

Compare a recent long-distance phone bill with one of last year's, and you may discover the cost has gone up as much as 15%. But don't blame your staff for making longer calls. The culprits are actually two separate fees that took effect at the beginning of this year--and the uneven way they're being applied by phone companies. It's just one more reason to take a fresh look at your long

distance plan to see if it's the best deal you can get.

The fee that has made the most difference is the Universal Service Fund fee, essentially a tax to subsidize telecom services for schools, libraries, and rural communities. Long-distance carriers have to kick into the fund 3.9% of their billings on interstate calls. But that's on the company's total interstate billings. And some carriers have chosen not to impose the fee equally on all customers. Qwest Communications, for instance, isn't billing residential customers. It makeS up the difference by charging business customers 4.9%. Is that fair? "It doesn't help small-business customers," concedes spokesman Tyler Gronbach, "but we are currently looking at alternatives to work this out."

The second fee--the "carrier line charge" on the phone bill--was supposed to reduce the per-minute cost of long-distance calls by rejiggering the way long-distance carriers pay local phone companies to use their lines. While the new charge has been passed along in your bill, the savings probably haven't. There's really no way to tell on an individual account. But filings with the Federal Communications Commission show that long-distance carriers on average are paying a penny less for each minute--yet no major carrier has announced wholesale rate reductions for existing customers.

Since these fees are new, billing mistakes can crop up. Just ask Diane Vaclavik, vice-president for marketing at St. Louis Data Destruction, a Maryland Heights (Mo.) shredding service. She discovered she was being overbilled $13.75 a month in carrier-line charges on five lines after inquiring about the unfamiliar fees that were appearing on her bill. "I spent more than $13.75 of my time to get it done," Vaclavik says of her quest for a refund. "But I had to--or else get billed this much every month."

CHECKLIST. To ensure you aren't being overcharged, there are a few parts of a bill you should check. First, take a look at your USF fee and divide the sum by the total interstate calling charges before taxes. If it comes to more than say 5%, ask the carrier exactly how it's calculated. Second, take the number of phone lines and multiply it by your phone company's carrier-line fee (typically $2.75) to get your carrier-line charge. Finally, divide the long-distance charges by the number of calling minutes to double-check your per minute rate vs. the rate you obtained when signing up. If you find errors, insist on a refund for the overcharges.

Even if you don't find any errors, the changes in rates and fees make it a good time to take a hard look at your bill and shop for a competitive plan. If you find a better one, be prepared to jump ship. Carriers are quick to offer lower per-minute rates for new accounts and reluctant to do so for existing customers, though if you're armed with an alternative, you might cut a better deal. Remember, USF and carrier-line charges won't be quoted in the overall rate.

To make it easier for you, we've analyzed the long-distance service programs--including new fees--at the seven biggest providers in 1997: AT&T, MCI, Sprint, WorldCom, Excel, Frontier, and Qwest LCI. We included only small-business plans that don't require you to sign up for a minimum period. Although plans with set time periods do feature better prices, the FCC is expected to adjust the fee structure in 1999, and we prefer the flexibility of being able to switch providers as needed.

We then evaluated the plans based on three calling scenarios reflecting light to moderate usage; high-volume usage wasn't analyzed because often companies with big bills can negotiate better rates than those listed by the carriers. To make the comparisons fair, we included the USF and carrier-line charges in addition to the basic long-distance rate. And in all cases, we assumed all long-distance calling was interstate and confined to the continental U.S.

It wasn't easy because long-distance rate plans have a lot of moving parts even without the two new fees. For starters, you have to consider the initial call length. For instance, AT&T, MCI, and Qwest will bill you for a minimum half-minute call even if you hang up after the first five seconds--while other companies will bill you for only 18 seconds. After that, most carriers bill in increments of six seconds, rounding upward even if you hang up after one second.

SMALL CHANGE. So which phone plan is best for you? Say you don't make many long-distance calls since your customers are local, but you do have multiple phone lines. In this case, Qwest LCI's Q.biz plan stands out. Assuming you have five phone lines and make about 500 minutes of calls, you'll pay about $77 a month. (MCI is a close second, with the same final bill but slightly less-generous billing increments of six seconds vs. Qwest's one-second rounding.) Frontier Corp.'s EZ Plan actually worked out to be $2 less, but it comes with a $10 monthly minimum requirement, which we would avoid at such low levels of use.

It's worth noting that the new carrier-line charges represent a substantial portion of the final bill--about 15%-- when call volume is this low. But the differences among carriers are small. AT&T charges $2.50 a line vs. $2.75 for the rest of the companies.

In our middle scenario, we looked for the most competitive plan for about 2,500 minutes of interstate calls each month and used eight phone lines. Frontier's EZ Plan came in lowest here, with a billing rate of $330 a month. The $10 monthly minimum is sure to be met under this scenario, so that's not a concern, and a five-second misdialed call will bill at 18 seconds instead of the half-minute that other plans featured.

Our final example is for a company that bills about 5,000 minutes a month, using 10 lines. Excel Communications Inc.'s Prime Business Select 3 stands out at here, with a monthly billing rate of $625 a month. With its tiered rate structure, Excel's plan allows companies to benefit from lower rates if they rack up more calls, but they are not required to meet any minimum billing level. And lest you think our penny-pinching doesn't matter, consider that Excel's Prime Business Select 3 will save you more than $1,100 in the course of a year over AT&T's plan.

Keep in mind that these rates are based on a snapshot of this fast-moving industry and on prevailing prices as of midsummer. Subsequent discounts and rate cuts may make some of these deals more attractive. But these special discounts need to be tracked to ensure that they are actually applied. Kevin S. Bartlett, sales and marketing manager for Manchester (N.H.) database manager Tolles Communications Corp., wrangled an attractive rate from MCI Communications but found that, over the past year, he has had to jump through hoops to get $6,000 in credits for discounts he didn't receive.

"I literally can say that on one billing problem, I talked to 38 people, and the issue is still not resolved," Bartlett says now. "It's not an easy process." His advice: Get the discount promises in writing, a tactic that has helped him in his efforts. Says MCI spokesman Brad D. Burns: "Obviously, we apologize if this customer has had a bad experience and will take any action to ensure that his bill is corrected." Who knows, maybe you can find savings like that if you scrutinize your phone bill. Consider this your wake-up call.

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