By Tim Covell For the Journal
Long-distance carriers successfully use a strategy of confusing consumers so that most make no effort to ascertain the best calling plan.
An AARP study shows only 47 percent of consumers (and 33 percent of those over 65) shop for the best price on long-distance calls. The two most common reasons for inaction are that shopping is too complicated and that savings are too little.
Buy a Phone; Don't Rent
While on the subject of phones, you may wish to spend a few extra minutes to consider your local phone service.
Low-income residents may qualify for the "Telephone Assistance Program" or TAP. If you receive Medicaid or Low Income Home Energy Assistance Program (LIHEAP) you can get basic phone service for about a dollar a month.
If you live on a reservation you may qualify for the broader "Tribal Lifeline," giving a similar benefit to those who qualify for a range of government benefit programs. Call Qwest to see if you qualify.
Infrequent callers may wish to consider switching to measured service. Measured service costs about $4.92 less a month, but charges 3 cents a minute for local calls.
If you spend less than 164 minutes a month making local calls, you may benefit from a switch.
Finally, several million, mostly older consumers still lease their phones for rates of $5 to $10 a month. In an era when functional phones sell for less than $10, this is like giving your money away.
Long-distance providers now set rates with almost no regulation. If you compare last month's phone bill with that of a year ago you will find the bottom line has gone up significantly, through increased per-minute rates as well as fees with labels like "federal access charge" and "universal service fee."
You likely had no notice of the change other than a flier in your phone bill or a notice that you could get rate information at a Web site or by calling a toll-free number.
Long-distance providers make their bills more complex by separating federal taxes and fees from the total. Fees and taxes result in most consumers paying about 15 percent more than the stated rate.
The phone companies' strategy of bamboozling consumers makes them billions of dollars. But with a little effort you can save more than $200 a year as well as have the satisfaction of not being taken.
A preliminary step is to call your long-distance service provider and ask it if you are on the most economical calling plan for your calling pattern. The calling plan that was the best deal when you signed up four years ago may offer the worst rates today.
You can also compare rates on the Internet at a site such as abtolls.com.
High-volume callers are likely motivated to shop for the best bargains. Many will purchase a "bucket of minutes" for a fixed monthly fee.
But a substantial number of consumers make few long-distance calls. The federal government reports that 32 percent of households make no long-distance calls in the average month and 41 percent make fewer than 10 minutes of calls.
Both low- and high-use callers can significantly reduce their monthly bills.
Few consumers are aware that you do not need to have a long-distance provider at all. For $10, Qwest will remove the long-distance provider and its charges from your account. Although this notion initially seems radical, it makes sense for many people.
Consumers who have mobile phone service with free or low cost long-distance may wish to make all their long-distance calls from the mobile phone. Those who never make long-distance calls may similarly wish to remove the long-distance provider.
Further, consumers who have more than one phone line likely need long-distance service on only one line.
Eliminating your long-distance service provider does not cut you off from long-distance. You can always receive calls from all over the world. You can still connect to 800 numbers.
Most important, you can continue to make long-distance calls at a lower cost by using one of three strategies:
* Prepaid calling card;
* Dial-around service; or
* 800 number service.
Prepaid calling cards are available at most retail stores. You pay a set amount, such as $5, and then make calls until the card is depleted. Rates can be under 5 cents a minute for interstate calls.
You should carefully review the terms of a calling card plan, watching for connection fees, billing increments and expiration dates.
Dial-around services require you to dial a prefix such as 10-10-629 before dialing a long-distance number. The provider may require you to set up an account in advance or may bill you through your local phone service.
Some of the better rates are 10-10-629, which charges 7.9 cents per minute for state-to-state calls, subject to a 9.9 percent fee, for an effective rate of 8.6 cents per minute.
AT&T offers 10-10-345, with in-state and interstate calls at 10 cents per minute plus a 15-cent-per-call connect charge.
Both plans have no minimum fee or participation charge. They are accessible by dialing the prefix, then 1 and the area code and number. Both plans bill you on your local phone bill.
More information is available on the Internet at www.1010phonerates.com.
Dial-around services may at first seem inconvenient, but you can put the code into your phone's memory and access the service with the push of a button.
However, you must be careful with 10-10 services because rates can change virtually overnight.
Some providers have a service where you first call an 800 number from your phone, then enter the long-distance number. They then bill by mail, credit card, or on your local phone bill. You can probably save another 1 cent a minute over dial-around plans with services such as GFI 800 World Access, available on the Internet at abtolls.com.
For those who are uncomfortable eliminating the traditional dial-1 long-distance service, two major providers have dial-1 service with no minimum fee. This allows you to experiment with other long-distance methods without losing the convenience of dialing 1 plus the long-distance number.
AT&T offers the "one rate basic plan" and MCI offers "anytime calling." Both plans have fairly high fees, but you will be billed nothing unless you dial 1+ the long-distance number.
Like many phone consumers, I signed up for a calling plan years ago. But changing rates — along with a change in calling habits — resulted in my paying a flat $10 monthly fee for the privilege of making calls at nearly double the lowest rate of no-fee dial-around plans.
By changing my calling plan, I have been able to save nearly $20 per month.
Without state or federal regulation, long-distance providers will likely offer competitive rates to those willing to shop, while charging more to those too busy or confused to figure out the plans.
Consumers may wish to ask their federal representatives to impose regulations making shopping easier.
Albuquerque attorney Tim Covell can be reached by e-mail at tim--cov@msn.com or by calling 883-4083.
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