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Consumer groups file plan to cut phone fees

Officials tell the FCC the idea could save $4-billion annually. Phone companies call it shortsighted.

Leading consumer groups said Monday they have devised a way to slash $4-billion a year from home and business telephone bills _ even for people who make few long-distance calls.

The proposal, submitted to the Federal Communications Commission, would reduce one line-item charge that consumers now see on their monthly bills and eliminate another.

The coalition of groups backing the plan, including Consumers Union, the Consumer Federation of America, the National Retail Federation and AARP, say the innovation would take several dollars off the bottom of every home and business phone bill.

"This would guarantee that every consumer, regardless of how much calling they do, would get the benefit of declining industry costs," said Gene Kimmelman, co-director of Consumers Union's Washington office.

The proposal responds to a plan offered by the phone industry this summer to reduce by $5.6-billion a year "access" fees that local phone companies charge long-distance carriers to connect calls.

If long-distance companies pass on the savings, the companies contended, their customers would see lower rates. In turn, certain flat-rate fees on local phone bills would go up. Backers of the industry proposal, which has been submitted to the FCC for consideration, include Bell Atlantic, BellSouth, GTE, SBC, AT&T and Sprint.

Consumer advocates have argued against the industry plan on the ground that it contains no guarantee that long-distance companies will pass on the savings to consumers.

Even if the rates do fall slightly, that wouldn't offset the increases in monthly fees, Kimmelman said. He said most people don't make enough long-distance calls to benefit from rates going down if the fixed charges go up significantly at the same time.

The consumer plan would take $1 off the cost of the phone line from the local phone company into the home. That charge, identified on monthly bills as the Subscriber Line Charge, is now capped at $3.50 a month.

The consumer proposal also would get rid of another charge, which pays for long-distance companies' use of the local phone network. That item varies by company but averages about $1.50 per month.

The phone companies can afford the cut if they recover costs from customers more in line with their actual expenses, said Mark Cooper, research director of Consumer Federation of America.

Cooper said consumers will save even more over the course of the next four years as regulators continue to cut access charges to reflect local phone companies' connection costs better. This should lead to lower per-minute long-distance rates for customers, he said.

The industry coalition immediately rebuked the consumer plan as shortsighted.

"They want to issue price controls to drive savings for consumers, when the clear trend is to use the marketplace to drive savings for consumers," said John Nakahata, a lawyer with the Washington firm Harris, Wiltshire & Grannis, who represents the companies.