Competition for local telephone service is at last heating up, as cable companies begin their first serious push into local and long-distance service, routing calls over the Internet to avoid the call completion charges that artificially inflate the price of long-distance calls.
Cablevision today rolled out its first Internet telephone package -- combining local and long-distance telephone service with high-speed Internet access and digital cable television, all for $90 per month. Cox Communications started marketing a similar plan a few weeks ago.
Cablevision said the pricing makes the Internet phone service practically free, since many consumers are already paying $90 a month for cable and high-speed Internet access. The $90 price will be good for one year.
Cox offers a $99.99 plan that gives customers either unlimited phone calling or digital cable, plus a premium service for $124.99 that offers all that plus additional services.
Local telephone companies aren't likely to welcome the news. They're already losing business to cell phones and to competitors like AT&T and MCI, who lease space at discounted rates on the local companies' circuits.
Cablevision already has about 100,000 telephone customers in its New York service area. It charges about $35 per month for standalone phone service. It charges $45 for high-speed Internet access and $40 for digital cable if purchased separately.
The Bell companies have been responding to the competition by offering their own packages, usually consisting of local, long distance and DSL Internet service. Though still losing basic business, the Bells are taking long-distance business away from AT&T and MCI are a rapid pace.
SBC Communications has been the most aggressive Bell company in pricing bundled service. It charges $105 a month for unlimited local and long-distance calling, high-speed Internet and television, delivered by EchoStar Communications Corp. For an extra $25, it will throw in 250 cell phone minutes per month.
Verizon, which competes with Cablevision in the New York area, has a package comparable to Cablevision's, selling for $123.85 per month.
AT&T, MCI Raise Rates
The trend is reversed among the long-distance carriers. As their business deteriorates, they're raising prices as fast as they can.
AT&T is adding an "in-state connection fee" in six more states starting next month. The company says its fee covers extra costs of doing business in various states. Less than a year ago, AT&T; assessed such a fee in only 12 states. Now the total will be 25 -- half of the states in our country. What's more, MCI and Sprint have followed AT&T; with similar fees in the past.
MCI will increase phone rates and fees effective July 1st. Monthly fees on 17 domestic service plans will rise $1. Five different international calling plans' fees increase $1 as well. International calls from the U.S., which connect to mobile phones overseas, will be charged at higher rates.
MCI is said to be making plans to quit offering consumer phone service, including local and long-distance. The next day, MCI's TelecomUSA division increased rates and fees for its 10-10-987 service.
"Those hikes are relatively early in the life of this service, which launched nationally with a big ad campaign last April," said Rich Sayers, editor of consumer help sites 10-10PhoneRates.com and Phone-Bill-Alert.com. "This appears to accelerate MCI's burn-and-churn* marketing strategy in the dial-around segment."
Sprint and AT&T; may increase some rates on national long- distance plans in July, but it is more likely those increases will come in August, Sayers said.
Sprint recently increased some fees related to its local phone service in several states. Fees increased 20 to 25 percent in most cases. For example, a charge to not be listed in the phone book going from $2.50 to $3; a Toll Restriction charge for blocking outgoing long-distance calls rising from $2 to $2.50.
"These charges for not getting something really irritate consumers and me too," said Sayers.