NEW YORK -- American Telephone & Telegraph Co. plans to ask the government next month for permission to slash its rates on interstate long-distance calls by 10 to 15 percent beginning Jan. 1.
AT&T says the proposed rate reduction will amount to $1.75 billion a year, making it the largest rate cut in Bell System history.
An AT&T spokesman said Wednesday the projected 10 to 15 percent reduction in average long-distance charges is in line with what the company had previously estimated the rate reductions would amount to when it divests its 22 local operating companies on Jan. 1.
AT&T said it plans to submit the new rate schedule Oct 3 to the Federal Communication Commission for approval. If approved, the lower rates -- which are over and above the 40 percent and 60 percent discounts already in effect evenings and weekends -- would become effective Jan. 1, the same day the Bell System is scheduled to break up.
'The scheduled reductions will save our customers substantial sums of money and represents the largest rate cut in telecommunications history,' said Morris Tanenbaum, chairman of AT&T Communications, the AT&T division that will provide long-distance service after divestiture.
Customers, however, will find the rate reductions at least partially offset by a $2 a month surcharge that will be added onto local phone bills beginning next year. Business customers will have to pay a surcharge of $6 a month. Last July, the FCC approved these 'access charges' as a means of covering the local phone company's cost of linking customers' calls to long-distance networks.
The proposed rate reductions are expected to help make AT&T more competitive with independent long-distance services, such as MCI Communications, that have been able to capture a small but fast growing share of customers by offering discount rates.
The court-ordered break-up of the Bell System and growing competition in the long-distance phone business paved the way for lower long-distance rates, as well as the 'access charges.'
For decades, revenues from AT&T's long-distance service have helped subsidize local telephone service. The divestiture will end those subsidies.
AT&T's proposed long-distance rate reductions, Tanenbaum said, 'is evidence of the direction we can and intend to go in our pricing as old, artificial subsidies of local service are reduced.'
AT&T said the rate cuts are contingent on the access charges being implemented on schedule. Congress has the power to override the FCC's access charges plan.
The local Bell operating companies are expected to file tariffs no later than Sept. 30 to comply with the FCC rulings on access charges, AT&T said.