Watch that pay phone

Penny Loeb; Warren Cohen; Gary Cohen; Katia Hetter

June 26, 1995

Or risk getting charged far above the usual rate for long-distance calls

Ray Serra, an accountant from East Hampton, Conn., stopped at a roadside gas station during a trip to Vermont last summer and made a quick call to a neighbor back home. A month later, his phone bill listed a charge of $12.18 for the one-minute call. The angry Serra fired off letters to the Federal Communications Commission and to American Telecommunications Enterprise, the long-distance provider that services calls from the gas station's pay phone. American Telecommunications blamed a software error and refunded most of the payment. The charge should have been $5.39, the company said. If AT&T had handled Serra's call, the charge would have been 93 cents.

The FCC receives thousands of tales a year from outraged callers like Serra. Pay phones are among the most often cited offenders. Long-distance carriers like American Telecommunications -- known as operator service providers,or OSPs -- charge up to 10 times the AT&T rate. The phones themselves are sometimes owned by independent companies, which are mostly separate from OSPs; these phones may charge a premium for local calls.

Under telephone deregulation, which began in 1984, the only long-distance rates subject to federal restrictions are AT&T's. The FCC views OSPs as a competitive force that should broaden service and drive down prices, and has given them relatively free rein. A 1992 industry report found that the number of pay phones has indeed increased by 325 percent since 1984. The chances of encountering an independently owned pay phone or a phone served by an OSP are now about 1 in 6.

Good info, good choices? The problem, according to the FCC, is not service or price but a need for more cost-related disclosure. "The thing consumers need is information to make informed choices. Our mission has been to make sure consumers have that information," says Kathleen M.H. Wallman, chief of the FCC's common-carrier bureau.

Until the Bell System was split up in 1984 into a long-distance provider and seven Baby Bells, all long-distance calls from pay phones flowed through AT&T. In the wake of deregulation, the FCC gave the go-ahead to OSPs to offer long-distance service. MCI and Sprint jumped in, with rates comparable to AT&T's.

Complaints about overcharges at pay phones served by smaller OSPs quickly surfaced. In response, Congress passed the Telephone Operator Consumer Services Improvement Act in 1990. It required, among other things, that the name of the long-distance carrier serving a particular pay phone be displayed. In 1992, the FCC reported to Congress that "market forces are securing rates and charges that are just andreasonable."

Unhappy callers. Perhaps -- but the 2,493 complaints the FCC received about high charges at pay phones in 1994 were nearly double the number received in 1993, and 1993's total exceeded 1992's. An examination of more than 200 letters shows a host of calls for which AT&T would have charged no more than $1.25 for the first minute but others charged far more: $5.95 from Oncor, $5.31 from LDDSMetromedia Communications and $4.26 from International Telecharge, for example.

Surcharges weigh down most long-distance calls that go through an OSP. Communications TeleSystems includes as much as $4.25 per call for a "provider handling fee." LDDSMetromedia Communications adds nearly $3 in calling-card surcharges per call. Opticom's rates and surcharges can increase by half after nine minutes.

OSPs say they charge more because they have to pay commissions to the store, hotel, hospital or whoever controls the space where a phone is installed. "We aren't in the business to rip people off," says Beth Elkin, a spokesperson for Opticom, an OSP owned by One Call Communications. "But we're trying to have our business survive."

Those who write to the FCC are unlikely to be mollified. "Is this what happens when we have DE-REGULATION. I thought the FCC was to monitor things like this or does the average citizen have to pay through the nose," wrote Ruth Hyman of Southold, N.Y., after getting a bill from American Network Exchange for $8.28 for a two-minute call she made from a pay phone, from Deerfield, Fla., to Southold.

Some letter writers complain that the long-distance carrier displayed on the phone was not the one that handled their call. And others say that when they have tried to use their own carrier by punching in the access code, the pay phone blocked them even though that has been illegal since 1993. The phone may even ignore the access number. Roberta McNulty of Lancaster, Calif., used her AT&T access code at a pay phone but was billed $8.90 by Communication TeleSystems International for a three-minute call from her hometown to Glendale, Ariz. A company spokesperson said it is technologically impossible for that to have happened.

If you are blocked, by a busy signal or by buttons that suddenly don't respond to your touch, the FCC suggests dialing 00. That should connect you to the provider's long-distance operator -- to whom you should insist on having your call placed through your carrier. And if you still get an astronomical bill, write to the company and to the FCC, which tracks patterns of abuse and follows up on individuals' complaints (Federal Communications Commission, Enforcement Division, Common Carrier Bureau, FCC Mail Stop Code 1600A2, Washington, DC 20554).

Figuring out which pay phones are ringers is like playing a game with shifting rules. In many cities, the local Bell company -- NYNEX in New York City, for instance -- has the franchise for street-corner phones, and long-distance calls are routed through AT&T and either MCI or Sprint. Pay phones near or attached to stores are more likely to be owned by independent companies and are more likely to be tied into OSPs. They also may charge more than 25 cents for a local call or keep your money even if your call doesn't go through.

Local preference. Most pay phones served by an OSP will not let you use an AT&T calling card. They will accept calling cards from a local phone company, such as a Bell Atlantic IQ card -- and this is how many people are tripped up, since they don't realize that the rate will be imposed by the long-distance carrier for that phone. To use your own carrier, you must punch in its access code. About 30 states regulate long-distance charges for intrastate calls made through OSPs. Illinois, for example, permits a surcharge of no more than $2.50 and requires that per-minute rates be no higher than those of the dominant provider.

Spurred by a rash of complaints -- FCC Chairman Reed Hundt's own brother-in-law accosted him with a tale of woe -- the FCC has recently taken action against a number of OSPs. In April, the FCC fined Oncor, which controls nearly half the OSP market and garners nearly half the OSP-related complaints, $1.4 million for servicing long-distance calls at pay phones and in hotels without notifying the owner of the phone, a practice known as slamming. (It also happens with residential phones.) The FCC is considering ordering the company to lower its rates as well. Three other companies are under investigation. And last week the FCC clamped down on slamming from all kinds of phones, including home phones. New regulations require consumers to agree in writing to a switch.

A coalition of OSPs, pay-phone operators and some Baby Bell companies submitted a proposal in March to the FCC that would cap rates. A one-minute call to anywhere would cost no more than $3.75, although that still can be triple the charge of a call routed through AT&T. The FCC and consumer advocates think the proposed cap may not be the whole answer. The Pennsylvania Public Utility Commission, for one, thinks the cap is too high.

Chairman Hundt said the FCC is making excessive charges at pay phones a top priority. Continued investigations are expected throughout the summer, and rate regulations could come by next year. Until then, callers need to check the long-distance carrier before they punch those buttons.


Costly calls ...
Here are pay-phone charges levied by two long-distance providers -- and what AT&T would have billed.

AN 18-MINUTE CALL FROM RAMSEY, N.J., TO NEW YORK CITY THAT WAS HANDLED BY CAPITAL NETWORK SYSTEM COST $21.32. AT&T WOULD HAVE CHARGED $5.53.

A 6-MINUTE CALL FROM ALBANY, GA., TO BIRMINGHAM, ALA., WAS HANDLED BY OPTICOM AND COST $11.22. AT&T WOULD HAVE CHARGED $2.11.

Note: Examples are based on complaints to the Federal Communications Commission

and how to avoid them
Following these tips should help protect you from ringing up stiff charges at pay phones.

The long-distance carrier's name should be displayed on the phone. Look before you dial.

Do not assume that using a calling card guarantees your call will be charged to your long-distance carrier.

A voice announcement should identify the carrier. You may be able to switch to your carrier by punching in its access code (800-225-5288 for AT&T, 800-877-8000 for Sprint and 800-888-8000 for MCI). Some phones block a switch, however. If so, dial 00 to connect with the carrier's long-distance operator and insist on being put through.

If you think you have been overcharged, complaining to the carrier may get you a refund.

Keep a log of long-distance calls made away from home to be sure you are not billed for an unanswered call.

Avoid surcharges on hotel phones by using your carrier's access code.

Copyright 1995 USNews & World Report. All rights reserved.