Note: Yet another example of the "competition=lower prices" myth - and the triple play trap.

from: USA Today [1]

Phone Giants’ Rising Rates Questioned

From USA Today, January 28, 2008
By Leslie Cauley

AT&T and Verizon are raising prices for caller ID and other popular phone services by as much as 300%, even as they continue to push regulators to loosen up because of increased competition.

AT&T and Verizon have argued they need pricing flexibility to compete with cable TV and others offering Internet-based phone services. Dozens of states have acquiesced, giving carriers freedom to jack up prices.

In California this month, AT&T raised prices for several stand-alone features: Anonymous call rejection now costs $5 from $1.90; caller ID rose to $9.99 from $6.17. Some local toll calls — calls that aren’t considered long-distance but don’t qualify as local — jumped by more than 200%.

In Ohio, AT&T raised the price of call forwarding and three-way calling from $4 each to $5.99. Automatic call back now costs $1.99 per use, up from 70 cents.

Verizon has made similar moves. Call forwarding now costs $3 a month in Ohio, a 300% increase from 75 cents. Call waiting is now $5 a month, up from $3.

“This is not a good story for consumers in Ohio,” says Janine Migden-Ostrander of the Ohio Consumers’ Counsel. “Customers are getting rate increases, but they’re not getting a whole lot of benefit for it.”

Verizon spokesman Eric Rabe says consumers “aren’t trapped in any way. … The reality is that people have lots of choices” in telecom companies.

AT&T prices, even with the increases, “are very competitive,” spokesman James Peterson says. Both say prices, in some cases, had not been changed in years.

Mindy Spatt, communications director of The Utility Reform Network (TURN), a consumer advocacy group in California, says the increases speak to the market power of AT&T and Verizon. In truly competitive markets, “Prices go down, not up,” she says.

In many markets, cable TV companies offer Internet-based phone services and throw in caller ID and other popular features for free. Consumers usually have to buy a bundle of services — voice, data and video — to qualify.

AT&T and Verizon are using the same tactic, offering cut-rate prices to customers who buy bundles of services. Those packages can be pricey, topping $100 or more a month. Verizon’s Rabe says consumers who want to control costs “can go to the bundle. Those prices are steady or falling.”

Consumer advocates say the elderly and low-income families are hardest hit by the creep in fees.

They are “less-savvy consumers who don’t have the wherewithal or time” to shop for better prices, says Chris Murray of Consumers Union, which keeps tabs on the national consumer scene.

Peterson says, “The majority of our customers prefer bundles. … It’s where the market seems to be moving.”