Jordan Goodman is the author of Everyone's Money Book, available at 888-201-6300. This is the third edition of the book. You can also visit his Web site at www.moneyanswers.com. He talks with us on Thursday mornings.

February 21, 2002

"Cutting Long Distance Phone Bills"

Host: Taken a close look at your phone bill lately? Well, in this edition of "The Road to Riches," personal finance expert Jordan Goodman says maybe you should.

When the phone industry was deregulated in 1996, the idea was that there would be a huge amount of new competition, prices of local and long-distance phone service would fall, and service would improve. It hasn't exactly worked out that way. There is only a bit of competition in local service and the flowering of competitors in long distance has led to a major shakeout with many companies going broke -- and most of the others losing millions of dollars.

So how is the consumer supposed to get the best deal in this environment?

The per-minute price of a long-distance call has been falling from over 10 cents to 5 cents, or less, but the major phone carriers are making up for it in several sneaky ways.

One of my favorite Web sites to help consumers find the best deal for their usage pattern is www.Phonesaver.com. You put in where you live and the number of interstate and intrastate calls you make each month, and the online calculator compares the 25 main long-distance carriers to give you the one with the lowest estimated cost. The lowest company in their database charges 3.9 cents a minute in 6 second billing increments.

Here are the three sneaky fees that the phone companies have been playing with to make up for falling per-minute rates:

1. Universal Service Fund fees:
The USF fee is mandated by national policy to subsidize phone service in rural locations, schools and libraries. The FCC requires a minimum 6.8 percent fee, but carriers can charge anything over that they choose to. Sprint and MCI charge 9.9 percent and ATT just raised its rate to 11.5 percent in January.

2. Basic rate plans:
If you do not subscribe to some kind of calling plan and just take the basic rate, fees are going up substantially. Millions of people are still on these plans that already charge the highest rates. ATT's and MCI's basic rate went up from 30 to 35 cents a minute during daytime on Feb. 1,and from 25 to 30 cents a minute at night.

3. Minimum and low usage fees:
If you don't call for enough minutes or spend enough dollars each month -- typically at least $25 -- carriers are now charging minimum usage fees of $1 to $3, which significantly raises your per-minute phone costs. Others charge fees if you insist on getting a paper bill sent to you in the mail, instead of only getting your bill online.

So it pays to shop around for long-distance phone service now more than ever to avoid these fees and get the best deal for your usage pattern. A Web site like Phonesaver.com can help consumers find the best deal.

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