IXC of last resort?

AT&T's recently announced $3 minimum monthly charge for new long-distance customers raises some questions about the telco's role.

AT&T says it can't continue to lose $3 a month in billing and customer support costs for every customer who makes few or no long-distance calls. Once a regulated monopoly required to serve everyone, it still carries 10 million customers who spend less than $3 a month on long-distance (see story on page 33).

Consumers, for their part, are just as outraged as they were when banks began charging customers who kept an account but didn't maintain a minimum balance.

In the local market, carriers often get reimbursed for serving unprofitable customers. One of the largest portions of the universal service fund goes toward supplementing the cost of serving high-cost areas-areas where it costs more to serve a customer than the customer generates in revenue. Currently, the incumbent local exchange carrier, by default, is the carrier of last resort. It must deliver service to these unprofitable customers, but receipts from the universal service fund help ensure that the carrier recovers its costs. Maybe it's time to rethink the carrier-of-last-resort concept.

GTE recently proposed a plan that would give alternative carriers the opportunity to become the carrier of last resort for an area through an auction process. Whichever carrier pledged to provide service for the lowest cost would become the carrier of last resort and would be entitled to funding accordingly-certainly a step in the right direction.

Suppose we get even more creative.

We are already beginning to move into the world of the integrated communications provider that offers local and long-distance service. This includes virtually every competitive LEC, many Independent telcos and some of the IXCs-and the Bell companies are eager to join in, too.

What if the carrier of last resort could offer both local and long-distance service, with the shortfall on revenues for high-cost customers calculated by looking at both local and long-distance? Total costs would be higher, but for most customers, total revenues would be higher yet. And the person who rarely makes a long-distance call but would like to have the ability to do so in case of emergency would not have to shell out $36 a year.

If local service at a reasonable price is a national goal, shouldn't long-distance also be part of the equation?