Future of the Pay Phone: Outta Here or Higher-Priced? - MSNewsNow.com - Jackson, MS

What's Their Future?

Future of the Pay Phone: Outta Here or Higher-Priced?

By Brian Gregg
PlanetFeedback.com

The "pay" is either sleeping slowly from pay phones or creeping higher.

BellSouth, citing shrinking revenues, has decided to cut the cord on its 143,000 pay phones spread throughout the southeastern United States because of increasing costs and shrinking revenues.

Qwest Communications, on the other hand, has decided on a different tactic to the same problem: it will raise the price of pay phone calls to 50 cents, a 15-cent jump since its previous increase.

Are pay phones on the way out?

The moves by BellSouth and Qwest have experts speculating about several scenarios for the future of pay phones. Some think that other telephone giants may follow BellSouth's example and get out of the pay phone business altogether, while other observers think phone companies may raise their prices now that Qwest has made the leap.

Higher costs, lower use
In announcing the 50-cent calls, Qwest said its maintenance expenses for phones are increasing while usage is dropping. In the last five years, in fact, local use of pay phones has dropped nearly 50%, and half of all pay-phone calls are completed using a toll-free number or calling card.

The 50-cent price hike, to be phased in over the next four months, will affect 96,000 Qwest phones in 14 states.

Old technology?
For all phone companies, the reality is pretty simple. With 97 million people in the nation using cellular phones, the number of consumers willing to drop 35 cents into a payphone has dropped dramatically in the past few years.

"BellSouth has carefully evaluated the market trends in the payphone business, which indicate that our customers are opting for the new technology options we provide, including wireless telephones and interactive pagers," said Charlie Coe, president of BellSouth Network Services.

Karen Walls, senior staff associate for the Telecommunications Research and Action Center in Washington, D.C., said she hopes BellSouth's decision is not a growing trend because consumers will suffer.

"There are a lot of people, like me, who don't have a cell phone because they don't use them a lot," she said. "It's not really worth their while to pay to have a cell phone if they're not going to use it a lot."

Independents may step in
The American Public Communications Council, Inc., a trade group representing 1,600 independent payphone providers, denies the payphone business is dying.

Council president Vince Sandusky said profits are shrinking because long-distance carriers are not compensating phone operators for dial-around calls, such as 1-800-COLLECT or 1-800-CALL-ATT . According to Sandusky, payphone operators lose $288 million a year from these types of calls.

Still, he expects independent payphone operators to answer the call when BellSouth leaves the business in 2002.

"It is evident that with BellSouth exiting the business, independent PSPs (payphone service providers) must step up and fill the gap left by BellSouth to ensure that payphone service remains available to all Americans, particularly the 5.4 million households lacking residential phone service," Sandusky said.

Payphone calls still growing
Sandusky's group cites several statistics as proof that payphones will survive:

· Thirty percent of American households do not have cellular phones.
· A study by Frost& Sullivan, an international marketing consultant, found that 16.5 billion payphone calls were placed in 2000, up from 14.1 billion in 1997.
· The Federal Communications Commission estimates 5.4 million households do not have residential service.
· There are about 2.3 million payphones nationwide, and many are being enhanced with state-of-the-art technology.

Sandusky said payphone operators are working to adopt new technology so those who can't afford cell phones, computers or wireless communications can still gain access to the Internet and e-mail.

"Payphones are not going away," he said. "They are evolving to meet the current technological needs of consumers."

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