Incentives Run Amok in Local Long-Distance Arena

The pitch from MCI promised “big savings.” By using MCI instead of Pacific Bell, it said, Angelenos could save 31% on calls to Santa Barbara.

MCI might have included some of its true-false buzzers in its mailings. Here’s why: Pacific Bell, a local phone company, doesn’t handle long-distance calls between Los Angeles and Santa Barbara. Letters touting the bogus rate comparison went to 400,000 Southern Californians before MCI caught the error.

MCI’s goof is just one example of promotion run amok in California’s newly competitive local long-distance market. Consumer advocates say they’ve been bombarded with complaints about confusing deals being offered by long-distance carriers.

“People are not getting helpful information, what they need to help them make a choice,” said Melia Franklin, a spokeswoman for consumer group Toward Utility Rate Normalization.

Beginning in January, Californians have been able to choose a phone company for local long-distance calls, defined as those more than 12 miles away but within a local calling region. In the past, PacBell and GTE have had a monopoly on those calls, and rates were sky-high.

In their battle for a chunk of the $3-billion local long-distance market, MCI and other phone companies have ignited a promotional mania not seen in California since the long-distance market became competitive in 1984. The current free-for-all has brought lower local long-distance rates--but greater frustration for some consumers.

Oakland communications consultant John LaFleche complained that Sprint sent him an offer about a penny-per-minute promotion without telling him he didn’t qualify. LaFleche discovered he was ineligible when the discount didn’t show up on his phone bill.

“They actively encouraged and enticed me to use their service and then they overcharged me,” LaFleche said.

Sprint marketing director Paul Wescott said LaFleche, as a participant in one of the company’s long-distance calling plans, shouldn’t have been sent the offer.

“Apparently, it is the case that some people slipped through,” Wescott said, adding that the company is refunding money to customers who were “honestly confused” by the promotion (including LaFleche).

Long-distance companies say incentives, typically a discounted rate or an hour’s worth of free calling, are necessary to persuade Californians to dial cumbersome five-digit access codes before placing local long-distance calls. Unless consumers punch in the codes, calls are carried by the local phone company, either PacBell or GTE--a situation that gives local carriers a significant advantage.

The competition for local long-distance calling also appears to be influencing the battle for long-distance customers.

AT&T; is paying selected consumers as much as $100 to switch to its long-distance service, evidently on the theory that its own consumers are likely to choose it for local long-distance. The $100 incentive exceeds the size of some recipient’s annual long-distance bill.

An AT&T; spokesman said the latest round of enticements is related to “market conditions” in California. While the promotion isn’t new, AT&T; typically had dangled checks in the $25-to-$50 range.

In the case of MCI, the company, in its zeal for business, somehow overlooked the fact that Los Angeles-Santa Barbara is a long-distance call, not local long-distance. The rate comparison was part of a pitch offering MCI customers one free hour of local long-distance service.

“The only thing I can tell you is that this is a new market and errors like this are bound to occur,” said marketing manager Larry Leikin.

He said MCI customer service agents have been instructed to tell people who inquire that the rates are wrong. He said the blunder has done little harm.