Long-Distance Price War Intensifies as MCI Enters the Fray

Strategic Insights -

MCI WorldCom Inc.'s latest move extends its popular 5-cent Sunday plan to Saturdays and parts of weekdays, intensifying the long-distance price war. The company's new plan, 5 Cents Everyday Plus, offers 5 cents a minute on state-to-state calls between 7 p.m. and 7 a.m. and all day Saturday and Sunday, and 10 cents a minute during weekdays, for a $4.95 monthly fee. This move is seen as a response to Sprint Corp.'s similar 5-cent calling program introduced three weeks ago. By halving their nighttime rates, MCI and Sprint are undercutting AT&T, the market leader, and passing along recent reductions in access charges.

Key Takeaways:

  • MCI WorldCom's 5 Cents Everyday Plus plan offers 5 cents a minute on state-to-state calls between 7 p.m. and 7 a.m. and all day Saturday and Sunday, and 10 cents a minute during weekdays, for a $4.95 monthly fee.
  • Sprint Corp.'s nickel-night program offers 5 cents a minute 7 days a week between 7 p.m. and midnight and 10 cents a minute during the day, for a $5.95 monthly fee.
  • AT&T charges 15 cents a minute around the clock with no monthly fee or 10 cents a minute with a $4.95 fee.
  • Industry analysts predict that the moves by MCI and Sprint will lead to a new wave of lower prices for consumers, forcing AT&T and other competitors to respond.
  • For a $4.95 monthly fee, MCI's 5 Cents Everyday Plus plan offers 5 cents a minute on state-to-state calls between 7 p.m. and 7 a.m. and all day Saturday and Sunday, with another option, 5 Cents Everyday, available for $1.95 a month with weekday calls billed at 25 cents a minute.
  • Sprint's nickel-night program is more restrictive, offering 5 cents a minute 7 days a week between 7 p.m. and midnight and 10 cents a minute during the day, for a $5.95 monthly fee.
  • Analysts predict that voice traffic will continue to erode as Internet and data traffic grows, leading to a decline in long-distance call revenue.

Statistics:

  • Long-distance rates per minute:

+ MCI WorldCom: 5 cents on weeknights from 7 p.m. to 7 a.m. and all weekend; 25 cents on weekdays with a monthly fee of $1.95, or 10 cents with a fee of $4.95.

+ Sprint: 5 cents on calls from 7 p.m. to midnight and a 10-cent rate at other times with a monthly fee of $5.95.

+ AT&T: 15 cents at any time with no fee or 10 cents at any time with a monthly fee of $4.95; 5-cents option on Sunday calling by request only.

  • Monthly fees:

+ MCI WorldCom: $1.95 for 5 Cents Everyday, $4.95 for 5 Cents Everyday Plus.

+ Sprint: $5.95 for nickel-night program.

+ AT&T: $4.95 for 10 cents a minute with a monthly fee.

Sources:

  • MCI WorldCom
  • Sprint Corp.
  • AT&T
  • Current Analysis (Jilani Zeribi)
  • Bank of America Securities (Rex G. Mitchell)
  • Forrester Research (Jeanne Schaaf)