Long Distance Shrinks Amid New Phone Technology

When was the last time someone called at an inconvenient hour to ask if you want to switch long-distance telephone companies? What used to be a frequent annoyance now appears to be a thing of the past because the long-distance telephone business has undergone some big changes.

On AT&T's Web site you'll be hard-pressed to figure out the company even offers long-distance telephone service. That's a big change from the 1990s when Ma Bell's pitchman Cliff Robertson was on television attempting to woo customers back from Sprint and MCI.

According to the Federal Communications Commission, the long-distance business reached its peak in 2000, when it raked in over $109 billion. By 2007, revenues were down to $58 billion.

Telecom analyst Jeff Kagan says the demise began in earnest after Congress passed the Telecommunications Act of 1996. It changed the ground rules for the industry and put regional Baby Bells in direct competition with their former parent, AT&T. Within just a few years, the local companies won that competition, and in 2005 Baby Bell SBC swallowed AT&T and took on its name.

"The competition is now between AT&T and Comcast; it's between Verizon and Comcast ... and Cox ... and Time Warner," Kagan says. Cable television companies are becoming large providers of telephone service at the same time telephone companies have gotten into the TV business.

Now the long-distance sales pitches are gone. In their place is lots of talk about bundling various products — TV, Internet, phone and cellular service — into one package. Long distance almost seems an afterthought, according to Jim Speta, telecom law professor at Northwestern University.

"One of the big changes over the past 10 years has been the movement of something like a quarter to a third of all long-distance minutes from land-line phones to wireless phones," Speta says.

There's also the emergence of Internet phone services like Skype, which are free if both parties use the software. Even for long-distance calls made the old fashioned way, prices are just pennies a minute. Speta says technology is part of the reason for that.

"There has been what we call the death of distance. And what that means is that, to a significant extent, the cost of transmitting locally is not that much different than the cost of transmitting long distance," Speta says.

The long-distance business is still there, but most of us aren't even aware of it anymore. It's focused on transmitting data rather than just voices, and it does that much more cheaply. So these days, even if someone does interrupt dinner to ask about switching long-distance companies, rather than feeling annoyed, it might prompt a trip down memory lane.

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