WorldCom Inc. is delving deeper into the local phone market with a new initiative that offers unlimited local and long distance calls for a flat monthly fee of about $55.
The Neighborhood, announced Monday and offered by WorldCom's consumer MCI Group, will place the company in direct competition with local Bell companies such as Verizon Communications Inc. and SBC Communications Inc.
The plan is available immediately in 32 states and provides "all-you-can-eat'' local and long distance calling in the United States _ a new offering in the industry, said analyst Pat Comack of Guzman & Co. in Miami. However, at costs between $49.99 and $59.99 a month, Comack questions how competitive The Neighborhood will be. He said consumers typically spend $55 a month for traditional local and long distance service already.
"I'm not sure how much 'all-you-can-eat' is going to make a difference,'' Comack said. "I think they'll have to lower the price to increase volume.''
In February, long-distance carrier AT&T Corp. launched a new long distance calling plan that allows residential customers to call other AT&T subscribers and talk as long as they want for a flat monthly fee of $19.95.
Unlike the WorldCom offer, the AT&T Unlimited plan levies 7 cents per minute for calls to non-AT&T subscribers and includes no local calling component.
To reach local customers, WorldCom will have to pay the Bell companies for access to the calling network in local markets, an arrangement provided for in the Telecommunications Act of 1996.
WorldCom said declining fees to use those networks make such service more feasible. It had offered local phone service in 11 states.
"As more and more states reduce the unjustified fees local phone monopolies charge competitive local carriers like MCI to access the public phone network, more consumers will begin to experience the long-awaited benefits of competition,'' said Wayne Huyard, the MCI Group's chief operating officer.
Customers will receive one bill for all home phone service under the plan. WorldCom said it expects to offer the service nationwide by early next year.
Analysts say WorldCom hopes to slow declining revenue in the MCI Group, but it's too early to say how much of a boost the new service will provide. Long distance price competition has battered the MCI side of WorldCom's business and prompted the company to create an MCI tracking stock last year.
WorldCom shareholders approved the restructuring to separate the struggling voice operations from those in the WorldCom Group, which includes the high-growth data, Internet and international businesses.
In trading Monday on the Nasdaq Stock Market, WorldCom Group shares rose 6 cents to close at $5.07. MCI Group shares climbed 3 cents to close at $4.75, also on Nasdaq.
Amid an ongoing Securities and Exchange Commission investigation into accounting and loan practices and worries about billions in debt, WorldCom stock has lost about 65 percent of its value this year.