Phoning Home: Students Decry Hefty International Rates

With the first month's bill from the Harvard Student Telephone Office (HSTO) comes a flyer trumpeting cuts in international rates.

But even after the cuts, Harvard's rates, both domestic and international, are far higher than those available to residential customers across the country.

Harvard officials say their hands are tied by a dated contract with MCI WorldCom that leaves the long distance carrier to walk away with substantial profits while the University is forced to pass the high prices on to break even.

As Harvard looks to reevaluate its contract this year, MCI WorldCom's rivals are bucking for Harvard's business. If Harvard plays its cards right, the renegotiations of rates could mean substantial savings for students, who paid $4.5 million in HSTO bills last year.

And one company says it could save students some 20 percent on domestic rates.

In the meantime, students are stuck with rates that, while comparable with those at other colleges, drive the cost of phoning home out of this world.

Calling Home Costs

Domestic long distance rates from the HSTO vary from $0.12 to $0.29 per minute, depending on the time of day.

On the other hand, the three leading commercial long distance service providers, AT&T, Sprint and MCI WorldCom, all advertise dime-per-minute rates for residential customers. AT&T offers a nine-cent per minute plan for customers who will receive their bills online and MCI WorldCom recently launched a plan offering domestic calls for a nickel-a-minute on Sundays.

"It's outrageously more expensive than at home," says Tracy M. Long '00.

It doesn't get any cheaper running for the border: International callers are hit even harder. Canadian callers pay $0.06 to $0.13 more per minute than market rates for a weekend call home.

"It's a real hassle. Whenever I telephone my parents, I have them immediately call me back with their cheaper long distance rates," says Paul D. Todgham '99, co-prime-minister of the Harvard Canadian Club.

Students calling the U.K. are still worse off, hit with a charge of $0.30 per minute, two-and-a-half times the going rates offered by all three service providers at $0. 12.

Hands are Tied

Robert E. Grenier, manager of the HSTO, is quick to explain that Harvard is not getting rich off calls to Mom and Dad.

"We're not getting that rate--let me tell you that," Grenier says.

Harvard's contract with MCI WorldCom is at least three years old, dating back to a time when phone companies were charging residential customers more.

"At that negotiation, we were trying to hedge against the rates going up, which seemed a possibility with changes to telecom company regulation," he says.

The strategy backfired. As the three major carriers became engaged in a bidding war for customers, the competition drove rates way down.

The HSTO keeps track of its revenue and adjusts rates accordingly, aiming to just break even, Grenier says.

"We're a non-profit organization, so if we're ever in danger of making any money we jump out and lower our rates," Grenier says.

Last year, domestic rates dropped and HSTO lowered international rates this August.

HSTO plots proposed rate changes against current calling patterns to forecast the impact on revenue. Models predicted a $300,000 drop after the domestic cuts and another $200,000 for this year's international cut.

These funds were used for projects such as the wiring of dorm rooms for the Ethernet. The completion of those projects made room in the budget for the rate decreases.

Grenier says connection fees and features are subsidized through the long distance rates, which are the only service on which the HSTO charges more than its costs.

While the HSTO is able to alter specific rates, it is ultimately constrained by a mandate for balanced budget and external costs that prevent it from being competitive with market offerings.

"Let me just say that we are going to be negotiating and re-negotiating our long distance carrier arrangements in the future--within the next year--and recent changes in the residential fees landscape are at the top of our agenda," Grenier says. "We'd like to be competitive against the current advertised residential market."

Yale Is The Worst

Other universities distribute their costs differently, but though they may beat Harvard on either domestic or international rates, none of the Ivy League schools surveyed by The Crimson is lower on both counts.

Only Yale has higher rates for both domestic and international calls.

MIT came close, offering students domestic rates as low as $.09 per minute and near-market-level international rates with a $3 monthly long distance access fee.

Schools such as Cornell, Princeton, the University of Pennsylvania and Columbia all bear outdated long-distance carrier contracts. Each chooses to place an even heavier burden on international students than Harvard does by balancing lower domestic rates with international calling costs that exceed even Harvard's rates.

"Our rates were structured in the mid-1980s, and we are now going through a process of recosting everything," says Patricia A. Searles, deputy director of academic technologies at Cornell University.

Searles says some feel that they are being overburdened, but any kind of redistribution would lead to a hike in rates for other services.

Cornell's international students are hit the worst, she says.

"You can pick up any newspaper or magazine and hear the international rates that are offered to consumers, and because our rates are based on business rates, ours are substantially higher. It's frustrating," Searles says.

Campus telecom offices act in students' best interests, says Jeri A. Semer, executive director of the Association for Telecommunications Professionals in Higher Education (ACUTA), of which Harvard is a member.

"Colleges and universities are driven to set the best possible rates for their students because they know that students will see lower rates advertised and that will cause confusion," says Semer. "Unfortunately, the colleges themselves are somewhat stymied by the fact that they can't get those rates."

Future Rate Cuts?

With competition fierce among companies and Harvard looking for a better deal, the next school year could ring in savings.

Upcoming renegotiations for Harvard and other schools have significant implications for the three major long-distance carriers.

Long-distance fees from students in residence are big business for the carriers: the three largest collect hundreds of millions of dollars in revenue each year from them. But AT&T is making moves to corner the market by beating its competitors rates, making an offer that neither Sprint nor MCI WorldCom would match.

Jay P. Summerall, director of college and university sales for AT&T, said his company is prepared to make major changes in contracts between the long distance carrier and the University.

"It's tough for a university to provide service at a rate that's competitive with what consumers pay unless you take the cost of the back bone down. The business model is challenging," Summerall says.

AT&T has launched a program that replaces the traditional model used at schools including Harvard, where the carrier sells to the school and the school to students.

"This arrangement is effectively an outsourcing. AT&T would have to administer billing and customer service in order for this to be offered," Summerall says. The University and Bell Atlantic would continue to control local service and prices for options such as voicemail.

Summerall explains that this program enables students to take advantage of all rate plans advertised by AT&T, including the $0.10 per minute plan.

Though AT&T would take over HSTO, the arrangement would not affect the Admin Telephone Services office, which manages faculty and staff service, nor would HSTO cease to exist.

Summerall says he doesn't see any downsides for students and expects AT&T will bear a decrease in revenue to be competitive.

"There could be a financial or organizational downside for the University. I don't know--I would think that there would be plusses and minuses," Summerall says. "We think this is a good program for students."

Summerall says that this structure has been implemented in a couple of schools in the Northeast as a pilot, though it is new this year. He didn't disclose which schools, however.

"This has become our lead offering in our current negotiations with schools," Summerall says.

University officials could not be reached in time to comment on the AT&T plan, but to students who pay anywhere from a few cents to several thousand dollars in phone bills, it's an easy call.

"My friends at other schools brag about their $0.10 plans," says Michael A. Blaustein '02. "I think Harvard should definitely negotiate and get a better deal."

--Luis S. Hernandez Jr. contributed to the reporting of this article. Small Change? Joshua H. Simon Crimson Staff College's charge their students far more for domestic long distance than any of the big-three residential carriers. College Carriers  20 Minute Domestic Weeknight Call  35 Minute Domestic Call Noon on Sunday Harvard  $2.60  $4.20 Yale  $2.60  $4.55 Stanford  $2.00  $3.15 Cornell  $4.76  $3.43 Princeton, U.Penn, Brown  $2.00  $3.50 Residential Carriers  20 Minute Domestic Weeknight Call  35 Minute Domestic Call Noon on Sunday   AT&T One Rate Online  $1.80  $3.15 AT&T Connect 'N Save*  $1.70  $3.15 Sprint Sense  $2.00  $3.50 MCI One Savings  $2.00  $1.75 *IP calling alternative