NEW YORK -- Verizon will increase the price of a local payphone call to 50 cents in most of the markets it serves. At the same time, the company also announced that it will experiment with a 10-cent-a-minute price for local payphone calls in some locations.
Verizon operates 430,000 payphones in 33 states.
The price change follows an intense and ongoing cost-cutting campaign at Verizon's Public Communications subsidiary, the company unit that operates payphones. The effort was waged to combat declines in both payphone revenue and use resulting from stiff competition from wireless services. Without the rate increase, the widespread availability of payphones is threatened.
The company will begin converting payphones in most markets immediately to the new price of 50 cents for a local call of unlimited length. In some areas, market conditions are not right for a price change at this time.
The process of changing prices involves changes at each individual phone and will take several months to complete.
Qwest and SBC Communications announced 50-cent pricing for local calls earlier this summer.
With the new 50-cent rate, Verizon is eliminating timed calling in New England and other areas where callers paid 35 cents for an initial block of time and then paid an additional amount if they talked longer.
Later this year, Verizon also will test 10-cent-a-minute local calls in certain markets to assess customer acceptance and its impact on revenue. The special 10-cent-a-minute local call payphones would be placed in high traffic areas such as commuter transportation hubs, schools, factory break rooms and on busy streets and neighborhoods.
"With this low rate, we hope to entice callers back to the payphone who need to make a quick call," said Paul Francischetti, vice president of marketing and business developmen for Verizon Public Communications which operates Verizon payphones. "And at the same time, the 50-cent price provides a very good value to customers who make longer calls."
The increase to 50 cents for most payphones follows erosion in payphone usage of about 23 percent over the past 2 1/2 years, when wireless services became a popular way of calling for people on the move.
At the same time, revenue has decreased overall as a result of federal rules that compensate payphone companies just 24 cents, regardless of how long a call lasts, when callers use pre- or post-paid calling cards or dial-around services like collect calling services.
However, Verizon believes a 10-cent-a-minute rate could draw many more users to payphones.
"We're committed to market-based pricing. If customers can communicate what they need to quickly -- like to report what train they'll be on, or that soccer practice is over -- low, per-minute pricing would meet their needs and increase usage of our payphones," Francischetti said.
Verizon introduced the 10-cent-a-minute pricing option this spring at Union Station in Washington, D.C., and at 30th Street Station in Philadelphia, using phones clearly marked with the alternative price. They were placed alongside phones with the normal 35-cent price. Results show it could be worthwhile to expand the experiment to other sites.
Verizon has a similar service in place at New York's Penn Station, where New Yorkers can make a 30-second short-distance toll call for 25 cents.
"We're meeting the challenge from alternate services and technologies," Francischetti said. "We're making sure our phones are located where people need them, that they're functional and clean, and that they have the features customers want. We're experimenting with different types of equipment and with Internet access via up-to-date work station kiosks."
In addition, he said, the company is reviewing the profitability of its payphones, removing some phones to cut costs and increase the return from phones that remain. In most cases, this involves taking out one or more phones from a bank of phones, improving the performance of those that remain. When removing phones, the company rarely abandons a site completely.
Verizon continues to aggressively cut the overall costs of running its payphone business. "Our benchmarking studies show that we run one of the most efficient payphone businesses in the country," Francischetti said.
Verizon also will be increasing the price of local directory assistance dialed from payphones to 50 cents in areas where it is below that price. Verizon Public Communications must recover the cost it incurs in providing directory assistance to its payphone customers.
Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services. Verizon companies are the largest providers of wireline and wireless communications in the United States, with 125 million access line equivalents and approximately 28 million wireless customers. Verizon is also the largest directory publisher in the world. A Fortune 10 company with about 260,000 employees and more than $65 billion in annual revenues, Verizon's global presence extends to 40 countries in the Americas, Europe, Asia and the Pacific. For more information on Verizon, visit www.verizon.com.