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BellSouth getting out of the payphone business by end of 2002.

Doctor’s house calls, the milk man and payphones

If you think it’s tough to find a payphone now, just wait a while.

BellSouth has begun transitioning out of the payphone business, and will drop all 10,500 of its payphones in the state by December 2002.

Patsy Tolleson, director of external affairs for BellSouth, said the announcement was made so far in advance of the time BellSouth will completely exit the payphone business in order to give people enough time to consider alternatives.

It is possible that some of the payphone operations will be picked up by other telecommunications providers.

“There are other payphone providers,” Tolleson said. “There are actually 129 businesses purchasing payphone access lines in Mississippi accounting for about 4,500 payphones. So we expect some other providers to pick up most of these payphone locations. The prison industry is what really brought the advent of payphone competition to its height. So there is a lot of competition, in the prisons, particularly, for payphones.”

As cellular phones have become more popular, use of payphones has declined. Another reason given by BellSouth for its decision is that payphones are not a focus area of the company’s core strategy.

“This decision will allow BellSouth to focus on its core broadband, Internet and digital network offerings, as well as domestic wireless data and voice business and Latin America,” said Charlie Coe, president of BellSouth Network Services. “BellSouth has carefully evaluated the market trends in the payphone business, which indicate that our customers are opting for the new technology options we provide, including wireless telephones and interactive pagers.”

Tolleson said the company hasn’t actually lost money on the payphone business, but the usage levels have decreased dramatically.

“Cellular telephones, e-mail and interactive pagers are other ways to communicate that are becoming increasing popular,” Tolleson said. “Now you can send someone a page and it is no longer just a numeric page. You can send messages using the keypad on the pager. Then that person can turn around using the keypad and type a response to you.”

Payphones are not regulated by the Mississippi Public Service Commission, so there are no mandates that payphones be provided in a certain number of locations.

BellSouth has approximately 143,000 payphones in the Southeastern United States. The company said that while declines in payphone usage have been seen for a number of years, since 1998 usage levels have decreased dramatically.

In addition, the payphone industry has had to contend with problems collecting the rates that long distance carriers are supposed to pay payphone service providers for 800-number and other “dial-around” types of calls.

Mike Theis, president of Alternative Communications Technology Inc., which provides some payphone services in Mississippi, said “dial-around” is important to the issue of payphone profitability. Payphone operators are supposed to be paid 24.5 cents per call according to FCC regulations. But there is reportedly a big problem with companies not reporting the number of calls they get from payphones and hence not paying the 24.5-cent rate.

“A lot of prepaid card company owners don’t pay the 24.5 cents, which means they use the payphone for free,” Theis said. “Underreporting of calls is difficult to correct and is constantly being challenged. Maybe a company gets 2,000 calls per month from a payphone provider and only reports 200. That happens a lot and is under investigation.”

Theis said some of the payphone locations being given up by BellSouth are likely to be picked up by other providers. But other locations may not be profitable.

“With the pressure caused by cellular phones and prepaid calling cards, it makes it very tough for the payphone owners to make a profit,” Theis said. “It costs about $800 to buy a payphone, and to put that payphone on the wall will cost about $50 per month in phone line changes from BellSouth. And usually the lease payments on purchasing the phone are $50 per month. You have to make that much money from people using the payphones in order to make them worthwhile.”

He said there are three ways to make money off a payphone: coins put in the box for local and long distance calls, charges for operator service and 1-800 calls like 1-800-COLLECT.

“If the payphone owner gets that money, then he can basically make money on that phone,” Theis said. “Otherwise, he can’t. A lot of phones don’t do $100 per month back to the payphone owner. When those phones get pulled by BellSouth, they won’t be replaced because it won’t be profitable. I can tell you from being in the industry a long time that between 30% to 40% of all the phones that BellSouth is going to be pulling out will not be replaced simply because they don’t do enough volume.”

Pam Burgess, spokeswoman for AT&T, another company that provides payphone services in Mississippi, said that while AT&T doesn’t have any plans to pull out of the payphone business, neither is it planning on picking up the payphones being dropped by BellSouth.

“Our payphones are primarily at airports,” Burgess said.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.


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