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February 25, 2002

Miller: Long Distance Companies Agree to Disclose Key Information in Ads

DES MOINES. Attorney General Tom Miller said Monday that AT&T, MCI Worldcom, and Sprint have agreed to clearly disclose if there are extra costs or limitations that affect the basic rates featured in advertising for the companies' long-distance calling plans.

"Our concern was that many ads failed to adequately disclose crucial facts, such as additional monthly fees or important limits on when the long-distance plan was in effect," Miller said. Twenty-three states and the District of Columbia conducted a two-year investigation of the matter and reached a settlement last week with the three large carriers.

"Tiny print flashing across the screen for just a few seconds can be overwhelmed by distracting audio and video and claims that calls will cost just a few cents per minute," Miller said.

Miller said the states argued that ads sometimes failed to clearly disclose several key points:

  • Additional monthly fees often were charged in addition to per-minute rates advertised to be as low 2, 5, or 7 cents.
  • The low rates often were available only at night or on weekends.
  • Low rates were restricted to inter-state calls and in-state calls could be much higher.

"Pennies-per-minute can be very misleading," Miller said. "People's bills could be much higher than they expected, especially if they made only a few calls per month, made in-state calls, or made calls during the day instead of at night, for example."

The companies denied wrongdoing but will pay the states a total of $1.5 million by March 7 for costs of investigation and consumer education. Iowa's share is $35,000.

Under the formal agreement with the states, the companies must "clearly and conspicuously" disclose mandatory additional fees, such as per-month fees charged by the company, and any limitation on the rates, such as calls being limited to certain times of day and to state-to-state calls.

"Clear and conspicuous" means a disclosure must be "readily noticeable, readable, and understandable," under the agreement. Audio disclosures must be given "in a volume and cadence sufficient for a consumer to hear and comprehend it." Visual disclosures "shall be of a size and shade, and shall appear on the screen for a duration sufficient for a consumer to read and comprehend it." The settlement agreement contains comparable terms for print advertising.

Miller offered several tips to consumers for selecting long distance service:

  • Shop around. Determine your calling patterns and what kind of plan works best for you. You can find information at company web sites or literature.
  • Consult independent organizations that help you calculate what service may be best for you:

  • Don't make a snap decision in response to a phone call or ad. Get the details first in writing.

"Telecommunications is a complicated area for consumers," Miller said. "It's hard enough to make the right choice when you have all the information. This agreement should go a long way to give consumers a fair shake at knowing what their real costs will be for long distance service."

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