WEco and the Bell Labs were always working to reduce costs. So do most buinesses, Wes Leatherock snipped-for-privacy@aol.com snipped-for-privacy@yahoo.com
So much so that if you're a VoIP subscriber today there is no additional cost for long distance calls.
But Bell was cagey, they were keep LD rates artificially high to subsidize the local service.
In all fairness to Bell - that was at the bequest of the various state PUCs who saw long distance as a luxury or business service. Regular people wrote letters by post for interstate communication to friends and relatives.
In effect, taxing long distance to subsidize the local service was a political decision. It fell apart as all subsidies eventually do, when businesses got tired of paying inflated rates and challenged the laws that prevented alternate services like MCI.
The goal of the regulators was universal service. The "entry" rate for the most basic residential and business phone services was intentionally kept as low as possible to encourage as many people as possible of modest means to have a phone. This applied to tiny businesses as well. Premium services, both toll calls and equipment, cost more intentionally.
Also note that Bell rates were intentionally ordered to be uniform, by air miles, not actual transmission costs. So a low-cost corridor, such as Chicago to St. Louis ended up being priced above cost, while a high cost corridor, such as in Montanna, was priced below actual cost.
What sleazy MCI and certain regulators did was allow MCI to skim off the cream of the business--to undersell AT&T in profitable corridors but not have any of the high cost obligations. Indeed, Bell attempted to respond with a lower rate Telpak offering and the regulators denied it. (Bell did offer WATS lines for high volume long distance users.)
MCI didn't bother handling any 'difficult' calls, only the easy ones. Customers having trouble were simply told to use AT&T instead (by code, not by name.)
The kicker is TODAY we STILL subsidize low-end users, only this time it's an explicit line item on the bill for _all_ local subscribers. I don't know if cable, VOIP or cell phone users have to pay it. They certainly should since the rest of us do.
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