American Telephone & Telegraph Co. wants to cut its basic interstate long-distance rates by an average of 3.8 percent and its business service prices by up to 6.2 percent to reflect savings in local network costs.

The cuts, totaling $697 million annually, would take effect Dec. 1, the day that residential and small business customers begin paying an additional 60 cents per month to pay the costs of maintaining the local phone network.As subscribers pay more of the costs to maintain the local network, long-distance companies pay less. The Federal Communications Commission requires AT&T, the nation's largest long-distance company, to send these savings back to consumers by lowering rates.

AT&T's competitors are not required to return these savings to customers, but the companies have tended to lower their rates in response to AT&T price cuts.