AT&T announced Friday it would lower its interstate long-distance prices by $637.5 million per year as of midnight.

The total price reduction is $98.5 million more than the reduction AT&T proposed last month to the Federal Communications Commission. The additional cuts will be applied to services used by residential and small-business customers, the company said.With the additional cuts, prices for the basic long-distance service that both consumers and business customers use will drop an average of 1.9 percent.

The decrease, AT&T's eighth since 1984, brings total interstate long-distance price reductions to more than 39 percent in the five years since the breakup of the Bell System, the company said.

In a Feb. 15 filing with the FCC, AT&T initially proposed price cuts on services used by both business and residential customers, including significant reductions on key business services to meet intense competition in the business market.

That proposal reflected reductions in the fees AT&T and other long-distance companies pay to local telephone companies for access to customers' lines. Further reductions in those fees ordered by the FCC since the Feb. 15 filing allow AT&T to reduce rates by an additional $98.5 million, bringing the total decrease to $637.5 million, the company said.