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In the Public Interest
Telephone Industry Abuses and Scams
By Ralph Nader, Washington, DC
Gene Kimmelman of Consumers Union has been following the telephone industry for many years, both before and after the notorious deregulatory Telecommunications Act of 1996. This act was supposed to benefit consumers by increasing quality competition between local, long distance and cable operators. Here is Kimmelman's shorthand evaluation of the result of the Act on your pocketbook and precious time: "Cable rates, since deregulation, are up almost three times faster than inflation (more than 30%), local phone rates are up, and the majority of consumers are actually paying the same or more for long distance, and no sign of meaningful competition in the local phone market." He rendered these judgements on the December 16 edition of CBS's Sixty Minutes. Anchor Steve Kroft produced an excoriating report of a law, backed at the time by the industry, that has boomeranged against consumers in favor of the selling companies, including the biggest telephone companies.
Connecticut Attorney General Richard Blumenthal has been investigating abuses. "Scams and schemes" and "competing by cheating" are the ways he described the rip-offs by AT&T, MCI, Worldcom, Sprint and Quest, whom he has sued. One such scheme, which has been experienced by large numbers of residential consumers, is switching their telephone service to another company without their permission. This illegal practice is known as "slamming." Blumenthal has also taken AT&T to court for continuing to send people bills after they had indicated their termination of the company's service.
Deceptive television advertising is another widespread practice. Recall the 7¢ a minute come-on. Kroft gets the nub: "But it's not 7¢ a minute anytime, anywhere, when you factor in the restrictions, the monthly fees, the charges and the surcharges that appear in fine print, which you would need a remote control, slow motion and high-definition television to read." Or, as Blumenthal says, "The fine print is illegible and meaningless."
Kroft spent "months trying to get interviews with AT&T, MCI, Sprint and Quest." They refused to be interviewed and referred his request to their trade association, as befits a cluster of corporate hucksters too often plying the same fraudulent trade.
The 1996 Act was supposed to deconcentrate the telephone industry from that year, when 94% of local phone service was controlled by the seven regional giants called the Baby Bells. Now, after the post-1996 merger wave, just four of these Baby Bells control 93% of all local phone service.
You used to be able to get through quickly to a human being in the phone company. Now you're hanging on the phone with "Press one, press two …" and once you get a voice, it is increasingly that of a robot who doesn't know discretion, judgement, or the answers to unprogrammed-for questions.
Then there are the deliberately inscrutable bills you receive. As Mr. Blumenthal himself says: "I don’t understand my phone bill a lot of the time. I know a lot of people, very informed, very smart, who don't either. And I think that's the result of a deliberate strategy on the part of the phone company."
Most people give up on understanding their phone bill. Why does Sprint charge its customers a 1% monthly surcharge to pay for its property taxes? Phone companies are required by law to pay 6.9% of their long-distance revenue to subsidize rural phone service and Internet service for schools, libraries and hospitals. So, what do phone companies do? Turn the charge into a profit generator by charging customers 10%-12%. The hapless Federal Communications Commission has asked the carriers the reasons for the markup. According to the FCC's Dorothy Attwood, the so-called regulatory agency hasn't gotten satisfactory answers yet.
Whatever fines are exacted from these corporate crooks by state attorney generals, state commerce commissions or the FCC, they are just a cost of doing business. The gouging goes on and on. Congress continues to do nothing about this problem. Television programs like Sixty Minutes do their job by providing clarity: law enforcement against these corporate crimes and fraud scratch the surface; and private civil lawsuit litigators, like John Bell, of Augusta, GA, achieve sizable settlements after years of persistence. But at the end of the day, little changes. The companies—big and small alike, with few exceptions—pocket illicitly far more zillions of dollars than they have to give back. These corporations are not just mostly above the law; they are beyond the law.
Nothing seems capable of stopping these abuses until the state and federal governments require these companies to insert printed invitations to their customers in state after state, offering them the opportunity to band together into full-time consumer protection groups with full-time staffs. As the old saying goes, it takes organized people to take on organized money.
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