Bruce Kushnick has been dubbed everything from the "Leading Visionary in the Telecom Industry" to another "Bitter Bell Critic"; but what's certain is that nobody in the industry is ignoring him. With decades of experience in the industry, Kushnick has single-handedly taken on the telcos in recent years for their convoluted billing practices, fuzzy math, and failed promises to deploy high speed data services.BBR
: You've been in Telecom for quite some time, aside from your bio
on your website, what can you tell us about what experiences pushed you into the role of exposing the Telco's dirty laundry and acting as a consumer advocate? Bruce
: First some background. I started New Networks Institute
in 1992 to examine the "new Networks", the fiber-optic new networks that were supposed to be rolled out by the bell companies. The other task was to examine the impacts the creation of the Bell companies had on telecommunications. For those of you who don't know, prior to 1984, there was only one monolithic phone company --- AT&T. It owned 22 local phone companies, almost all long distance, provided the phone equipment, etc. It employed over one million people and was the magnet for anyone interested in telecom primarily because it owned Bell Labs, the premier research and development firm.
"Divestiture" as it was known, created seven large companies and each one wanted to be another AT&T. However, instead of caring for their local phone customers, the companies started expanding into everything else -- from real estate and computer stores to international cellular and phone companies.
From 1982 through 1992 I had worked for all of the local and long distance phone companies. I was the one of the guys who predicted "press one for this, press two for that", realizing that the addition of technology to the then virgin telephone networks would change every telecom application. I predicted the eventual rollout of Caller ID in 1986, took another 7-10 years to get fully rolled out.
However, I went to my Aunt Ethel's house in 1992 and realized that every charge on her bill had been hyped up, with hidden charges all over the phonebill. I had never looked at a phonebill in detail before and so, I got so annoyed that I typed into a database 168 months of her bills. What did I find? By 1985, in part because of divestiture, many phone services were "deregulated", meaning that the company could keep the profits, and by 1992, the price for the exact same local phone service was up 250%. --- each item was now extra. Prior to 1982, phone service was bundled -- unlimited local, directory, a phone and the wire was all $8.19 in New York.
My Aunt had paid over $1000 per rotary telephone, $360 per inside wire, (she had two phones and wires) and she was living on a pension and social security. Now for all of you techno wonks, I ripped the phone out of the wall and bought her phones, but I discovered that 75% of everyone had paid hundreds of dollars for a used piece of equipment that cost $22 to make. (NOTE: NYNEX/Verizon had made almost $400 dollars in the phone rental because of hidden charges)
This lead me to question virtually all of the Bells business announcements and dealings.
So I went back to my phone company clients and they said "if you want to lose our business, keep talking". I felt deceived by my clients. I had seen behind the curtain of their money machine and it was clear that they couldn't care less about the customers. I also felt I needed to pay pennance since some of the work I had done allowed them to make even more money with Caller ID, etc......Caller ID cost pennies to offer, but the companies can charge $5-$7 bucks a month.
So, in 1992, I then undertook one of the largest research projects -- came to 1900 pages, 900 exhibits, etc -- and I went through every part of the business, including competitive issues, revenues and profits, phonebill charges, overseas investments, etc. I then did a press conference and suggested that the Bells should be broken up and there should be a second "Divestiture".The first Divestiture hadn't gone far enough. It had created 7 new monopolies which thought of themselves as free market companies, even though they were Utilities who controlled the wires into customers homes and offices. I also pointed out that the FCC didn't have the will or ability to enforce the laws, so whatever law that would be written wouldn't work -- (In 1996 the Telecom Act was written to open the networks -- we're still waiting for competition.)
But it got worse -- In 1994 I wrote "The Information Super-highway: Get a Grip", which prophesized that the Bells would never fulfill any of their proposed fiber-optic new services. These companies had outwardly mislead customers and regulators that they would rewire 50% of the US by 2000.
And for some unknown reason, call it destiny or revenge for Aunt Ethel, a gang of us have been trying to hold the Bell companies accountable for their sins -- the total disregard of the term "public interest".
In 2002 we created Teletruth
as an experiment in Advocacy because as I will explain later, the situation today is way worse that 1992. The monopolies have control over the parts of Congress, numerous state legislatures and Commissions, and even the FCC. And they are being treated as 'free-market' companies, even though there isn't enough competition in most areas to lower prices. Also, the current FCC has been totally useless in fixing the competitive issues that have plagued the industry and cost hundreds of companies to go belly up.
So what would you do if you found billions of dollars of customer overcharging by your clients? Would you simply shut up or try to hold them accountable? And at what personal cost? The funny thing is that my original plans called for a two year project -- and then back to consulting. But as I turned over more rocks, I realized the situation was a lot worse than I had ever imagined. (You can read the summarized data from the research project see: "The Unauthorized Bio of the Baby Bells
" with Foreword by Bob Metcalfe. -Ed.) BBR
: Surely over the years the telcos have sent their lawyers after you; do you have any entertaining stories of close calls or absurd warnings from legal departments? Or have in fact the telcos left you alone? Bruce
: Well, beside the death threats in the early days, two things happened that pissed me off. First, in 1993 after a press conference with my publisher Probe Research, SBC wrote a memo to the other companies to stop buying the research -- costing me my livelihood.
But the funniest and the one that convinced me just how crooked the system is --- I was disconnected in 1993 and I call the NYNEX office and they tell me my 'wife' disconnected me. Since I'm not married, they write me stating -- "it was a mysterious-third party" that disconnected me. Being paranoid, I go to some of my old Bay Ridge friends who-know-somebody-who-know-somebody, just to see if someone took a "hit" out on me.
After more investigation of the phone info, I realize it was the phone company's error --their 30 year old records were all screwed up and they disconnected the wrong apartment. I filed a complaint with the Public Service Commission (PSC) who told me it was my fault, so I appealed. After a year and a half, there was a phone-hearing, and while Verizon admitted guilt, they said they wouldn't compensate for my time. Worse, I asked the PSC person why he didn't defend me -- "I'm a wimp. I have to deal with the NYNEX people every day." However, after further questioning I found out that he had worked for NYNEX for 22 years and after retiring worked for the PSC....
As far as coming after me, it's hard to argue with anything I say because I use the Bell company data as well as other unimpeachable sources. However, Verizon has, of course told reporters lots of lies. I really liked this one from the Boston Globe -- "These are two individuals, not a group," said Hoey, referring to Kushnick and his auditor, Tom Allibone. "Their Web site should be called Telebaloney, not Teletruth." --- If you go to our web site our Board of Advisors has over 25 people listed, and most are active. But what can you expect when your spokesmen's last name is "Who-Wee.", or when your main spokesman, James Earl Jones, doubles as the voice of Darth Vader.
For the record, I'll debate any Bell company at any public forum or TV, radio or cable show. BBR
: You recently gained some attention
by pointing out that Bell Atlantic never delivered on promises to bring fiber to the door of Pennsylvania residents in exchange for regulatory slack back in 1994. Can you update us on this? Is there any legal progress being made? Bruce
: For those of you who don't believe me about the fiber-optic plans, let's start here -- you need a good laugh.
So, from 1991 to 1995 virtually every state in the US applied for "Alternate Regulations" to pay for the "information superhighway" -- This happened in NY, Texas, CA, MA, Ohio, Illinois.... it goes on and on.
However, everyone reading this should know that the promises for broadband started with ISDN and the original changes in state regulations began in 1986-1991 to give the local phone companies more money to pay for network upgrades.
The state info-highway promises started in New Jersey in 1991 with a study by Deloitte & Touche called "Opportunity New Jersey" and it was so successful that they Consulting firm cookie-cut it to "Opportunity Pennsylvania", "Advantage Ohio", "Advantage Indiana", "Opportunity Illinois".
And the promise was -- we will rewire the entire state, just take away the regulations that look at out profits and give us Alternate regulations that only look at the retail price. The bottom line is that while the FCC crows, the broadband action was all in the states because the local phone monies are STATE controlled.
In Pennsylvania, the promise is for a 45 MPS, two-directional service to the home and office, in ALL areas, rural, urban, suburban, and half of the state is supposed to be rewired by, stop laughing, 2004. This is not ISDN or DSL over copper!
This is one of the only state commissions that decided to hold the Bell company accountable for their promises. So we filed a complaint
to the state. Our finding is that each household paid approximately $785 for a service they never received. About $2 billion was collected by year-end 2002. Worse, it looks like Verizon also funded its entire DSL rollout free of charge -- paid for through these funds.
We estimate that across the US, the Bells collected over $75 billion in extra phone fees and tax deductions for services that customers will never receive.
How they made this extra money was massive staff cuts and not spending any extra money on construction. Local phone service has a 45+% profit margin, so the less expenses, the more profits. From the readers' perspective ---- Call Waiting cost less than 1 penny to offer. So if you just get more people to buy it at $4.50 -$7.00 per month. It's all profits. And note, the network upgrades for Call Waiting, and all calling features, including Touchtone service also came directly from customers' phonebill charges, not the company shareholders.
The excuse was that these new features would speed up network utilization and thus have major technology savings. How sick does it get? Some states, such as New Jersey, still charge a separate fee for Touchtone, a service that cost $0 to offer.
We believe this is also a case of fraud. The companies lied about their ability to deliver these service to get changes in the law to get more money. We know they couldn't build the networks in 1994. As a former consultant, I had lots of friends still working for the companies who confirmed that the technology wouldn't work, not at the prices they were quoting.
The status is -- If you're a citizen of PA, read our petition
and try to order the service and write us and we'll forward it to the Commission and the other media --- Right now we're on hold.BBR
: Can you chime in on Verizon, SBC, and BellSouth's recent announcement that they'd come to an agreement to standardize their fiber deployment? While much of the press remains skeptical, some analysts, like DSLPrime's Dave Burstein, seem to think the telcos are finally taking FTTH seriously now that cable companies are barking at their door (some might suggest the door has been knocked down and they're rummaging through the fridge). Your thoughts? Bruce
: While Dave is a friend of mine, I believe history should talk --- For this interview I created a new web page (available here
, -Ed.) with links so you can read just some of the materials we've written/collected over the last decade on the subject of the Bells' failed broadband roll outs. The cartoon says it all.
Here's what's really going on. The current proposed FCC law will block the competitors use of the Bells' networks for broadband, including line-sharing -- Where the CLEC can get the DSL portion of the line to use. In fact, the CLECs will probably be restricted from even using any parts of the networks that are upgraded with fiber. Meanwhile, another bill in Congress last year by Tauzin and Dingell, would do about the same thing, and we're expecting this bill to come back soon.
So, if you read the Bell's statements, what you have is them blowing more smoke in everyone's face. They will continue to put out totally misleading reports about what they will be doing next. I not only don't believe them but I believe that they should also be held accountable for their statements through legal actions when they don't come through, since many other companies are also betting on these new networks.
And, If you believe that customers have already been paying for any new networks, then the most obvious question is -- how can the Bells simply get what customers' paid for as private property? Why haven't the regulators, instead of giving these companies more money, gone back to examine how much money they've already gotten through promises they will never keep.
Just how harmful is it? Here's the Bell Atlantic 1996 broadband announcement
with Lucent for a six and one half year fiber-optic contract --- now imagine that you sign the deal and retool only to find that the networks you were planning on supplying services are not real.
Want Deja Vu? According to DSL Prime: "Larry Babbio of Verizon says he'll have deployments within the year, so what would normally be a multi-year process must be completed within months. I think cable competition will inspire the bells to build, probably in very limited areas before 2006 or 2007, and I've been reporting groundwork for that over the last year."
In 2001 when I predicted that the telecom collapse would last a while, I also noted that many of the fiber-optic companies went belly up because they had listened to the Bell companies' promises.
Here's my official analysis
of the Verizon 100 Megabit Challenge -- Tell the Truth.
Let me put in one more wrinkle to all of the Bell's statements -- their current networks are a mess and the staffing for these networks has been so far cut back that these companies can't deliver on most promises. One has only to read Broadband Reports installation and ordering horror stories to know that. Here's the story
according to the New York Communications Workers of America:
"Verizon does not supply enough clean copper pairs to enable technicians to properly install new customer lines or replace defective pairs on existing customer lines. Instead, Verizon utilizes a "short term" technological fix called an AML or DAMLs." AML/DAMLs cannot support DSL service. Also, competitors seeking to provide DSL to Verizon’s voice customers via line sharing cannot do so where an AML/DAML exists on a customer’s loop. Use of these temporary fixes therefore interferes with CLEC efforts to compete with Verizon in the DSL market." (Quotes trimmed for length and clarity. See the full quotes in the report
: What is in your opinion a realistic timeline before we see fiber to the home via telco, if ever? Is Fiber truly their video solution or do you see VDSL taking off for them?Bruce
: To repeat: History says the Bells are full of crap. Full of "Who-Wee". They will continue to make announcements of their "Developments", etc. However, the costs associated with the new fiber upgrades will never be spent. Worse, everyone reading this should be asking: how much money did I already pay for networks I didn't get and why am I not getting refunds on current prices, since they were set based on bogus assumptions?
And if they mention "satellite", all one has to do is go back to the other exact same promises made in 1995-- just cross-out the date for a new model. For the full effect of the "Who-Wee" co-efficient, I suggest you read our Complaint filed in 1999
against Verizon Massachusetts over that state's broadband failure.--- lots of 1994-1995 quotes that you can simply change the year for effect.
Remember, the Bells will be asking for MORE MONEY, and MORE INCENTIVES to do these new networks. That's why they're making the noise now.
Timeframes? I know of no state that will mandate broadband as part of rates, or that will enforce it, so, the timeframe is lots of noise followed by oh, did I say that? I predict NO serious US deployment from the Bell companies to homes and offices in the foreseeable future. BBR
: User Clecrupt
asks: "Given that the bells have something like 90% market share of local dialtone in their territories, do you think there will ever be true competition in this market? Is hybrid VoIP, like Vonage, part of the key to that? Do you think that services like Free world Dial represent the next PSTN, and how do you think the telcos will address people having their own private PSTN networks?" Bruce
: Once again history haunts me. In 1985-88, hundreds of companies, known as service bureaus, tried to roll out voicemail services. It should be remembered that voicemail was tied to digital memory and computer costs, so in the early years it was expensive to offer. By 1990's the industry was decimated when the Bell companies rolled out their own voicemail while, at the same time, blocking competitors from using the various calling features....and the industry went into a tailspin.
In 1998 when New Networks Institute was doing surveys of Internet Providers, it was clear that identical anti-competitive business practices were underway. By 2003, the FCC and the states have almost completely stopped any real enforcement of the laws. That's why so many DSL customers have problems with their DSL ordering -- the underlying networks are still controlled by an unfettered monopoly. Considering I wrote columns for the now defunct CLEC magazine, and worked for the now defunct ISP group CIX, and Teletruth has ISPs and CLECs on our board, I know from whence I talk.
I would like to be more open to the thought that Vonage of VOIP would work. Once again history: In 1993 I was working with a group to create a voice over the Internet phone company and realized that because the Bell companies have such a wiring of the political system, they could at any time get Access fees (fees put on long distance calls), hold up the use of phone numbers, since they will argue 'number exhaustion', and every other devilish scheme to block anything innovative. The companies have followed true-to-form and are now in the process of doing whatever they can to block innovators. BBR
: Here's some additional questions from users from our Broadband Politics forum
wants to know: "Do you have the breakdown on how FTTH has been deployed thus far? I was looking for the number of homes wired via ILEC's, CLEC's and Muni's?"
asks: "There seems to be growing interests in municipalities building their own high-speed fiber network. What impact do you think this will have on the Bells and how will they respond? They have been successful in several states in making it illegal for municipalities to build their own networks it this prohibition likely to expand or retract?"
asks: "Can you comment on the state of broadband in NYC, arguably the "most wired" east coast city? What special circumstances do you see here that differ from the rest of the country? Do you feel VZ has a stranglehold on underground cable rights?" Bruce
(Answering the previous three questions together): We've received numerous reports from municipalities about wiring their communities, including New York city.
My personal feeling is that the Divestiture of the Bells -- the separation of them from the wiring, should be the next step and that instead of doubling the wiring, we should make the wiring a regulated monopoly, with funds going directly for the upgrades. This was the plan in many states and customers have already been funding this.
In the case of New York, what should piss everyone off was that the prices set to competitors is based on 100% fiber optic upgrades to every end point (New York Public Service Commission, 1997 (Opinion 97-14, page 10)
"We adopted New York Telephone’s position and used, as an input, 100% fiber (optic) feeder. In doing so, we
acknowledged the "incontrovertible evidence" that New York Telephone contemplated installing a broadband system and that fiber and associated equipment were needed for that system." (A feeder is the endpoint of the network that connects multiple homes, offices, etc.)
And to make matters worse, the city of new York has simply given Verizon their phone services without serious competitive bidding " Indeed, for several years, the New York City Comptroller’s Office has written to DoITT expressing their concern over the $96 million sole source contract annually "awarded" to our City’s Incumbent Local Exchange Carrier (ILEC) – Verizon. Without competition, and with Verizon’s lock on 75% of the City’s telecom bill, the Comptroller’s Office repeatedly has asked a basic question: how can New York City be assured that it is getting the best telecom rates and service if it is not soliciting multiple bids in a rigorous, open market process?"
In a speech
I gave called "The Two Broadbands...How NYC Got Conned and What We Should Do for The City’s Broadband and Economic Health" I outline how the state has already been charging competitors based on networks that were never upgraded and the company was supposed to have upgraded large segments of the city. However, as I also pointed out previously, the city's current wiring is a total mess, not based on my analysis but based on the CWA.
Around the country there's been numerous cities that have started to do their own wiring, but so far, many of these have had problems. Some aren't open to competitors or have weird statutes about who can use the networks --- schools and....
One email I received from a reporter talks about a fiber plan for Upstate New York. "You may or may not be aware that Verizon is objecting strongly to a publicly-owned fiber optics network in the works by the Development Authority of the North Country, which is an infrastructure development organization encompassing a five-county area in northern New York."
Meanwhile the city of New York has also recently proposed a fiber plan for New York....in an attempt to by-pass Verizon.
While I don't have specific numbers, some of the Teletruth board have been actively working on fiber-based muni-upgrades and the word we've been hearing is that it is a hard sell. Many don't see the need for high-speed, the problems are political, the local phone and cable monopolies will fight you, and just getting everyone to agree on the specs, including franchise fees, use of rights-of-way, etc, make projects coming online a very slow processBBR
: Comcast CEO Brian Roberts has been very vocal lately
, noting that cable is well prepared to out-perform the telcos
when it comes to speed. Do you believe the cable companies or the telcos have a rosier future? Bruce
: All monopolies exaggerate and it is hard to determine from anything they say, what they will actually do next. It should be remembered, that many of the older cable networks are mostly one way and need serious conversion to do both data and cable, much less voice. It is true that cable modem service has beat out DSL in user base because the Bell companies a) try to hose all of the ISPs and CLEC selling on their networks,. b) many of the networks are 100 years old and have serious conditioning problems. c) the cable companies, who had terrible customer services in the 1990's, actually started to care more about their own image and service. However, based on the trying to get someone on the phone at the cable companies last month for hours, they, too are cutting costs on customer issues.
Also, the cable companies were not required to open their networks to competitors, so they didn't have to design for other users (and what I've heard about those using AOL-Time-Warner under their merger conditions, which requires them to open their networks, has not been a good experience for ISPs. BBR
: The final draft of the FCC's February decision on line sharing is becoming.....somewhat overdue. Rumors insist that the FCC has met with companies like Covad and that the final version of their ruling may be slightly more friendly to small providers. Your thoughts? Bruce
: If you thought that the FCC's media consolidation rules were a problem, the FCC's current plans are the death-knell for anyone who uses an independent ISP. There are 6 different broadband proceedings at the FCC but each one is more harmful than the next.
The February decision said that line sharing will go away and that the Bell companies will no longer be required to give competitors access to the new networks. Unless there's been some major difference from what was already announced, then Covad and every ISP will have no growth plan on the wireline side, and the ISPs and CLECs are also being prohibited to use the cable networks.
But it gets worse. Teletruth has an active petition at the FCC which says: Clean up the Installation/ordering process, and if the phone company has problems or can't supply adequate network, compensate the customer and the ISP. We call it "The Broadband Bill of Rights", and if you want to be a co-signer or read the document go here
Right now, there's no safeguards for customers or the ISPs and CLECs that offer service. In a recent survey we found that 1/3 of all customers have install problems when using a competitor. Also, the ISPs have been frozen out of most of the using the Bell DSL networks, even when customers have funded it through higher rates, such as the case in PA, LA or WA.
The bottom line is that the FCC's decision should be out ASAP and it will be sued immediately by lots of different companies. However, by the time it all gets settled, the other problems could help put the nail in the competitors' coffins.
Meanwhile, there are currently suits across the country, but they have all been tied up due to "Goldwasser". Essentially the Bell companies have argued they can't be sued for anti-trust issues because they are protected by the Telecom Act. One case "Trinko vs Verizon' will be going to the Supreme court soon to settle whether you can sue the bells directly. BBR
: Speaking of competition, what ever happened to the Letter you wrote the Senate Commerce Committee about the SBC -Ameritech merger conditions? Bruce
: In 2002, Teletruth wrote a letter to Senator Hollings, then chairman of the Senate Commerce Committee, that we believed that SBC was in serious violation of the merger conditions. Believe it or not, SBC, which was originally Southwestern Bell, one of the original seven companies, merged with Pac Bell and Ameritech, two of the other Bell companies. The Ameritech-SBC merger stated that they would compete out of their regions in 30 of the US largest cities by 2002, or pay $1.2 billion in fines. And the FCC currently believes that the company complied with this condition.
Take the situation in New York. Everyone we interviewed in New York has never heard of SBC Telecom, the wireline company that's supposed to be competing with Verizon. However, probably everyone has heard of Cingular, the wireless company owned by SBC and BellSouth.
What we believe happened is that SBC mislead the FCC and the public to get the merger through then took the money and paid for the Cingular rollout, as well as entering long distance in their states. Next week we will be filing a new petition with the FCC, stating that the agency should break up SBC and make them pay the penalties....because we believe that they never fulfilled their obligations, especially in New York. And according to numerous sources, services in the areas SBC took over got worse for customers. (You can learn more and read the letter here
And why does it matter? Well, right now every city could have millions in new funds, competition would have really been here and prices would have lowered, and all of the competitive issues would have been cleared up because they would never stand for the crap that they dish out to the competitors.
Also, the Verizon-GTE-Bell Atlantic-NYNEX merger was also a scam. So far, all of the $500 million that the company was supposed to spend on competition outside their region, they tried to use their investment with Northpoint (a data CLEC). Not only did they promise to buy the company and then stopped the deal, which helped the company go bankrupt, but they also wrote-off the investment on their taxes, and was allowed to use some of the investment toward fulfilling the obligation, even though there's no company or service being offered. In another case, they also put in some equipment to compete, but some of the equipment was still located in their original territory, and not in the new regions.
In short, the mergers of the Bells has done little if anything for the public. It only strengthened their own monopolies over larger territories of the US.BBR
: You recently launched a campaign to examine users phone bills for billing problems, noting that 50% of all bills contain some kind of error. How has the response been to that, and how are you generating the manpower to go through them all? Bruce
: Now this is a funny story... according to our Verizon friend "Who-Wee", "Verizon has repeatedly given the company high marks for bill accuracy, including a score of 100 percent in October."
First, any company reading this can have a free phone analysis and audit
. Teletruth will share in whatever we get back from your local telco. Teletruth has an arrangement with board member LTC Consulting who are experts in audits.
We also work with law firms and so far we've established two class action suits about phonebill charges that supposedly don't have any mistakes. For the record, out of the first 48 phonebills, 24 had questionable/mistakes -- paying for lines that don't exist, not getting everything the tariff promises, double billing -- you name it, we found it. I can't go into details, but the errors are rarely in the customer's favor and the problems go back for years....Verizon, can you hear me?
Our campaign is continuing. We'll be announcing new findings July 1st, 2003... stay tuned.BBR
: Earlier this year Forbes ran a great article (available here
, but sadly only to subscribers) outlining a 2000 agreement between the FCC and the bells that effectively buried tens of billions of dollars in questionable profits and billions more in imaginary hardware, all uncovered by an FCC audit team. One of the end results of this meeting was the FCC line charge
that nets the telcos $5 billion in profits every year from consumers. Why hasn't this deal made a bigger impression on the public, and what are your thoughts about holding all those involved accountable? Bruce
: It is the largest accounting scandal in history and the FCC and the states have just let it drop. Essentially, the Bells have been including "Vaporware", missing equipment, in their accounting for local phone rates -- for all services. And we're talking about $19 billion being missing -- and that's a finding from only 1/4 of the potential audits.
Once again the Bells have denied everything and tried to make the Forbes reporter look stupid. It also blamed the article on "The long distance companies" -- Unfortunately, Forbes saw our data, so once again the Bells just made it up. Teletruth/NNI has filed complaints with the IRS, SEC, Congress and the FCC over this, as well as the state commissions, and as of next week, we will be updating these complaints with new data.
Meanwhile the FCC Line Charge, on every phonebill, which doesn't go to the FCC but back to the local bell companies, is going up on July first again --- an 86% increase in three years from $3.50 to $6.50 for the first residential line. There's absolutely no reason for these increases, since the FCC doesn't know what local service really costs, so it can't possibly know whether this increase is valid. However, based on some dark room handshake deal at the FCC, the audits were dropped and given to the states, while this FCC charge continues to climb.BBR
: Consumers who feel strongly that they're being trampled by lobbyists and corporate interests often shrug their shoulders and accept poor service (or no service). How can they get more involved in holding companies that don't deliver accountable? Bruce
: As with the FCC audit analysis, we have been trampled by the fact that the Bell companies have been able to essentially pay off large segments of the media and political/regulators into either doing things that help 4 large monopolies control the agenda, or to just simply NOT do anything.
Case in point? Back in 1993, I was supposed to do a feature on CBS -NY. Our story was that many charges on the phonebills were essentially being presented in a deceptive way and customers were paying hundreds of dollars extra a year because of it. I quoted Aunt Ethel's phone charges, and mentioned the rotary telephone and inside wiring.
When push came to shove, according to my press agent at the time, CBS cut the show because when they asked NYNEX to comment, the company said it would pull their advertising. Millions of dollars. Ironically, the case of phones rentals was settled in 2002 for $292 million, while there's been inside wiring cramming cases in virtually every state during the 1990's. Also, the FCC ignored our complaint on this completely, which was
filed in 1993. --- another tale.
Since that time, I've heard many other advocates, small companies, on the 'other-side-of-the-argument' have identical problems with getting basic truths into the mainstream media.
The other thing most people don't know is just how rigged the system is. The bells and other phone companies have 'skunk' works groups that are fake "Astro-turf" groups designed to sound like consumers, but always with the company's agenda in the front. This can also include fake research, op-eds by notable academics --- money talks. BBR
: The Bell companies keep pleading poverty and that they need more money. What's your take on their Revenues and profits? Bruce
: We have a series of reports we wrote on this, available here
The Bells are still some of the most profitable businesses in any country, with local phone service having a 45-50% Profits (EBITDA). Without an audit we'll never know the truth. Based on their own data Yellow Pages advertising has a 57% profits (EBIDTA). Meanwhile, there's been massive drops in expenses, with 107,000 cuts in staff in the last two years, mostly from the local phone companies. as well as a 50% drop in capital expenditures/construction, which will affect security and competition.
Local phone prices shouold have been dropping dramatically since the costs for service has been dropping -- but instead it went up... funny math?
Local phone service has been covering up the fact that in 2001 and 2002, these companies took $15.6 billion in losses and write-offs for investments overseas. as well as $16 billion in write-offs for the mergers and domestic losses.
The executives at Verizon really benefited from the mergers. As a group, Verizon, (the merger of Bell Atlantic (NYNEX) and GTE) had the highest group pay and salaries and options with 6 executives getting $194 million in salaries and almost 15 million shares of stock, valued at $424 to $1.1 billion - This includes two CEO’s (GTE Charles Lee and Bell Atlantic’s Ivan Seidenberg.).
And when we keep hearing about competition? According to last count less than 10% of households had local phone service competition, though it varies greatly by state, and various reports shows that the prices to competitors still gives the Bell companies hefty profits. It should be remembered, that the Bells got into the long distance markets because they were supposed to open their networks to competitors -- It now looks like they got the better part of that deal.BBR
: Reports this week surfaced that the FCC is considering 'taxing' cable modem providers an additional 9.1%
, and perhaps even including VoIP and Wi-FI providers in paying into the Universal Service Fund. What are your thoughts on the usefulness of the USF, and is expanding it a good idea?Bruce
: The FCC is out of control when it comes to added charges on phonebills -- Since it refuses to actually calculate what local phone service really costs, all it does is give more money into questionable areas, and it taxes anything that moves or communicates.
The current USF taxes are a slush fund and a recent audit of found massive amounts of poor accounting, questionable charges, lack of proper documentation -- it goes on and on. Before any new services gets hit with new taxes, it would seem prudent to clear up the accounting and oversight issues. While the FCC tweaks the laws, a real audit and enforcement should be put in place. BBR
: What's next for Teletruth?
If you want to help keep Teletruth active, go to our site, get involved and donate. We are independent and NOT sponsored by any large company.
But right now everyone reading this should realize that the if customers' don't get involved -- writing letters to their Congressmen and senators, writing the FCC, or volunteering for Teletruth and working to get press or at least get others to get involved, the picture of the future is not good. I'm heartened to see what's been happening on the media consolidation side and the FCC fight. It's clear that there's a great deal of people who care. However, they have not come out in droves on the broadband issues and the cards are stacked against customers and competitors alike.
In the next few weeks the most important fight is going to be to reverse the proposed FCC broadband rules and to get Congress to get directly involved. We need to make sure that the competitors are not closed out of offering us service. I know I personally don't want to lose my ISP, Bway.net. This will also include getting the FCC to fix the current broadband problems, not simply block bad laws -- If you have an installation problem, shouldn't you should get compensated for your troubles?.
We are also planning to question the increases to the FCC Line Charge and other charges to phonebills, since the phonebill keeps going up for no reason. We will continue our phonebill audits to get money back as well as continue on our cases to get money back for the vaporware equipment that's been added to our phone charges.
We will also defend the rights of Municipalities to do the rewiring instead of the Bells, make sure that the proliferation of Wifi and VOIP does not get blocked through the political clout of the monopolies, and be proactive for new solutions, including considering breaking-up the Bell companies because they refuse to do what's right for the public interest.
And finally, our goal is to work to give everyone on Broadband Reports a voice. --- Right now, who's defending your broadband and Internet rights? I think sites like Broadband reports are great because it allows for an open dialogue. Now it's time to get the regulators, politicians and the media to get your voice heard.
Tell-The-Truth, It's more unbelievable than anything I could make up. And one last thing. I'd like to thank the Teletruth board of advisors who helped in creating all of this information and these activities. They are all volunteers as well and without their pro-bono legal, auditing and regulatory expertise, none of these stories would be properly told.
(For a Summary list of Teletruth's work and links for 2002-2003 check out this site