Bruce Kushnick, 212-777-5418, bruce@teletruth.org

Tom Allibone, 609-397-2257, tom@teletruth.org

To see a unique "phone bill" markup and other materials: http://www.teletruth.org

Released on April 21st, 2004.

New York — The national customer alliance Teletruth announced today the results of a two-year investigation of phone bills, entitled "Phone Bill Independence".

"Verizon’s phone bills get an failing grade," says Tom Allibone, Director of Phone Bill Audits at Teletruth, and President of LTC Consulting. "They are still a convoluted, unreadable collection of mislabeled charges, hidden phone company revenues, mistakes in tax calculations, quintuple taxation and missing discounts. The average customer can’t make heads or tails of these charges and cannot tell whether their monthly bill is incorrectly inflated or represents what is actually owed the phone company."

While Teletruth’s report focuses on local phone bills from two Verizon states, New York and New Jersey, the problems identified with itemized charges on these bills are common to ALL phone bills across the nation.

Why is Teletruth sounding the alarm now? "This report comes at a time when many states are fighting or contemplating large phone-rate increases, debating whether or not to impose traditional phone taxes and surcharges on new, innovative services such as Internet-based calling services, "VOIP", or debating the costs to competitors (TELRIC) for using the phone networks," said Bruce Kushnick, Chairman of Teletruth and Executive Director of New Networks Institute. "The FCC is also preparing to propose raising the monthly FCC Line Charge from $6.50 to $9.00 on residential bills. Teletruth is requesting the FCC and other regulators defer all such increases and any new surcharges on any new services, until all costs are examined closely and justified."

Teletruth also agrees with NASUCA, the consumer advocate’s association, who recently found similar problems with long distance and wireless bills as well.

Highlights from the Report

• 59 "Truth-in-Billing" (TIB) violations on a sample of 110 bills, including missing information, charges that do not add up correctly, mislabeling, etc. (TIB is a set of guidelines created by the FCC to ensure that phone bills are readable.) Example? The word "surcharge(s)" on the NY bill lacks any description of how the charges are applied.
• Because of deregulation, NO regulator examines the entire phone bill for revenues or profits. Multiple jurisdictions have been allowed to add charges.
• The total of taxes and surcharges on the NY City bill are 112% higher than the cost of basic local 'Dial tone' service.
• Some of the taxes and surcharges represent revenues that are collected for the telephone company, even though they are misleadingly designated as itemized charges such as the "FCC Line Charge", which does not fund the FCC as most customers assume from the name.
• Since 1999 the FCC Line Charge has increased from $3.50 to $6.50 without any proof that such an increase is necessary. In fact, based on estimates of what an efficient company’s "line charges" should cost customers, the current FCC Line Charge should be reduced by almost 85%, not increased to $9.00.
• Quintuple taxes applied — The FCC Line Charge has Federal, state and local, Universal Service Fund charges, and 'surcharges' applied, adding 27% in NY, 18% in NJ and most of the US is somewhere in-between.
• The Spanish American War Tax (Federal Excise Tax) was applied to phone bills in 1898 to fund the war and was never removed.
• The Universal Service Fund (USF) is a multiple-fund creation that is "out of control", with various claims of fraud, lack of oversight, and lack of competitive bidding.
• The Universal Service "High-Cost" funds are being given to Very Profitable rural and urban telcos regulated under "Price Caps", that no longer examines profits.
• Packages — An estimated 15-25% of the population are on the wrong package which cost them more money. Most households do NOT benefit from a package.
• The taxes and surcharges on Verizon packages adds 36% to the total advertised price. (The price doesn't include the FCC Line Charge, for example.)
• Calling Features — The cost of Call Waiting is less than a penny yet the companies charge retail of $4.00 — $5.30 a month.
• "Idiot Items" populate phone bills, which are services that cost $0.00. Example — Many NY bills have a Touchtone line-item, which was removed in the mid-1990's.
• Verizon New Jersey still charges for Touchtone! — Try buying a rotary telephone.
• Cross-subsidization? The 'Consumer Education" Inserts have turned into what appears to be free advertising for Verizon's other products, from DSL to wireless.
• Competitive ISPs are paying "broadband taxes" that Verizon and the other Bell companies and cable companies do not charge their own customers.
• Misleading statements to the press and public. Verizon NY and NJ in 2003 claimed that they hadn't raised rates for 11 to 20 years, but they never include various items in this analysis, such as the FCC Line Charge. They redefined and "devalued" the term "Basic Service" for their own use.

Class Action Suit Settlement for Small Businesses in New Jersey Our survey found multiple mistakes on customer phone bills. Teletruth has helped to initiate two class action suits based on the survey results. On March 30^th, 2004, the first case against Verizon was settled. Our survey found that 40% of the small businesses under 5 lines in New Jersey were missing their discounts. Our second case found that at least 10% of small businesses were paying for non-existent 'special circuits', such as an alarm circuit.

Teletruth’s solution: Congress and the FCC should do an "End-Result Test". No regulator has ever examined all of the charges on the phone bill collectively, and as Teletruth demonstrates, many of the various charges, including taxes and surcharges, are not only revenue to the phone company, but the total is "unfair and unreasonable". Teletruth will also be filing complaints in New York and New Jersey, as well as with the FCC and Congress over the excessive Truth-in-Billing violations, which makes the phonebills even more unreadable, and excessive hidden profits from current services.

A novel about phone bill charges and regulation? "The Dirty, Little, Secret Lives of Phone Bills" is a unique way of getting the mundane, very technical story into readable form for the average customer. The story: Valerie Simpson, an investigative reporter, is assigned the task of answering: "Why are there all these little charges on the phone bill?" Dirty Little Secrets covers how to read your local phone bill, how to file a complaint, and the good and bad about bundled packages. It also examines the regulations surrounding phone bills, the skunk-works and astroturf groups that control the telecom and broadband agenda, and numerous uninvestigated scandals that have cost customers hundreds of dollars in excess phone charges.

"Phonebill Independence" is published by Teletruth, 2004. Price $50.00, 131 pages, 60 exhibits, available as an ‘e-book’, 8/12by 11 format, PDF format.

"The Dirty, Little, Secret Lives of Phone Bills" is a published by Teletruth, 2004. Price $20.00, 167 pages, available as an ‘e-book’, 8/12by 11 format, PDF format.

Teletruth is an independent customer alliance and a member of the FCC Consumer Advisory Committee. All funds from the sale of these items are used to continue the work of Teletruth. For more information contact Teletruth at 212-777-5418 or by email at phonebills@teletruth.org