Bruce Kushnick, Chairman, bruce@teletruth.org 212-777-5418
Daniel Berninger, dan@danielberninger.com Anti-trust, FCC Audits, 202-250-3428
Tom Allibone, tallibon@voicenet.com Phonebills, auditing, 609-397-2257
Joe Plotkin, heyjoe@bway.net, Broadband and Wireless, 212-982-9800

For Immediate Release: December 29^th, 2003

Who are the Baby Bells?The Bells were created in 1984. There are now only 4 left: BellSouth, Qwest, SBC, and Verizon.http://www.teletruth.org/History/bbells/bb_history.html

Let’s face it. When you examine the last 20 years of the Baby Bells’ reign, one thing stands out — American customers were disconnected by the monopolies that control the wires into US homes, offices, schools and libraries. At this 20^th anniversary, it is now clear that America put its trust in companies who essentially allowed corporate greed to overtake the public need.

Teletruth believes the Bell monopolies stole your Digital Future, harmed competitors that have been trying to give you new services, and overcharged you hundreds, if not thousands of dollars, in numerous ways. Prices continue to rise even though expenses keep falling. The phone bill is still unreadable and hiding dirty, little, secret charges all designed to nickel and dime you. You paid for a fiber optic future on the Info-highway that you will never get. Instead you now have a very expensive 100 year-old dirt road. What’s worse, this cartel of Bell has been able to buy and take control of the telecom and broadband agenda through a web of skunkworks, from lobbying and law firms to astro-turf consumer groups — all paid for by you through excess charges on your phone bill. (Discussion and links below.)

Here’s 29 Reasons to Not Celebrate The 20^th Anniversary of the Baby Bells.

Phonebill Issues (Data from an upcoming report.)

• Phone bills get an "F". — You still can’t read your phone bill. Teletruth found 37 Truth-in-Billing violations on Verizon, NY and NJ bills.
• Dirty, little, secret phone charges — You know all those dirty, little charges on the phone bill can’t possibly be correct — and you are right. Many of the "taxes" are unmarked revenue or enrichment to the local phone monopolies.
• Local phone service, for the exact same service, went up 409% in New York, since 1980. — Phonebills don’t lie.
• The "Taxes and Surcharges" section of the NY local phone bill is 112% more than the cost of "Basic Service". — Phonebills don’t lie.
• The FCC Line Charge, which doesn’t go to the FCC but is more revenue to the local phone company, is quintuple taxed in most states — taxes on top of taxes.
• 15-25% of customers using a bundled package of service are on the wrong plan and paying too much.

Cost of Service

• NO REGULATOR EXAMINES YOUR PHONEBILL FOR PROFITS ANYMORE.
• The FCC-provided statistics on phone rates is inaccurate or just wrong.
• Prices should be tumbling since the two major expenses have been slashed:
• Staff cuts for telecom have been over 65% (employees-per-line) since 1984.
• Construction expenditures since 2000 have been slashed over 50%.
• You’re owed more money for the biggest accounting scandal in history. The Bells’ accounting books have added an estimated $50-80 billion in missing equipment. Known as "Vaporware", this has added over $600 to phone rates per line.

Broadband Fraud

• You’re owed money for broadband scams. Why did American customers pay $120 billion in higher phone rates for networks they will never receive?
• By 2003, virtually half of American households were supposed to have been rewired with fiber to the home. Yet, today, the Bells still can’t build the networks they promised in 1993!
• Are Pennsylvania customers owed $1135 for a fiber-optic network they never got?

Competition and Merger Conditions – Siblings Should Never Marry.

• In order to complete their mergers, SBC and Verizon promised to compete with each other for wireline service in 51 cities by 2003. Virtually none of it exists today. Why hasn’t the FCC or FTC broken up the mergers for failure to deliver? Every city is owed millions.
• The Bells have been doing everything in their power to harm competitors who are using the customer-funded networks. They are blocking Internet Service Providers who want to resell DSL, suing over the costs of service to competitive voice companies, as well as suing to get rid of "line sharing", which allows a customer to use their home phone line for DSL.
• While local phone competition only has less than 10% of homes, the Bell companies, in a few short years, have been able to garner 30 million households for Long Distance services — about 25% of all homes, and higher in the states they serve. Remember, the Bells were supposed to open their networks to competitors and have competition before they entered Long Distance.

Business Issues

• Where did all the money go? Did the excess profits from local phone service really go to pay for the Bells’ $26 billion in overseas losses and write-offs of almost $95 billion since 2000?
• Large sums were paid to executives. From 1999-2002, the top executives from the Bell companies received an estimated 54 million shares of stock options with an estimated value of $1– $2.1 billion – almost 10% of all stock options.
• "Dirty Math?" Why does the Bells’ statistic for "Voice Line Equivalents" show clear growth and not the major losses from competition that the Bells keep talking about?
• Did Cingular, the second largest wireless provider and owned by SBC and BellSouth, really get to use PCS licenses as a "Very Small Business"?
• Did the Bells get their cellular licenses for free and shouldn’t they have paid customers back as defacto investors when they were sold to a foreign company?
• You still can’t take your wireline phone number with you when you move.
• We live in a 24 hour, seven-day-a-week world, but most of the Bells still don’t work on Sunday.
• Did the Bells improperly use their local service to help "cross-subsidize", pay for their other businesses, including long distance, DSL or wireless?

The Regulators and the Skunk Works?

• Is the Bells’ biggest strength their ability to lobby all state and federal regulators, Congressmen, Senators, and any one else to make sure that the laws are written in their favor?
• Why are there multiple astro-turf consumer and research groups all working for the Bells agenda, including Issue Dynamics and Sam Simon’s "TRAC", "APT", and "New Millennium"? Why don’t they identify who funds them?
• Brain Dead Regulators? Why haven’t the regulators gotten your money back?
• Why did the FCC just give the Bell companies exclusive rights to all future upgraded networks, even though customers paid for them?
• Why did the FCC ignore the Small Business Administration’s Office of Advocacy when they pointed to the fact that the FCC was violating various small business laws?

A 20^th Anniversary Discussion of Telecom and Broadband in the US.

Quick Background

In 1983, Ma Bell, also known as AT&T, was one of the largest companies in the world, with over one million employees. The company had a monopoly on almost all local service, since they controlled the original 22 local Bell companies, such as Ohio Bell or New York Telephone. They also had a monopoly on long distance services, services that cross state lines, and even manufactured the equipment used in the networks or in the home, such as the black rotary telephone.

Then in 1984, AT&T was "broken up", also known as "Divestiture" and 7 new regional phone companies, known as the "Baby Bells" or "Regional Bell Operating Companies (RBOC)", were created to control local phone service. This did not include GTE, another large phone company. By 2003, through mergers, there are only four companies left, and Verizon now owns GTE. http://www.teletruth.org/History/bbells/bb_history.html

Over the next 20 years, a process of "deregulation" freed the companies from their concerns over the public interest, even though these companies are still monopolies and utilities. Deregulation freed the regulators from examining the profits or the charges on the phonebills, and a serious lack of government oversight or enforcement also freed the companies from having to fulfill most commitments from rolling out fiber-optics or competing with each other.

Maybe it’s time for the public to now be freed from the companies that have not served us well. Here’s some discussion of the outcome of deregulating a monopoly. You decide. For a more complete history download, free, "The Unauthorized Bio of the Baby Bells" at: http://www.newnetworks.com/downloadbook.html

Phonebills? Do you really think that all of those dirty little charges are justified? In an upcoming report on phone bills, we show that most of taxes and surcharges are really hidden revenue to the phone companies. In fact, the "Taxes and Surcharges" are 112% above the cost of dialtone in New York, which is identical to many other states. Does that not sound like something is wrong? Are all of these charges together "just and reasonable" as required by law? So what if the phone company can charge extra for an "unlisted" number, or touchtone in some states, or hide other charges.

Mistakes on phonebills are common. It is now clear that over 50% of all residential and business customers are being overcharged through mistakes on their phonebills. Our recent survey found 40% of New Jersey small businesses were missing their discounts and that 10% of special circuits billed to customers may not exist. http://www.newnetworks.com/class_action_suits_against.htm

Bundled deals can cost customers more. Most states do not have enough local competition to lower the price of local phone service. In our survey we found that while packages of bundled of services can save some customers money, the advertised prices are missing 36% of additional charges, some of which are direct revenue to the phone companies. Also, 15-25% of everyone on a package may not benefit, spending more because of the bundled deal or plan.

Vaporware Audits Go Unexamined. Even the costs of the current networks, and therefore ALL prices, are inflated. An audit by the FCC found $19 billion in missing or unverifiable equipment – Vaporware. This was only ¼ of the audits that should have been performed. And when the Bell companies state it doesn’t effect current rates — remember — ALL current rates were set based on this original data. No regulator has done their job to complete the audit and get refunds and lower rates.See: http://www.teletruth.org/auditupdate.html

The broadband front has been a total scam. We’ve documented how the majority of states were promised a fiber-optic wire into customer’s homes and offices, schools and libraries — over 50% of the states should have already been wired. This is Not DSL over the 100 year old wiring, but upgraded fiber-based networks. We estimate that customers paid over $120 billion in excess phone rates for networks they will never receive. For more: http://www.newnetworks.com/Bellsfailedfiberopticdeployments.html

For example, by 2004, Verizon, Pennsylvania was supposed to have rewired 50% of the state with a 45mps, two-way, fiber-to-the home service. Rural, urban and suburban areas were to be upgraded equally. By 2003, Teletruth estimates that each customer paid $1135 for a network they will never get. And it is also clear in 2003 that Verizon couldn’t build the networks when it made the commitments to the state and customers in 1994. See: http://www.teletruth.org/PennBroadbandScam.html

And how have the cable companies gotten the lead on broadband? The Bells never upgraded their networks and harmed every Internet Service Provider (ISP) who tried to resell the Bells’ services. They killed their own distribution networks.

Follow the Money? Where did all the profits go? From 2000-2003, customers helped to pay for the Bell companies’ $26 billion in overseas losses. The companies also took over $58 billion in US tax write-offs or merger-related write-downs, and took an additional $11 billion in network write-offs –over $95 billion. Meanwhile, capital expenditures are down 50%, while the employees-per-line has dropped over 65% since 1984 – meaning 65% less people to help customers. Yet prices keep increasing?

And large sums were paid to executives. From 1999-2002, the top executives from the Bell companies received an estimated 54 million shares of stock options with an estimated value of $1–$2.1 billion – almost 10% of all stock options.For our 2002 Report see: http://www.newnetworks.com/profitreport2002.htm

And competition? The Telecom Act of 1996 was supposed to bring lower prices through competition and advanced services — and the Bells were supposed to open their networks in exchange for going into long distance — so much for that idea.

The Bells have done everything possible to harm competitors, from providing them inferior services to blocking orders in numerous ways. How is it that while local phone competition only has less than 10% of homes, the Bell companies, in a few short years, have been able to garner 30 million households for long distance services. Harm to ISPs and customers: http://www.newnetworks.com/PRISPPETITIONS.html

Siblings Shouldn’t Marry – Collusion to not compete? In order to complete the massive mergers of SBC and Verizon, these companies gamed the regulatory system by promising to compete with each other in 51 cities by 2003. None of this exists today, and the $1.2 billion in penalties to SBC was never imposed. http://www.teletruth.org/TakeAction/Breakupsbcameritech/BreakupSBCAmeritech.html

A Bell Cartel controls the agenda. Regulatory Capture – Customers don’t have a voice. It is now clear that the most visible problem in telecom and broadband is not about the technology but in the ways the Bell companies have been able to control the agenda – "Regulatory Capture 101". The companies have been able to buy the favors of state legislatures, public service commissions, and even Congress and the FCC. There exists a spider-web of astro-turf groups, lobbying firms, massive advertising budgets and sheer cash to make their point of view, not the Public Interest, take control of the agenda.

For example, Issue Dynamics, run by Sam Simon, a former consumer advocate, has helped to create and shape, through various Bell funds, "TRAC", "APT", "New Millennium", and a host of other groups that continually tout the Bell positions, though they continually hide their affiliations with the sponsor. They even got the Gray Panthers $200,000 to do full page add against competitor, MCI.

http://www.corporatecrimereporter.com/06_02_03_pressrelease.html

http://www.nwfusion.com/news/0126snow.html

http://www.broadbandreports.com/shownews/33214

Meanwhile, the state legislatures in Florida influenced by campaign financing from the monopolies, just increased rates for no reason, while the state Legislature of Illinois, thick with Bell funded sponsors, tried to block competitors from using the local phone networks at reasonable wholesale rates. And let’s not forget the actions of Bell funded Representatives Tauzin and Dingell, who keep putting in new proposed laws to help the Bell companies, not the Public. http://www.newnetworks.com/TauzinDingellisevil.htm

With a massive budget to outspend any side’s point of view, let’s make one thing clear —Customers got the short end of the stick on every front.

The Future is also a mess. Right now, there is no regulator who examines the profits of the Bell companies for local phone service or any almost any other service. Everything has been deregulated and therefore, ignored by regulators. But it gets worse. The FCC’s current proposed laws blocks competitors from using any upgraded networks, not to mention closes competitors off from using "line sharing", the ability to use the same wire for voice and DSL. And the Bells are also suing the FCC over the price of offering service to local phone competitors. Meanwhile all of the competitors also have to sue for their basic rights as granted by the Telecom Act of 1996. This will be bogged down in the courts for years. The Bells don’t care. They can outlast and outspend all competitors, who are cash poor and will lose investor funding if the laws are decided against them and the Public Interest. http://www.teletruth.org/FOIA.html

Let’s stop all of the talk about the sky is falling for the Bells. The Bells’ are using "Dirty Math" to hide the fact that their "Voice line Equivalents", the total lines, has continually increased over the last few years. Even though the physical copper phone lines are going down, the Bells now are selling multiple products, like long distance and DSL, that uses the same phonelines. We don’t discount some losses in revenue, but it is nominal compared to the fact that they’ve been using local phone service to subsidize all of their other businesses they have been growing.http://www.tmcnet.com/tmcnet/articles/2003/120503nn.htm

Interesting technologies are on the horizon, such as VOIP, that can provide a voice call over the Internet to broadband users. However, this service is going to have multiple legal challenges in court, and potential threats on every front. Also, this is still a nascent technology that is still a mostly "broadband" application, not a substitute for regular local service today.

And let’s not forget wireless services. If doesn’t seem to bother regulators that Cingular, borne of SBC and BellSouth, has been able to get use of licenses as a "Very Small Business", even though they are now the second largest provider in the US. Or maybe regulators should have noticed that customers had been funding the development of the Bells’ cellular services, not to mention the fact that these companies never paid for their original licenses. The Bells were able to make billions of dollars when they sold them to foreign corporations with no payback to the defacto funders – the customers.

And while the cry that the wireless markets will eat the lunch of wireline services, today, only 3%-4% have left the security of the Ma Bell wires.

Killing the Innovation Engine. The next steps are critical. If the regulators, the commissions, state legislatures or courts decide to block competitors access to the upgraded networks, it will kill off not only lower prices, but America’s "Innovation Engine" – the thousands of small companies that brought us the Internet and web and even Voice-over-IP. If the regulators don’t do their jobs and enforce the laws and hold the large companies accountable, then prices will continue to rise through various, devious means.

Next Month, Part Two – Where do we go from here?

For more documentation on each of the topics discussed herein, see:Teletruth Progress Report: http://www.newnetworks.com/Teletruthlinks2003.htm

FREE BOOK – "The Unauthorized Bio of the Baby Bells". – The book the phone companies do not want you to read. This cult classic has had over 10,000 downloads and now you can have a PDF copy – free.http://www.newnetworks.com/downloadbook.html

FREE ANALYSIS – "Broken Trust - Indictment of the Bell companies" 2002 http://www.pulver.com/antitrustreport/documents/downloads/BrokenTrustRev1.2.pdf

January, 2004, Teletruth will be releasing:

• "The Dirty Little Secrets Lives of Phone Bills", a novel.
• "Phonebill Independence". A research report on phone bills.
• "The Baby Bells: The 20th Anniversary Report"
• Complaint in Pennsylvania for an investigation of failed broadband rollouts and refunds of up to $1135 per household.
• Complaint with the FTC to break up the mergers of SBC and Verizon for gaming the regulatory system to gain approval for the mergers.

Teletruth is a two-year old experiment in customer advocacy and has become a leading alliance dedicated to protecting customers' broadband and telecom rights. Teletruth is on the FCC's Consumer Advisory Committee and has active Public Interest complaints pertaining to telecom and broadband issues with the SEC, IRS, FCC, numerous state commissions, active class action suits. Teletruth offers free phone bill analysis to businesses and government agencies, through LTC Consulting. Through New Networks Institute, a telecom market research firm, Teletruth publishes research on the broadband and telecommunications markets. Teletruth is independent of any phone company, association, or lobbying group.

For more information, to join Teletruth, or work with us, see:
http://www.teletruth.org

Bruce Kushnick, Chairman, bruce@teletruth.org 212-777-5418
Daniel Berninger, dan@danielberninger.com Anti-trust, FCC Audits, 202.250.3428
Tom Allibone, tallibon@voicenet.com Phonebills, Auditing, 609-397-2257
Joe Plotkin, heyjoe@bway.net, Broadband and Wireless, 212-982-9800