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 News Alert: July 25th, 2007
AS A WORD DOCUMENT: http://www.teletruth.org/docs/Phonebillincreases2007.doc Are Customer's Subsidizing Verizon's FiOS And AT&T's U-Verse Through Rate Increases? Increases: * AT&T and MCI long distance increases, 200+% since 2000 for low volume users. More harmful actions: * Verizon adds $2.00 for not making calls, penalizes $5 if the customer wants to change. Issues: * Cross Subsidization – Customers' local rates are improperly funding DSL, long distance, corporate mergers and lobbying expenses. America is being nickeled, dimed, quartered, and half dollared to death. AT&T and MCI long distance increased over 200+% since 2000 for low volume users, 80% increase in Verizon local service in New York City since 2000, 472% since 1984, new bogus late fees or ‘shortfall’ fees, a 29% increase of the Universal Service Fee since 2006, and increases to every service, from packages, toll calls, and calling features to inside wire maintenance --- it goes on and on. Worse, plans are being made to increase the FCC Line Charge to $10.00, increase Universal Service and even add new fees. Competition was supposed to lower prices. Instead, America’s phone customers have been taken advantage of, especially low income, low volume users, and seniors. Teletruth has received multiple AT&T and Verizon bills ALL showing major increases, new charges, and new problems. If competition did exist for local, long distance, packages, etc. then all of these increases would not have happened. Conclusion: All of these increases point to 3 serious flaws. * There is no longer serious competition to lower rates. AT&T and Verizon have stopped competing and are raising rates. While this article focuses on Verizon New York and New Jersey, and AT&T, increases are happening throughout the US. The LA Times writes: "COSTLY CALLS" --- “AT&T has upped the monthly charge for caller ID service from $6.17 to $9, an increase of more than 45%. And call waiting is up 55% to $5.” How Did this Happen? Mergers, Bad Regulations and Bad Data. These increases are directly tied to the FCC’s bad re-regulatory policies, which eliminated the rights of competitors to use the Public Switched Telephone Network (PSTN) to offer competitive services, as well as allowed massive industry consolidation caused by the mergers of AT&T (SBC-AT&T-BellSouth, Pacific Bell, Ameritech, Southwestern Bell, SNET) and Verizon (Verizon, MCI, GTE, Bell Atlantic, NYNEX). The new “AT&T” no longer competes with MCI or Verizon for local or long distance service. The FCC also eliminated other competitors who offered Internet service and broadband competition. Meanwhile, the regulators have failed to keep these increases in check, or even have accurate data to analyze the situation properly. As you will read, we have filed Data Quality Act complaints because the FCC’s phone bill information is so flawed that it didn’t notice that 1/3 of US households have had major increases. And we note that increases to these services especially target low volume, low income families, especially seniors. Price increases to specific services, such as inside wire maintenance, which has a high percentage of seniors who use this service, has a more targeted harm. Worse, it is also clear that these cost of service increases are improperly being used to fund new non-regulated services, such as Verizon’s deployment of FiOS and (AT&T’s deployment of U-Verse). These services have been declared “interstate information” services and should not be funded through local phone rates. In fact, NASUCA, the National Association State Utility Consumer Advocates, found billions of dollars being dumped into local rates to fund DSL and long distance, and an audit in California found $1.94 billion had been improperly added to the expense of local service, thus inflating rates even more. Here are just some of our findings on phone bill increases, focusing on New York and New Jersey, though other states are also having increases in virtually all categories. More research is needed to determine what is going on throughout the US. * The Mother of All Increases: AT&T and MCI are “Harvesting” Customers. Ma Bell, under the new ownership, seems to want revenge on its customers so it has created a plan to simply raise rates on their long distance services until customers yell uncle and/or leave. In the industry it is known as “harvesting” --- “Harvesting refers to AT&T’s increasing price increases to encourage customers to discontinue service.” To read more on this topic, including a separate report: http://www.newnetworks.com/attmciharvesting.htm Essentially, because of the mergers of AT&T-SBC and Verizon-MCI, both companies have been practicing new anti-consumer actions. * AT&T and MCI local and long distance customers were harmed with increases of 200%+ since 2000, especially impacting seniors and low volume customers. Seniors and low volume users were especially harmed as they were loyal customers and there are few, if any, options. Why would AT&T and MCI want to harm customers? AT&T/SBC and Verizon each have their own, non-overlapping territories and they are forcing customers off their long-held services to purchase more expensive local and long distance packages. Instead of competing out-of-region for local or long distance, the companies simply stopped marketing the AT&T or MCI/Verizon services. Read our Harvard Nieman article on long distance increases: http://www.niemanwatchdog.org/index.cfm?fuseaction=background.view&backgroundid=00148 * Verizon Local Service --- A 472% Increase Since 1980. Before the break up of AT&T, when the local phone companies were regulated monopolies, the cost of residential local service in New York City was $7.63 (*not counting the rotary telephone). Local service consisted of 6 free directory assistance calls, the wire in the home, and a $4 allowance for local phone calls. Today, every directory call cost $1.25 not counting taxes --- no free calls, the wire in the home is now $5.25 a month, up from $1.49 in 2000, and because of various additions to local service, including the FCC Line Charge capped at $6.50 a month, the removal of the call allowance, Universal Service increases and other fees, local service for the exact same service cost over 472% --- $43.00+. Here are Aunt Ethel’s charges for Verizon, Brooklyn Local Service. http://www.newnetworks.com/NYClocalcharges19802006.htm Read our Harvard Nieman article on local service increases: http://www.niemanwatchdog.org/index.cfm?fuseaction=ask_this.view&askthisid=00233 Since 2006 there have been new major increases, including a 20% raise in local basic dialtone from $8.94 to $11.95 in June 2007. Since 2000, the increase for just local basic dialtone was 80%. (Local basic dialtone is the primary connection to the phone network and is only one of various charges that comprise “local service”.) * New York Calling Features Increases. What is most galling is the increased cost of calling features, such as Caller ID or Call Waiting. Here is a page from Verizon outlining that every calling feature is going up in price. Page highlighting Verizon, NY calling features increases: http://www.newnetworks.com/verizonnycallingfeatures20.htm We note that in 1999, a Florida Public Service Commission Report outlined that calling features cost a few pennies to offer and the rest was pure profit as the network upgrades to offer these services have been included as part of local service.
Source: "Report of the Florida Public Service Commission on the Relationships Among the Costs and Charges Associated with providing Basic Local Service, Intrastate Access and other Service by the Local Exchange Companies in Compliance with Chapter 98-277, Section (2) 1 Laws of Florida, February 19, 1999." If calling features was this profitable in 1999 based on these prices, imagine the profits when these same items cost $5-$10.00 each. • Verizon, New Jersey, Multiple Business Local Service Increases Verizon, New Jersey (VNJ) has had a series of increases over the last few years. * 8/16/03---VNJ eliminated the small business discount of $1.01/month on auxiliary business lines associated with accounts with 2-4 lines.
In short, there has been increase after increase, not to mention the removal of a credit, the removal of the small business discount, and rebalancing that harms specific municipalities -- just a few new tricks to raise the rates. NOTE: The costs being quoted for service have nothing to do with the final phone charges. These costs do not include the FCC Line Charge, which can be up to $9.00 on business lines per month, taxes and surcharges, increases to calling features, etc. * Inside Wire Maintenance Has Had Multiple Increases. In New Jersey, even the ancillary services, such as inside wire maintenance, have also had increases in 2007. * 1/1/07, Sentry I (Business maintenance) plan went up from $5.20/month per line to $6.20/month.
In New York, residential customers have had major increases from $1.49 in 2000 to $5.25 in 2007, a 252% increase.
NOTE: Inside wiring was included as part of local service in 1980. Many customers pay this fee even though they never ordered it or understand why it is on the bill. Also, a 1980 New York Telephone company report claimed that the inside wire normally breaks once every 18 years. * Toll Call Increases, New York, New Jersey In what is a sick twist of fate, Verizon has allowed the local phone company to offer toll calls as well as the long distance company. And it is clear they don’t compete. A”toll call” is a call within the state but not local. It also doesn’t cross state lines. And historically these calls are cash cows because they were inflated as it cost a fraction of a cent to offer. While you can call across the US for cheap, Verizon has figured out that toll calls can be a new profit center. * Verizon, New York has raised its basic “day” rate from $.15 to $.17 a minute. Evenings from $.12 to $.14. NOTE: All fractions of a minute are rounded up to the nearest minute. Other Harmful Actions • Verizon adds $2.00 for NOT making long distance calls, then penalizes customers $5 if they want to change, not to mention questionable taxes and surcharges applied. About 20% of the entire US doesn’t make long distance calls, and over 1/3 of US households make less than 15 minutes. Add to this the number of local phone customers who are using VOIP or other services over their local service with DSL and you have millions upon millions who Verizon has hit with a new $2 charge for NOT making calls. As one customer said: “I have a Verizon Local phone (POTS) line, for my alarm system (I use Vonage, a VOIP service for everything else). Since the line is just for the alarm, we have minimal dial tone service on it. On that line, I was enrolled in a Verizon Long Distance plan which had $0 monthly fee, since all charges accrued from actual usage. That way I could use the line for LD calls if Vonage was out and there was an emergency, but otherwise I didn’t have to pay for it. Obviously, this person should not have to pay the $5 dollar charge as it is clear that the contract he had was changed after he signed up. And Verizon was supposed to not have minimum charges as part of their previous commitments to enter long distance. Phone bill examples: • New York, Verizon http://www.newnetworks.com/verizonny2dollar.htm Insult to injury: Taxes and surcharges on NO calls. It is one thing to add a fee, it is another to charge someone a Universal Service Fund tax (adding 11.7%), or taxes on NO calls. Virginia added a telecommunication tax – with no calls, total $2.27. Verizon New York charges $2.25, calls it a ‘shortfall’, and includes the dubious Metropolitan Transit Tax (to pay for subways.), while Verizon PA charges $2.19. Universal Service is only supposed to be applied to ‘interstate’ calls. There are no calls being made, thus, this violates the term ‘interstate telecommunications’. * Late Fee Increases Verizon, local service, and AT&T long distance have added a similar “Late Fee”. According to AT&T, a customer with a bill of $20.00 is charged $5.00, even though 1.50% of the total should be $.30 cents. “Late Payment fee 1.50% or a minimum of $5.00.” This means that the customer paid a 25% late fee for one month. We note that having ‘late fees’ is many times caused because the phone company, not the customer, has determined which date during the month the phone bill is due. I.e., a customer may have a billing cycle that ends on the 20th of the month, not the end of the month. There have even been court cases about this practice, but it still continues, even though it violates various state and federal statutes. * Packages As “Savior” --- Low Volume Customers Are Harmed. First, Verizon has increased the cost of its packages in both New York and New Jersey. * Verizon’s Local “Unlimited”, “Premium”, “Standard” and “Extra” all increased $2.00 a month. However, there is a hidden problem – The advertised price of a package is essentially a violation of truth-in-advertising laws as the customer will end up paying an additional 35%-50+% in fees, including the FCC Line Charge (at $6.50 a month in NYC, which is not part of the advertised price), a Universal Service Fund tax applied to parts of the bill at 11.7%, and taxes and surcharges, both state and federal. We have filed complaints pertaining to this issue because at least 25% of those on a package are paying more than they would ala carte, having been convinced by an aggressive customer service salesman that they would save money. * Competitive Offerings? The “Gimme”: The Promotional Price Never Lasts. The other problem with bundles is the “Gimme”. Time Warner’s Triple Play offers Digital Phone, High-Speed Online and Cable Service, each costing $29.95. But this is where the small print comes into play. http://www.timewarnercable.com/nynj/products/tripleplay.html “Promotional rate of $29.95/mo. per service is only available for Triple Play Starter Pak, and does not include cable equipment charges. After 12 months, regular retail rate, which includes cable equipment on one set, applies. Triple Play Starter Pak includes Digital Starter Pak, High Speed Online Intro, and Digital Phone. Digital Starter Pak includes Basic and select Standard channels, Digital Navigator, cable box and remote on one set. High Speed Online Intro includes either Road Runner Intro or EarthLink Intro (speeds up to 768 kbps downstream and 128 kbps upstream). Additional charges apply for installation. Digital Phone monthly rate does not include, and additional charges apply for International Calls, Directory Assistance, Operator Services, and taxes and fees.” The following are the retail prices for the Triple Play which services revert to after a year. The $29.95 price for phone service, as a stand alone product is $49.95, and can be bought even if you have no cable service.
We could not find any information about the applications of taxes, surcharges and other fees. Obviously, for some clients, the deal makes sense, but for low volume users, there is no option for them. * Universal Service Fund Up 29% Since 2006, 200% Since 2000. Applied to all interstate calls is a “Universal Service Fund”. While Teletruth is firmly in favor of phone service for everyone and that schools and libraries should be wired for Internet service, the reality is that this service has become an unaudited slush fund for rich companies. Should customers bare the brunt of corporate welfare? Every quarter the FCC adjusts the Universal Service fee and it is currently 11.7%, up from 9.1% in 2006. However, it was only 3.9% in 2000.
The importance is – it is a tax on every long distance bill and there are plans underway to not only increase this charge, but apply it to the entire phone bill. Gordon Cook’s recent post on how companies can make Universal Service a profit center is clearly laid out in the story about Verizon selling its holdings in Maine, New Hampshire and Vermont to Fairpoint. http://gordoncook.net/wp/?p=193 More about the Universal Service Fund http://www.newnetworks.com/usfanalysis.htm NOTE: The Universal Service Fund’s largest contributions go to fund the “high-cost” fund, representing very wealthy companies. There is no ‘needs’ test, unlike the recipients of the lifeline fund, which most prove need. * Proposed FCC Line Charge Increases Since 2000: Could Go to $10.00 -- 186% Increase Since 2000. Another dubious charge on every local phone bill is the FCC Line Charge, which does not go to the FCC but is direct, unaudited revenue to the phone companies. Currently capped at $6.50, in 2000, the FCC Line Charge was capped at $3.50 and the increase to $6.50 was allowed because it was supposed to lower long distance rates. As we outlined, the previous plan to raise this rate failed miserably, as seen from the increases to AT&T and MCI’s rates. And now the FCC has a plan called the “Missoula Intercarrier Compensation” plan, to raise this charge to $10.00 claiming it will lower long distance rates. If there is no longer any government agency auditing the phone charges, then increasing this charge is simply a gift to the phone companies who have been able to take control of the FCC on this issue. More about the Missoula Intercarrier Compensation Plan and the FCC Line Charge http://www.teletruth.org/FCCMissoulaletter.htm * Questionable Tax Increases by AT&T on Business Customers. AT&T raised it business rates in April 2007 through essentially made up fees: * Federal Regulatory Fee: Increase from 1.19% to 1.59% (34% increase) These taxes are not mandated or imposed by the government. They are direct revenue back to the phone company for expenses that rightly belong in the actual cost of service. * Cross Subsidization – Customers local rates improperly funding DSL, long distance, corporate mergers, lobbying expenses. The National Association of State Utility Consumer Advocates (NASUCA) press release says it all: “Consumers paying billions due to misallocated telecom costs” Aug. 22, 2006. “(NASUCA) today told the Federal Communications Commission (FCC) that “seismic changes” in the type of services provided over local telephone lines have resulted in consumers overpaying billions of dollars in their local telephone rates.” And there are billions of dollars of non-local charges being dumped state by state. A California audit of Pacific Bell for just three years found $1.94 billion in added charges – everything from merger costs and lobbying expenses to lawyer fees and compensation for executives. * Who’s paying for FiOS: We Are Illegally Funding an “Interstate Information Service”. Every month, Verizon New York customers receive a 4-color, 4-page phone bill insert. Formerly a consumer education piece that was billed to local phone customers as an added expense, this piece is now an advertisement for Verizon’s new services, such as FiOS. http://www.newnetworks.com/verizonnyinsertfios.htm Besides the fact that FiOS is not available in New York City at this time, (except for a few locations but not Brooklyn or Manhattan), shouldn’t the public service commission have stepped in to lower rates by having Verizon pay for the advertising and mailings? This cross-subsidization is now using local rates as a dumping ground funding everything from this insert to TV and media buys, use of the phone company staff, and even the use of the entire phone networks, including poles and attachments. * The FCC’s Data Are Flawed Beyond Use. We filed multiple “Data Quality Act” complaints against the FCC’s phone rate data. Essentially, the FCC did not notice that AT&T or MCI had raised rates, even though 1/3 of the US was harmed. The FCC’s data is biased toward high-volume users, yet the FCC can’t tell us how many high, medium and low volume users there are, even though there are current FCC proceedings to raise rates that require the Agency to have this information so as to protect the public interest. For more information, including our Data Quality Act Complaint: http://www.newnetworks.com/dataqualityharvest.htm We’ve also filed complaints on increasing the FCC Line Charge, failure to investigate and properly auditing the Universal Service Funding, and other actions. In short, the FCC hasn’t tracked any of the information presented in this article, even though it has an obligation to collect accurate data and assess the marketplace for harms to customers. See our other Data Quality Act Complaints: http://www.newnetworks.com/Teletruthdataqualityfilings.htm Conclusion: All of these increases point to 3 serious flaws. * There is no longer serious competition to lower rates. AT&T and Verizon have stopped competing and are raising rates. Instead of raising rates, there should be investigations into why the phone companies have been allowed this continuous stream of increases, increases that especially harm low volume, low income families. This is only part of the story. More research throughout the US needs to be implemented to do a more rigorous analysis of all services, wireline, wireless, broadband and Internet.
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