To Read the Report (HTML)
Contact: Bruce Kushnick or Miranda Berner
212-777-5418, News@newnetworks.com
TO BE RELEASED, Tuesday, June 12th, 2001.
BELL PROFITS VIOLATE EVERY STATE AND FEDERAL "FAIR AND REASONABLE" STATUTE.
New York---- How is it possible that the local phone monopolies, SBC, BellSouth, Verizon (GTE) and Qwest, which are supposed to be regulated, have become some of the most profitable companies in America? Using information published by the Business Week in their annual "Scoreboard" (2/26/01) and other sources, including Bell company annual reports a new study by New Networks Institute (NNI) "Bell Profits are Outrageous", has found that:
Overall Bell Profits Are 200+% Above America's Best Companies. The Business Week Corporate Scoreboard (2/26/01) ranked American companies for revenues and profits. The Bell companies had overall profit margins 170% above the Top 9 companies, 256% above the Business Week 500, and 212% above other Business Week "Utilities". Top 9 includes: EXXON, GM, Ford, Enron, GE, Wal-Mart, IBM, AT&T, Citicorp.
The study's conclusion: Bell profits violate every state and federal "fair and reasonable" statute, from the Telecom Act of 1996, to virtually every state constitution, and the there should be an investigation into the excess profits. The Telecom Act of 1996 states:
"...Consumer Protection: The Commission and the States should ensure that universal service is available at rates that are just, reasonable, and affordable."
NNI estimates that the Bell companies (including GTE) are making some $17.1 billion over 'fair and reasonable' earnings---- about $200 dollars per household in 2000. This is made up of billions of pennies, nickels, dimes and quarters---- the charges on the customers' phonebills.
"The Bell companies are still monopolies. They control the wiring into customers' homes and offices and therefore have a captive customer base. Even competitors have to purchase services from them. Therefore, their profits are supposed to be "fair and reasonable". However, with profit margins 250% above the Business Week 500 and over 200% above their utility brethren, the Bells are ripping off customers--- Big time," stated Bruce Kushnick, Executive Director of New Networks Institute.
Some of the other report findings:
- Some Bell Products Have Profit Margins Approaching 50,000%. The Florida Commission found the profit margin on Bell South's Call Waiting feature was 48,680%. Caller ID, which costs the customer $7.50 per month, had a 3,264% profit margin. Some states still charge for Touchtone service, which has no costs.
- The Majority of Bell Profits Comes From Their Monopoly Customer, Not From Other Businesses. Bell South's "Wireline" and "Directory" business (for 2000) was 73% of the total revenue but over 92% of all profits. In fact, the Wireline and Directory business has paid for almost all of the other endeavors, including International sales.
- Prices To Competitors For Use
Of The Phone Networks Are Outrageous And Harmful To
Competition. From Internet Providers offering DSL, to
competitors trying to compete in local phone services,
Bell practices and prices are anti-competitive.
"It is clear that the promise of the Telecom Act to lower prices through competition and deliver broadband services is still a mirage. The findings from this report indicates that the prices to competitors, from competitive local phone companies (CLECs) to Internet Providers are inflated. Competition can't and won't fix the problems. Ironically, competition is actually helping the Bells put competitors out of business," added Kushnick.
How did it Bell profits get this way? In a related report "How the Bells Stole America's Digital Future": published by NetAction in 2000, NNI found that the Bells received massive financial incentives, known as state "alternate regulations", to rewire America with fiber-optics. By 2000 half of America was supposed to have a fiber-based broadband connections, replacing the still in use copper wiring. None of these plans were fulfilled, yet the Bells collected and continue to collect an estimated $50 billion in excess fees. http://www.netaction.org/broadband/bells/
"It is ironic that there is bill in Congress, (HR1542), presented by Rep. Tauzin and Dingell, which is now seeking to give the Bells more money for broadband, totally disregarding the billions of dollars already collected in the name of broadband. Congress should be going after the obscene profits from past Bell broadband boondoggles, not coming up with creative ways to give the monopolies more money." added Miranda Berner, Director of External Affairs for NNI.
There are also a host of other customer and competitor issues this report brings up.
- How many times was the copper network wiring written-off? More than once?
- Are the Bells "cross-subsidizing" DSL using ratepayer funds to pay for their rollout?
- Why do the profits claimed by the Bell never match the profits from Business Week?
- Have customers been paying for the wiring of schools and libraries twice in some states?
- Did Verizon Lie to The New York Times about its profits?
- And how the hell can Verizon charge $558 plus $96 a month just to let the customer keep their phone number when they move in Manhattan, NY?
The report's conclusions: Congress, the FCC and the state commissions should immediately:
- Explain how the Bells overall profits are 200+% above America's best companies.
- Examine the charges to competitors for 'fair and reasonable".
- Refund $200 per household for the year 2000 and investigate past overcharging, including monies collected for failed broadband service rollouts.
A companion report "The Real Truth in Billing: Phonebills Held Hostage", will be released July, 2001. It compares Bell profits to the charges on phonebills. For more information contact Bruce Kushnick or Miranda Berner at: 212-777-5418, or to read the full report, visit New Networks Institute at http://www.newnetworks.com
About New Networks Institute:
New Networks Institute has been researching and fighting for the rights of telephone users for ten years. Created in 1992, NNI has published the largest study ever undertaken about the how the break-up of AT&T and the creation of the Bell companies has impacted residential and business telecommunications. The 14 volume report series titled "The Future of the Information Age" is over 1,900 pages, over 900 exhibits, 2000 consumer interviews and two computer databases of the Bell companies' revenues, profits and charges to customers, among other areas, and was published by Probe Research and Philips Business Information (1993-1996). In 1992, at the organization's first press conference, NNI announced that because of the Bells' monopoly control of the networks, there should be "Divestiture II" - the separation of the Bell holding company from the local phone networks. Another report, "The Information Super-Highway: Get A Grip" published in 1994, predicted that the Bell companies would not roll out their promised fiber-optic services - and NNI was right. Since the publication of those reports, NNI has compiled this information in a book, The Unauthorized Bio of the Baby Bells, with Foreword by Dr. Bob Metcalfe. Over the last decade, NNI has filed numerous complaints with the IRS, FCC, state and federal regulators, and has worked with lawyers to develop class action suits. NNI currently has numerous complaints pending, all with the express purpose to defend the public's interests from the Bell monopolies' harmful actions - from overcharging to fraudulent acts.
NNI has also worked with CIX and the USISPA to survey Internet Providers about the harm the Bells have caused these companies. Our research has been featured in everything from the Washington Post, CNN, and Telecommunications Magazine to Communications Daily and Internet News.
Prior to the formation of NNI, Bruce Kushnick worked as a senior telecom analyst for Link/IDC and Strategic Telemedia. His clients included all of the Bell companies (including BellSouth, Bell Atlantic, Pac Bell, NYNEX, and Southwestern Bell), American Express, The Weather Channel, AT&T, MCI, Hong Kong Telecom, British Telecom, Northern Telecom and Sprint, to name a few. His predictions included the first research reports on rollout of Caller ID (1986), the use of voice technologies (such as, "press one for this, press two for that..") (1983), and the creation of the 500 network.