Telco Charged with Trickery on Technology

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Event Summary

Bell Atlantic has been charged with overcharging Massachusetts customers by more than $1 billion over the past four years. The charges are made by a telecommunications analyst, Bruce A. Kushnick, and Peter J. Brennan, formerly co-chair of a White House Roundtable for Telephone Information Services and an expert in telecommunications marketing and policy. The complaint, filed with the state's Department of Telecommunications and Energy (DTE), alleges that Bell Atlantic (then New England Telephone) achieved approval for price-based regulation by promising to develop enhanced cable and video services. The charges are disputed by Bell Atlantic and by a DTE commissioner who admit that the company made such representations in public statements about its plans, but that they were not tied to the eventual regulation.

The complainants believe that Bell Atlantic misled Massachusetts consumers and regulators with promises of advanced network deployments for the purpose of removing important pro-consumer regulation, and that once regulatory relief was granted they abruptly discontinued plans to deploy important new technologies. As a result, Bell Atlantic may have taken as much as $800 million in improper tax deductions in Massachusetts.

In an apparently coincidental development, soon after the complaint was filed Bell Atlantic announced a new "do-it-yourself" DSL service for consumers.

Market Impact

According to Brennan, while the complaint largely deals with consumer issues, "for Internet businesses who would, if the promises had been kept, now have affordable, reliable high speed access to the home market, the cost of the lost opportunity is immeasurable."

According to Kushnick the actions alleged against Bell Atlantic represent only a sample of the overcharging of consumers and businesses, and of other unfair practices, that regional bell operating companies (RBOC's or "Baby Bells") have been guilty of. He and other organizations and individuals will file complaints in at least seven different states against a number of RBOC's over the next few months. He will also file a Federal complaint alleging that the RBOC's wrote off, and took tax benefits for, their copper plant in order to build a fiber network. The promised fiber network has never been built, he argues, although the companies reaped $21 billion in tax benefits. Kushnick is also working with the Commercial Internet Exchange (CIX), a trade association whose member companies represent over 150 Internet Service Provider networks that handle over 75% of the United States' Internet traffic. CIX has already filed a petition with the Federal Communications Commission opposing regulations that they claim provide Bell Atlantic with unfair competitive advantages. Kushnick says "every ISP has been getting substandard service from the RBOC's. These companies use their monopoly power and insufficient regulation to walk all over their customers."

User Recommendations

An article in the May issue of Red Herring magazine claimed that regional Bell operating companies like Bell Atlantic "never wanted to be in the DSL business in the first place it throws a wrench into the pricing strategies for their highly profitable T1 and T3 services." That analysis supports Kushnick and Brennan's claims, and provides good reason for any business that has been waiting for home users to have faster access to the Internet, and any ISP, to wonder whether the they've been treated fairly by their local RBOC. "This is a situation," says Kushnick, "that requires a lot of people to start complaining."

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