Is The Sky Falling For The Bells? Nah, It's Just �Dirty Math" (Part 2)

BY BRUCE KUSHNICK

OVERALL SCAM OF LOCAL PHONE SERVICE
i) We come to the biggest scam of all. It looks like local phone service is now 70+ percent profitable and that the Bells, from 1982-2003, increased the local phone price for exactly the same service in NYC by 400+ percent. (not counting rotary telephones).

For those of you who don't believe this -- "Phonebills don't lie," -- and we have them. Also, Employees-per-line was down 62 percent by 2000 --- (We haven't found anyone publishing the number in recent years. If you find it, please send it along.) And local construction budgets are now at a drop of over 50 percent in the last three years. So much of deregulation of a monopoly. Under price caps, the more you cut the more you make -- who cares about the customer?

And we need to make a very significant point -- NO regulator has examined all of the taxes and surcharges and other fees for profits, even though in many cases, such as the "FCC Line Charge," "the Portability charge" or even "911." these companies get this revenue.

And Universal Service? What a slush fund. a), the Bells are price-capped in most states, yet are able to cry that they need 'high-cost-funds," -- if NO Regulator is looking at profits, and if in most states the prices have been averaged, this is a scam. b) Schools and Libraries -- the Bells are the largest single recipients of the fund for vendors, and the recent audits found that many of these contracts were NOT up for bid.

NOTE: another dirty little secret -- Universal Service, which is supposed to be put on "interstate" services, is being applied on local phonebills to two other charges in the "Taxes and Surcharges" section ---the FCC line charge and LOCAL number portability!

j) Cross subsidization is rampant -- Take out a phonebill "Insert," bill stuffer. In the case of Verizon, it's now advertising all of its other products, even though this Insert, paid for and built into phone rates as "consumer education," is now free advertising. From use of lists, advertising space and almost anything else we could find, it's clear that local service -- through excessive customers' rates, is funding these products. For example, if the Insert was to open to all competitors, the advertisements would generate revenue and thus lower phone prices under the older rate-of return.

If you examine the loss of revenue from the local service part of the equation, for not getting paid its fair share and also taking up the costs, you now know one of the reasons why local revenues aren't higher or showing more profits.

Also, remember, buried in the local service numbers in Bell quarterly statements are the funds to roll out long-distance state by state, advertise and implement DSL, etc. In states like Oregon and Louisiana, DSL rollout is part of the state regulations and billed directly to customers in the form of price-caps.

SUMMARY
Here's part of the chart we're working on which shows voice lines, voice line equivalents, competition, long-distance and DSL, and these services are increasing. When you add them together...

Drops in copper wiring are not the proper indicator anymore. It's Dirty Math. The sky is not falling. It's all being done to plead poverty to convince regulators that everything is bad.

The emperor has no clothes...

---Second q 2003 (the report will do a 20-year analysis of these line items.)
 

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Bruce Kushnick is chairman of Teletruth and Executive Director of New Networks Institute.

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