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Telcom Fraud: The Previous Generation
theodp writes "Remember back in the day when telcom firms were charged with simple, good old-fashioned consumer fraud? AT&T and Lucent got a history lesson Friday, agreeing to a $300 million settlement related to claims that they used confusing billing statements to mislead consumers into paying lease charges for their home telephones, including the timeless rotary Traditional, that totaled many times more than the actual value of the phones."
The "confusing" billing statements were mailed to residents of Palm Beach County?
"All art is quite useless." -- Oscar Wilde
Well great, so a practice that appears questionable at best is coming to a close.
Here's my problem with the universe of class action lawsuits: out of this $300 million, the lawyers are going to take 30% or so. This is a tidy little sum. The people who were gouged are going to end up with not-so-much relative to the amounts they were "overbilled". Probably less than the inflation-adjusted price of a Princess telephone.
The article even mentions that some of the settlement money comes in the form of calling cards donated to charity. This doesn't remediate the damage to the class in any way whatsoever, but it does help to pump the total value of the settlement (and hence the total value of 30% of the settlement.)
The class-action phenomena is great for lawyers who can come up with new and innovative reasons to sue companies for large sums of money.
Where it's abused, they cost all of us (the end users) a little bit of money, earn the litigators a lot of money, and often accomplish nothing more than what could be accomplished with a press conference or two to bring pressure on the company to stop.
Perhaps I am just growing cynical.
True story:
A few years back (1992-4) I worked as a counselor at a summer camp. We had a fairly strict policy about not letting kids phone home unless there was a really good reason. One of the kids in my cabin was given permission to phone home, but he then started crying. It took me a while to find out his problem: The phone at the camp was one of the classic rotary wall phones and he didn't know how to use it.
I would guess this kid was 8 or 9 at the time.
I dialed for him, and all was well. He'd be 16 to 19 now. I hope he's learned to use a rotary phone since then.
-srw
It's good to see this issue finally resolved, but this isn't the limit of the sleeziness of AT&T et al. Equally as disturbing as the phone lease charges addressed in this suit, is the ongoing bilking of cutomers who don't keep up on service plans and pricing opportunities. Many elderly customers (including, my grandparents, as I duscovered a few years back) are still recieving service at AT&T's base rates, from the late '70s, without the advantage of any of the pricing plans currently available upon request from all long distance carriers. Certainly the argument that it is the customer's responsibility to investigate pricing opportunities, is not without weight, but there are AT&T customers still recieving Pro Watts service, which in my case I discovered, then I tried to dial an 888 number from my grand parents redidence. Upon review of their bill, and with one 5 minute phone call, their bill was reduced by almost 70%, but the carriers are under no oblication to move customers to any particular rate plan at any time, and because the customer demographic which includes senior-citizens does not demonstrate elasticity in their telephone calling patterns, such that regardless of pricing, they will likely make the same amount of calls; there is no incentive on the part of carriers to offer them any more modern pricing plans. This is particularly interesting because over the past 20 years, it has been common opinion within the telecom industry that as market pressures drive pricing for basic calling services down, that refenue differential will be recouped through the pricision of more advanced services such as caller-ID, 3-way calling, distinctive ring, and so on.
At some point it will no longer be cost effective to treat their customer base in these two wildly divergent ways, and telecom carriers will be forced to bring their pricing into allignment elderly customers, althoufh this will have the down side of pringing down on these customers, that deluge of telemarketing calls from competing providers - a joy to whih they have been to some degree spared thus far.
--CTH
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Just watch the ad spot for AT&T digital cable, where they try to dispute the second "Digital cable is much more expensive" "rumor"... Digital cable, by their own admittance, is $69.99 per month, or over twice the price of basic...
What part of "more than twice the price" doesn't translate as "much more expensive" in any sense of the term? Sounds like fraud and false advertising to me...
Just because you can mod me down, doesn't mean you're right. Shoes for industry!
Four years ago I signed up with a local and long distance phone company called Econophone. One of the new breed of de-regulated, privatized competing phone service providers, they were offering rates for local and long-distance calls well below half what AT&T was, and still significantly cheaper than Verizon.
I used them successfully for two years, and paid very little for phone service. 5 cents a minute national long distance and comprable local rates.
How, you ask? De-regulation, which happened under Clinton in the mid '90's. However, once de-regulated, the baby bells immediately began testing the resolve of the federal regulators to force them to deal fairly with their "client competitors" for local & long distance service. You see, they wanted the good parts about de-regulation (being able to diversify, charge whatever they wanted, etc.) but not the bad parts (actually having to give up their monopoly status). They fought tooth and nail battles over various regulations and did their level best to kill their competitors... by bribing regulators to get call-completion charges, by systematically failing to service their new clients properly, and, now and again, by slamming their customers.
Clinton's people were going to stick it out and fight the bells into submission. The Bush people had a more, shall we say laissez faire attitude about it, and the last two years have all but brought about the end of competition among the bells, first as the feds looked the other way while they turned their embrace with their competition deadly, and now as the FCC is actually going to rubber stamp their new "pseudo-monopoly" status, enshrining the notion that bells need not lease their lines to anyone, just like they already did with cable.
Econophone is bankrupt. Many of you remeber the Northpoint fiasco; Econophone was very similar. Not content with stealing their customers and bludgeoning them to death with sabotaged service, the bells had to make a show of violently disconnecting them from the network, without warning. The message: don't deal with the independents. You just never know what might happen to your calls.
This industry makes billions of dollars a week. They are _printing money_. Their margins are _incredible_, and that's with some of the worlds most notorious bureaucracies. I've dealt with AT they just _hemorrhage_ money. Why not? They get paid most every time someone makes a call.
De-regulation was a failure. Not exactly because it was inevitable, but because it was never really intended as anything but ideological cover for more and better price fixing. $5/mo for call waiting service anyone? Or how about $3.50 for _not_ publishing your number in the phone book?
You might say the little carriers like econophone went out of busines because they didn't charge enough. But I don't think those people made a math error when they founded their company and calculated what they could charge. I think we got a brief glimps of what we _should_ have been paying all along, before the Bells furiously covered it up.
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It's 1996, and the bells have been newly de-regulated. They're pleased as hell, because they can diversify, but more importantly, because they can now charge whatever they want - price gouging galore! Time to raise the price of call waiting!
There was only one pesky problem. The bells were now theoretically obligated to "compete" with other carriers. The nerve! Wasn't everyone informed that they don't share their playground? Wasting no time, they immediately set to work on the FCC and congress to try to roll back the regulations (or at least the enforcement regime) that allowed competitors to re-sell some of the network and compete.
They came up with a great idea. Oh, it was a real doozy, and very simple. They convinced the feds to allow them to charge a "call completion" fee.
It works like this. If a customer in one local phone company calls the customer of another, the originating carrier has to pay a fee to the receiving carrier for "completing" the call. This, reasoned the bells, was *it.* Who can start up a competing local carrier, if (since they're new) every call from their customers terminates at a bell-controlled phone, and they're saddled with 3c fees for every call! It's a classic "screwing the little guy with the power of math" scenario.
It was a perfect plan. And it only had one fatal flaw.
The metropolitan ISPs of New York City were some of the phone company's most enthusiastic enemies. And why not? Have you ever tried to get the NYC Bell to do anything more complex than a residential hookup? How about manaing hundreds of lines in a hunt chain... let me tell you. You lose a few every few months for no discernable reason, and during one of your dozen hour-long calls to the bell for support, you discover that in trying to "fix" your hunt, they've now disconnected your office phones as well. True story.
The NYC ISPs were desperate to deal with someone, _ANYONE_ other than the local bell. So what did they do? They got together with a tiny, unknown little local carrier. And they became its first, and practically only, customers.
And do you know what happened then?
ISPs need lots of lines, and they're willing, nay desperate, to pay a premium for any kind of service exceeding the Soviet-block standard of the bell. They hardly ever make any calls out. But everyone calls an ISP. In fact, they get thousands and thousands of calls a day.
Within days of getting their first 8 figure "call completion" bill from the tiny little independent local phone company (that the bells had just been gloating over murdering), the bells were back in Washington, and back in court, desperate to break the deal.
Now, exercise for the reader: where they successul in weaseling out of it? What do you think?
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Note that comparatively tiny Lucent actually had to pay money in its part of the settlement.
Next time you see an older telephone in Canada, flip it over and see if it has a "Property of Bell Canada" sticker on the bottom. If it does, warn its owner.
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In 1996 I was the last person in my exchange with rotary service. After years of letters from NYNEX begging me to switch, for a nominal fee of about $4/month they finally cracked and just gave it to me. I refused to pay a charge for a service they had instituted in 1963 and had probably amortized by 33 years later. Apparently it cost them far more than $4/month to maintain the rotary crossbars for only one customer in the exchange.
It is my one small victory agains the MAN.
I purchased a Princess phone for the kitchen at a "Sale" advertized by AT&T at their phone center. I had it for ten years. When I called to cancel my phone service because I was moving the clerk reminded me to return the Princess phone. I was stunned. I told her I payed $30 for it at a phone sale. She said "check the light gray print on the back side of your bill of sale." In print so light you could barely read it was the word 'lease', even though the front was 'sales' invoice. This lawsuite is punishment for that kind of deceptive business practice. They got their phone back. Every component was taken apart and reduced to its minimum parts, all were put into the box, except for the screws and nuts, throughly shaken, and the box was taken to the company, sealed up. I left with my refund, they had "their" phone.
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