TeleTruth: The Alliance for Customers' Telecommunications Rights
Liar, Liar, SBC's Pants on Fire:
Break Up SBC-Ameritech
The Telecommunications Act of 1996 was created to spawn local phone competition
that would lower prices, give customers choices and bring in a new era
of broadband services. However, today, six years after the act was put
into place, less than 5% of residential customers are using a competitive
There are two reasons that there is no local competition today. The first is the documented harm the Bell companies have caused competitors and the lack of enforcement by the Federal Communications Commission. The entire competitive local phone market is on life-support and literally hundreds of companies have been put out of business.
The second major reason there is no competition today is the fact that SBC, the Bell company that merged and owns three of the original Bells---- Southwestern Bell, Ameritech and Pacific Telesis, (as well as SNET, Southern New England Telephone) never fulfilled their obligations to compete in 30 major cities outside their own region by April 2002.
As part of the SBC's agreement to merge with Ameritech, the company proposed a 'National-Local Strategy", and stated that they would be competing with all of its siblings by April 2002. As the FCC wrote, the benefits would be competition nationwide --- and the vision was that the ALL of the Bells would be competing with each other.
Why else would the FCC and the government want the monopoly to become larger and more able to harm competitors?
The conditions were a tradeoff. In exchange for allowing these huge Bell companies to become larger, SBC pledged to be competing in 30 cities outside their region 30 months after the agreement went through. According to the FCC:
If these conditions are not met, then SBC is required to pay penalties
of $1.2 billion (The term voluntary can be interpreted to mean the company
made these commitments of their own volition.)
In fact, SBC was supposed to be competing in Miami, Seattle and Washington within a year of the signing of this agreement. (St. Louis Post-Dispatch [2/5/99])
The deal of course went through, yet SBC has yet to compete in any vigorous
way, in any of the cities mentioned. Had SBC done this plan, the price
for customers' local service should have decreased because competition
would have lowered prices.
Why Congress Should Get Involved.
The Bells "gamed": the system ---- Our analysis is that SBC
decided to pull a bait-and-switch --- they told the American public and
regulators that they would give America competition in exchange for these
mergers. Once the deal went through, they would claim that they could
not go forward for some reason. They also knew that no regulator, including
the FCC or any other group, would be able to or want to do anything about
this. Any penalties would simply be the cost of doing business.
The Bells will argue that they have fulfilled their obligations. However, our reading of the merger conditions is that the Bells are in violation of both the spirit of the agreement, as well as failing to fulfill the basic conditions in any state. This includes:
And the penalties? The conditions state that they owe $100,000 a day for missed entries, $1.2 billion for missing the entry in all 30 markets.
Liar, Liar, SBC Claims it Rolled Out Competition in 22 States.
Everyone living in New York, Seattle, Miami, Boston, or Washington DC
probably never heard that SBC offers competitive local phone services
to customers. In New York, there are no adds in the newspapers nor even
in the yellow pages for SBC competitive local phone services.
And yet, SBC states that it introduced service in 22 new markets outside their region (From SBC, 10K 2001 Annual Report) and therefore has fulfilled its obligations.
We also find in the Annual Report that SBC hasn't spent virtually any money in 2001 or even 2000 to fulfill its obligations. SBC states that they "decreased approximately $90 million in 2001".
In total contrast, SBC spent $320 (million) and $260 (million) in 2001
and 2002 for entry into only four states to offer Long Distance.
Therefore, it is clear that SBC never intended to actually create a competitive environment in ANY state outside its region and never put up adequate dollars to even try. The company spent a great deal more to enter long distance than it ever did on bringing competition to other markets.
What Was Impact of This Merger on Ameritech Customers? --- Worsening Customer Services, Less Investment In The Ameritech Region.
The consensus about the merger in the Ameritech region seems to be that there has been a steady decline in services throughout the region since SBC took over. According to a letter from the FCC's Common Carrier Bureau to SBC at the end of 2000, it is clear that service in the Ameritech region declined.(Letter From FCC TO SBC, DA 00- 2298, October 6, 2000)
The Michigan Alliance for Competitive Telecommunications released a large report showing that SBC Ameritech has slashed investments in the state (July 24, 2001)
In Ohio, the story is the same -- SBC let customer service fall to unacceptable levels. DSL Prime's story "Ohio orders SBC to deploy DSL: Customer benefits in lieu of massive fines for poor service" . Feb 2, 2002
More recently, an industry newsletter "The Front Lines" by the Heinlein Group (Vol. 2, Issue 4, Feb. 25, 2002) discussed how penalties are currently being put on SBC from all of the Ameritech states.
These problems also effect the Competitors who are trying to offer services.
The CLEC Association of Michigan filed an Emergency Complaint in December
2001 claiming illegal practices:
And in California, Pac Bell, the other merged Bell with SBC, was found to have overcharged customers $350 million dollars. This headline and opening from the California Public Service Commission says it all. (CPUC, February 21, 2002, PUC18)
"Hoexter's Broadband Bits", an insider's newsletter clearly shows how SBC keeps paying fines --- a total of $53 million for the last year, but these fines mean nothing to SBC. It's cheaper than offering quality services to competitors. (Hoexter's Broadband Bits" - Issue #99, for the week ending December 28, 2001)
What Will the FCC Do?
Will the FCC assess SBC for damages and other fees for lying to the American Public? Will the FCC make them American Public whole? The American phone customer was supposed to receive the benefits of these mergers through competition and lower prices.
More importantly, the FCC is currently considering a series of dockets about deregulating the Bells and have let them into long distance services in multiple states, even though the Bells failure to roll out competition was evident over the last year with Miami, Seattle and Boston never seeing a true competitive market.
If the FCC was aware of these competitive failings, then allowing them into new services should have been postponed until their other obligations were fully acted on.
We believe that there should be public hearings and a complete investigation
by the FCC and all other new services and deregulatory matters be held
accountable to this competitive failure.
If the FCC is considering the public interest, then it is clear that the merger should be dissolved because the conditions within the Ameritech has reached unacceptable levels of harm.
Congress should investigate, require SBC to pay $1.2 billion and break-up this merger. SBC has missed virtually every commitment and has totally given up on competing with its siblings. And SBC has harmed Ameritech customers and competitors. SBC knows that the penalties it will pay are nothing more than the costs of doing business. It is time for Congress to investigate these failed commitments and make it clear to SBC --- We Won't be Fooled Again.
It is also clear that this merger has had a detrimental effect on the entire Ameritech Region. We believe that SBC should be required to divest Ameritech (and possibly Pac Bell and SNET) from their holdings.
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