Don’t Fall for AT&T’s Bait And Switch Scheme

Legacy Landlines are Far Superior to VoIP phone lines

AT&T’s May/June written notice to AT&T landline customers about AT&T’s plan to switch customers from Title-II-regulated Legacy Copper Phone-Switched Landline Phone Services to unregulated Voice over Internet Protocol (VoIP) Phone Services is misleading. No one has to switch, as clarified here, so don’t switch, if you don’t want to.

The following CPUC Blog Post attempts to clarify things (emphases are mine):

Included in AT&T customer bills in May was a notice of changes to AT&T’s Residential Service Agreement. In response to the many questions raised with the CPUC’s Consumer Affairs Branch by AT&T customers, the CPUC is directing the company to send a clarifying notification.

This clarifying message is being sent to assure that all customers are fully informed and aware that changes to the Residential Service Agreement do not impact their underlying telephone service. The prices, service descriptions, and other terms and conditions of an AT&T customer’s telephone service will remain the same in California.

Future upgrades to AT&T’s network may require the company to install new equipment outside a customer’s home in order for telephone service to continue to work. If AT&T upgrades its network in a customer’s area, the company will provide additional notice and make an appointment with the customer, if needed. However, AT&T’s obligation to offer basic telephone service in California is not affected by any potential network upgrades.

Legacy copper, phone-switched landline phone services have benefits that Voice over Internet Protocol (VoIP) phone service, such as U-Verse and Wireless phone service do not offer:

  • Only landline phone works even during an extended power outage. VoIP phone modems depend on short-lived batteries, if present at all, which provide only limited-time use during an extended power outage.
  • Only landline 911 calls auto-verify the address if the caller cannot speak — such as after suffering a stroke.
  • The Governor of Florida has recently encourage all FL residents to maintain a landline phone for reliable emergency communications during floods, hurricanes or other natural disasters.

The May/June AT&T notice includes the following:

The network equipment we install at your home may require the use of your electrical power for the operation of our facilities. Where a technician visit is required, if you do not allow AT&T to install the new network equipment at your premises, your telephone service may be disconnected in compliance with subsection (b) above.

The minute a customer agrees to this, then the customer will lose their legacy copper line phone switched landline service (the only service that reliably provides the emergency benefits listed above. Only VoIP or wireless service would “require the use of your electrical power for the operation of our facilities”.

Digging into the history of this, I found California SB-1161 and some analysis of that Bill, before it was passed, which provides some perspective on this AT&T bait and switch scheme. Don’t fall for it. Keep your landlines if you want. CA law is on your side if you choose to do so.

CA SB-1161 Voice over Internet Protocol (VoIP) Bill

Read the full text of this Bill, which was signed into law in 2012.

Key Parts of of SEC. 2. Section 239, which is added to the Public Utilities Code:

239.(a)(1) “Voice over Internet Protocol” or “VoIP” means voice communications service that does all of the following:

   (A) Uses Internet Protocol or a successor protocol to enable real-time, two-way voice communication that originates from, or terminates at, the user’s location in Internet Protocol or a successor protocol.

   (B) Requires a broadband connection from the user’s location.

   (C) Permits a user generally to receive a call that originates on the public switched telephone network and to terminate a call to the public switched telephone network.

(2) A service that uses ordinary customer premises equipment with no enhanced functionality that originates and terminates on the public switched telephone network, undergoes no net protocol conversion, and provides no enhanced functionality to end users due to the provider’s use of Internet Protocol technology is not a VoIP service.

Key Parts of of SEC. 3. Section 710, which is added to the Public Utilities Code:

(b) No department, agency, commission, or political subdivision of the state shall enact, adopt, or enforce any law, rule, regulation, ordinance, standard, order, or other provision having the force or effect of law, that regulates VoIP or other IP enabled service, unless required or expressly delegated by federal law or expressly authorized by statute or pursuant to subdivision (c). In the event of a requirement or a delegation referred to above, this section does not expand the commission’s jurisdiction beyond the scope of that requirement or delegation.

(e) This section does not affect any existing regulation of, proceedings governing, or existing commission authority over, non-VoIP and other non-IP enabled wireline or wireless service, including regulations governing universal service and the offering of basic service and lifeline service, and any obligations to offer basic service.

(h) This section shall remain in effect only until January 1, 2020, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2020, deletes or extends that date.

Result: No Title II Federal or State regulation over VoIP calls, such as AT&T’s U-Verse; Eliminates many Consumer protections. Read Analysis in [A] and [B], below

[A] AT&T and Verizon’s Wireline and Wireless Cross-Subsidies Harm Competition and Every Communications Service You Use

by Bruce Kushnick
Originally published on 6/05/2016 10:36 pm ET | Updated Jun 06, 2017

Verizon, AT&T and Centurylink have control over most of the wires as they are the incumbent, state-based utility companies. This has allowed them to also take control of the wireless services, (Centurylink, has a deal with Verizon Wireless) and they have been able to ‘cross-subsidize’ all of their other lines of business. So, there are just three very large holding companies, which do not directly compete for residential wireline services (even though every merger to make them larger was predicated on it) that control most of America’s wired infrastructure (or they sold off areas they didn’t want). And this also gives them control over most of the other competitors and businesses that rely on these wires, especially for “Business Data Services”, formerly known as ‘special access’, and that includes wireless services.

AT&T Mobility’s Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) service margin was 46.7% at year end 2015, up from 42% in 2014; Verizon Wireless was 55.3%, up from 48.6% in 2014.

Verizon and AT&T have been allowed to use their combined services to cross-subsidize the development and deployment of their wireless services and give their own affiliate companies advantages no other competitor has.

Verizon claimed in its 2015 annual report that it is a “digital-first mobile future” company while AT&T’s 2015 annual report proclaims that it is “mobilizing your world”. But both companies also have control over the wireline, state-based utility networks and this has helped them become the largest wireless companies – and to cross-subsidize their wireless business, as well as all of the other affiliate lines of business, including the ‘Broadband Data Services’ that businesses as well as competitors rely on.

[B] AT&T Should Be Begging California for Forgiveness, Not Regulatory Relief

by Bruce Kushnick
Originally published on 7/23/2012 04:38 pm ET | Updated Sep 22, 2012

AT&T is asking the California legislature for a big favor. A new bill — based on model legislation from the American Legislative Exchange Council (ALEC) would remove all regulations on voice-over-Internet services (VOIP) — meaning that, as one progressive group put it, “just as most Americans are moving to new technologies, the state might pull out the rug on any rules to protect consumers who use it.”

Indeed, if the phone companies get their way and eventually replace regular phone service with VOIP, they would effectively remove the entire regulatory fabric that protects customers, or the requirement to maintain the networks. If a customer calls and asks for their wireline phone service to be fixed, or if they want such service — too bad.

What the California legislature should be doing, instead of even discussing this bill, is asking some tough questions about why the state’s customers have been ripped off so badly by AT&T over the last two decades:

  • What did AT&T do with the proceeds of massive price increases over the last 10 years?
  • How did AT&T get away with charging customers billions for fiber optic services, then doing a bait and switch with slow broadband and Internet services?
  • Why has less than 50 percent of the state been upgraded?

Outrageous Increases to Phone Charges and Dubious Surcharges

Just how well has AT&T treated its California customers? Since 2004, the basic flat rate has gone up 101 percent, call waiting charges are up 163 percent, and unlisted numbers are up 346 percent. On these three items alone, customers are paying an additional $205 annually. (See the Chart)

Probably the most outrageous increase has been to “inside wire maintenance,” which is a favorite of seniors, who remember that this was once part of local service, not an extra. That’s now at $8 a month.

AT&T claims that there is competition — but doesn’t actual competition lower rates, rather than raise them?

AT&T is also “harvesting” the wireline customers who just want basic phone service. Harvesting is the practice of using price increases to encourage customers to discontinue service, or to buy a bundle or some other additional service to lower their rates. Those most impacted by all of this are low-volume users, and especially seniors, low-income families and Lifeline customers.

Dubious Surcharges, Which Mean More Money to AT&T

Hidden in plain sight are a slew of taxes, fees and surcharges applied to California phone bills, including, for example, the High-Cost Fund B whose proceeds go back to AT&T and Verizon and amounted to an additional $434 million collected in 2007. These taxes are on both wireline and wireless bills.

The CPUC Mandated Telecommunications All-End-User Surcharges produce more revenue, mostly to AT&T and Verizon, for services like Lifeline, which is a financial support to low income households; the phone companies get their retail rates reimbursed.

Then there’s the California Advanced Services Fund (CASF), which provides grants to bridge the “digital divide” in unserved and underserved areas in the state. Its initial funding of $100 million, was supposed to support projects that “will a) provide broadband services to areas currently without broadband access and b) build out facilities in underserved areas, if funds are still available.”

All that is on top of federal taxes, old and new, many of which rebound to the benefit of the same suspects.

Pacific Bell, now AT&T, California was supposed to spend $16 billion dollars to replace the old copper lines with fiber optic wires to service at least 5.5 million homes by the year 2000, with very fast broadband, with the plan to complete the entire state.

From the 1993 Pacific Telesis Annual Report:

“In November 1993, Pacific Bell announced a capital investment plan totaling $16 billion over the next seven years to upgrade core network infrastructure and to begin building California’s ‘Communications Superhighway. This will be an integrated telecommunications, information and entertainment network providing advanced voice, data and video services. Using a combination of fiber optics and coaxial cable, Pacific Bell expects to provide broadband services to more than 1.5 million homes by the end of 1996, 5 million homes by the end of the decade.” (Emphasis added.)

In 1995, Pacific Bell even claimed that it had laid 1 million feet of cable for this broadband network in 1994 alone:

“Network upgrades. Construction of Pacific Bell’s consumer broadband network is underway and will ultimately be able to deliver a wide range of telephone and video services to all its California customers over a fiber-coaxial cable system. Technicians placed more than one million feet of cable for the broadband network in 1994.”

Pacific Bell got billions of dollars from customers to pay for these upgrades (and took billions in tax write-offs), and after it was purchased by SBC in 1997 (now called AT&T) kept collecting the money.

In 1995 alone, the company took a $3.4 billion tax deduction, claiming that it was because the company was replacing the old copper wiring with fiber optics — yet a lot of those wires are still in use today.

Pacific Bell also pulled a bait and switch and rolled out DSL over the old copper wiring instead of upgrading to fiber.

In 2004-05, AT&T announced U-verse, its first “fiber optic network” to consumers’ homes or businesses. But U-Verse is a second bait-and-switch. U-Verse goes over the old copper wiring to complete the service, is only fast in one direction and can never, ever compete with other countries’ services.

To add insult to injury, when AT&T purchased the former regional Bell company, BellSouth, the 2006 merger agreement required AT&T to be able to supply a customer with at least 200Kbps in one direction in all of its territories. That was a low standard but it was never met and the FCC never bothered to check.

In the same merger agreement, AT&T also committed to offering DSL for $10 to new subscribers, but judging from our phone bill surveys of California, AT&T didn’t market this service, as many new customers paid full rates.

California officials should also be looking into the possible movement of assets out of the state-based utilities, and into their wireless divisons. See our report on Verizon’s state based annual reports for New York, New Jersey, Pennsylvania, Massachusetts and Rhode Island. Such movement results in a major increase in reported losses. We also pointed out that the wireless company may be getting a free ride in all of this, which can even include wireline construction budgets being used for wireless networks.

Where’s the outrage? Just imagine if AT&T had actually properly upgraded the networks to fiber, instead of pulling the bait and switch and use the old copper wiring.

And now what? Will California officials let AT&T fool them again?

Result: Apparently, yes.