New Networks Institute


Report 1: Bell Atlantic' Predatory Pricing of DSL

Report 2: Bell Atlantic Should Pay Compensation


Before The

New York State Attorneys General Office









Filed By


New Networks Institute

Bruce Kushnick

New Networks Institute

826 Broadway, suite 900

New York, NY 10003



Date: December 22nd., 1999





Internet Service Providers (ISPs) are mostly comprised of a rare breed of entrepreneurs who, at their own expense, clearly saw the need to supply customers with the foundations of the Digital Age --- Internet and web service provision and everything from e-mail to the creation of web sites. This group has been the real innovators of our Digital future, not the monopolies who supply local phone service, such as Bell Atlantic.

However, Bell Atlantic is harming the Internet Service Providers and Competitive Local Phone Companies (CLECs) that do not have the resources to be able to protect their own interests, and the interests of their clients, to the fullest. The Bells are also stifling competition and innovation by, in every way, creating a situation that only allows the monopoly to get stronger, while doing irreparable damage to these other companies attempting to deliver the digital future.

The Department of Justice (DOJ) has recently found that Bell Atlantic, New York has not been able to deliver an "acceptable level of performance" for the provision of competitor DSL (Digital Subscriber Line) services. In fact, the DOJ report found that 30 to 40% of all order confirmations to the CLECs were inaccurate while over 80% of all orders required some form of manual processing. (2)

"…when Bell Atlantic does return order confirmations, a substantial portion of those confirmations are inaccurate. Bell Atlantic has acknowledged in NYPSC proceedings that as many as 30 to 40 percent of confirmations are inaccurate,(30) and CLECs have alleged that levels of inaccurate confirmations are in that range or even greater.(31) Moreover, it appears that as Bell Atlantic struggles to improve its performance in returning manually processed order confirmations and rejections more quickly, its accuracy suffers significantly. In September, Bell Atlantic improved its combined UNE-P/UNE-L on-time performance for confirmations and rejections,(32) but only 42 percent of manually processed orders were correctly submitted by Bell Atlantic personnel to Bell Atlantic's provisioning systems (significantly down from only 64 percent for August).(33)

"These problems with late and inaccurate order confirmations appear to be the result of a high degree of manual processing of hot-cut orders at the ordering stage.(34) In August, more than 83 percent of unbundled loop orders required manual processing of some kind by Bell Atlantic employees, and the problems with late or inaccurate confirmations and rejections appear to arise almost exclusively in connection with these manually processed orders"

And this costs the CLEC (and ISPs) money and time.

"The high level of slow and inaccurate manual order processing imposes significant costs on CLECs, which must devote time, effort and expense to identifying and rectifying problems in order to ensure that orders ultimately are processed correctly."

This has lead the Department of Justice to request that the Bell be denied entry into long distance at this time. The department wrote:

"These considerations lead us to the conclusion that a BOC should not be permitted to offer in-region interLATA services as long as important constraints on local competition remain. It is, therefore, our judgment that Bell Atlantic should not be permitted to offer such services until it demonstrates that it has solved the existing problems in its provision of access to unbundled network elements."

More importantly, the Telecom Act's creators made it clear that the act was supposed to bring in competition and advanced networks. We concur with the Department of Justice clearly shows, when it comes to the treatment of competitors trying to roll out DSL, the Bell is unable to offer basic services to competitors. As the DOJ states:

"As to Bell Atlantic's historical performance in provisioning DSL loops, we are unable to conclude on the current record that Bell Atlantic has demonstrated an acceptable level of performance"

It is ironic, however, that the DOJ has not started an investigation into the Bell's monopoly power and anti-trust violations against the local ISPs and CLECS. The irony is that the DOJ is pursuing Microsoft as a monopoly and is discussing taking measures to protect competitors, which in turn harms customers. Microsoft's' miss-deeds pales in comparison to what is currently happening throughout the Bell system. Microsoft only has 90% of the market, while the Bells still control 99% of their residential markets. And those companies that are trying to bring in competition are all be harmed:

In short, Bell Atlantic is stealing New York's digital future, which, if let to continue, will dampen the city's future as a leader in the Digital Age. We call upon the Attorneys General to investigate our claims--- that Bell Atlantic is harming competitors, and customers, that the NY public service commission's decision should be overturned, and that an investigation and remedies should be immediately implemented.

We have broken-out the investigations into two reports.

1) Bell Atlantic is Using Predatory Pricing for DSL that is Designed To Eliminate Internet Service Providers. Based on interviews with ISPs, and an examination of Bell Atlantic's current discount schedule for Internet Providers, NNI has found than virtually no ISP can be profitable offering Bell Atlantic's ADSL product. Also, it is obvious that Bell (Bell Atlantic's Internet company) and the Bell Atlantic ADSL rollout are being cross-subsidized, even though is a separate company.

2) "Bell Atlantic is Supplying Sub-Standard Customer Services to DSL Internet Providers and Their Customers: A Model For ISP And Customer Compensation Because Of Bell Atlantic's Failures. Today, Bell Atlantic can NOT fulfill its obligations to its customers that are trying to get DSL service from the local Internet Service provider (supplied by their CLEC). Like the Department of Justice's finding, NNI found that 75% of EVERY order has a serious problem that delays the customer's service. In a whopping 30% of cases, Bell Atlantic didn't show up for the installation, and the customer waited a full day for their DSL circuit. To add insult to injury, 1/3 of these customers have a second or even third no-show by Bell Atlantic.


What the Attorneys General Should Do:

In order to protect the Public Interest and the Digital Future, we are asking the Attorneys General to:

1) Investigate these claims of wrongful treatment of competitors and predatory pricing.

2) Require the Bell to pay compensation when they fail to supply adequate customer services.

3) Appeal the New York Public Service Commission's Decision and Stop Bell Atlantic's entrance into long distance as they are in violation of the Telecom Act of 1996. As you are aware, the New York State Public Service Commission approved Bell Atlantic's entrance into long distance. This new business opportunity was wisely restricted because the Bells can and will use their monopoly power to not only dominate the market, but close out competition. It should be remembered that the Bells do not have robust competition as intended with the Telecom Act, and their abuse of competitors is nothing more than numerous violations of the Telecom Act.

As discussed, the Department of Justice has found that the Bell has not sufficiently opened up its networks to competition. Our data clearly demonstrates that the New York Public Service decision did not fully examine competitive issues.

About New Networks Institute

New Networks Institute ("NNI") was founded in 1992. Its mission is to explore the impact of the break-up of AT&T and the creation of the Regional Bell Operating Companies ("RBOCs") on telephone subscribers in general and on the development of advanced telecommunications networks. NNI's research is independently funded from the sale of reports, books and databases.

Filed: Date: Bruce Kushnick, New Networks Institute