The Unauthorized Bio of the Baby Bells

Book I Info-Scandal: Highway To Nowhere. The Story Of The Bells' Failed Broadband Deployments.

By 2000, almost half of America was supposed to be rewired with a fiber-optic wire into your home and office at speeds 100-500 times faster than DSL. Essentially, the Bell companies made commitments in the press, annual reports, etc that if there were granted state "deregulation', which would give the Bell companies extra profits, they would use those profits to create these new networks. And by 2002, the Bells collected an estimated $70 billion dollars in failed deployments and tax write-offs. (Note; The differences in the amount from the book and the reports is based on which year is being used as the baseline.)

Today, there are no fiber-optic broadband services as promised.

In 1998, while I realized that the Bells couldn't fulfill their plans, by 2002 it's obvious that with only a few exceptions, they are not even going to be held accountable for their statements or agreements. There are those who argue that the original fiber plans were for 500 channels of cable-like services. However, various filings also included online (now Internet and Web) services, remote medical diagnostics and perfectly clear video-conferencing.

We also need to smirk at all those who wrote us nasty letters because we said that the Internet was --- Evolution, not revolution. Having written a research report called "Internot", in 1995, which outlined how this was just another Tech bubble, our analysis in the book proved that the major analysts were wrong.

  • Summary Report: In 2000, New Networks wrote "How the Bells Stole America's Digital Future", published by Net Action, which highlighted the failed deployments, including Ohio, New Jersey, Texas and California.
  • In 1997, the New Jersey Ratepayer Advocate wrote a report on the failed fiber-optic deployments. See:
  • In 1999, NNI filed a complaint in Massachusetts over their failed broadband deployment.
  • In 2000, NNI published "The Bells Greatest Broadband Failures", a compendium of quotes.
  • In 2001, NNI wrote "The Bells Caused The Current Financial Recession: The Fiber-Optic Fiasco and America's Copper Dirt Road" This report outlines how the failed deployments helped to cause the Telecom crash and harmed the economy.
  • In 2002, Teletruth presented "The Two Broadbands: How New York City Got Conned and What We Should Do for the City's Broadband and Economic Health" which outlined that there were plans in New York for NYNEX to rewire the state with "100% fiber-optic" end points (feeders)
  • In 2002, The Pennsylvania Public Service Commission halted Verizon's Alternate Regulations because the companies was supposed to have rewired half of the state by 2002 with fiber-optic, both rural and urban areas, with speeds of 45mps in both directions. Teletruth has filed a Complaint:(DRAFT)

FCC filings on this topic:

IN THE BOOK: Info-Scandal is one of the primary themes of the book. Chapters 1, 2, 3, 4 and 5 details the Bells promises, Chapters 22 clearly outlines the incentives that were granted while Chapters 27, 28, and 29 explain our position on Bell overcharging, related to Info-Scandal. Chapters 46, 45, and 48 outline investigations the FCC should be undertaking.

Book II --- History & Strategies: Shareholders First, Customers Last. The History Of The Baby Bells And Their Shift From Away From Serving Customers.

Book II tells how AT&T, once the largest company in the USA, that had controlled both local and long distance services, was broken into seven regional holding companies. Unfortunately, each company wanted to become an International conglomerate, so they all shifted priorities by placing the shareholder and profits before local customer needs. From the excessive lobbying and a concentration on the removal of all regulation, to massive staff cuts and lack of new construction, or the moving of funds for International and non-Bell investments, the Holding company has put the customer in the back seat.

Since the publication of the book there have been mergers and name changes, so tracking the players can get complicated. For example, NYNEX was bought by Bell Atlantic and then the two combined companies merged with GTE and became Verizon.

In a special chapter titled "Liar, Liar: Baby Bell's Pants on Fire", we focused on the Bell statements and actions that were "deceitful", or "misleading". There have been so many cases that to list them all would take a new book. Statements made as comments in the press reveal each day the Bell companies are violating truth in commercial speech laws.

  • In 2002, Teletruth wrote a Letter to Senator Hollings titled " Liar, Liar, SBC's Pants on Fire". It discusses how SBC, when it merged with Ameritech, was supposed to be competing in 30 cities outside their own region—or pay $1.2 billion dollars. As of 2002, they never fulfilled virtually any of these commitments as stated in their filings or speeches, and worse, the FCC has done nothing about this. See:

Other Sources

  • In 2002, a good summary report on the Bells’ behavior was published. Titled "Broken Trust - Indictment of the Bell company CEO" by Daniel Berninger, Managing Director,, it states: "They pursued and obtained enormous short term profits at the expense of long term survival. They shifted tens of billions of dollars into unregulated businesses that never produced a return. They cut expenses without regard for network upgrades or service creation and pursued price increases without value creation for over 20 years."

Book III Show Me The Money: Bell Revenues, Expenditures And Profits.

While the Bell companies have continually pleaded poverty, anyone examining the Bell companies’ annual reports knows that they have been and continue to be some of the richest companies in America. These riches are NOT from all of the other businesses, but directly from customers --- the pennies, nickels, dimes, and quarters that these companies get from local phone service. In fact, the Bell companies have continued to cut staff and construction budgets.

New Networks Institute has been continuing to update this information in annual reports.

  • In 2001, New Networks published "Bell Monopoly Profits Are Outrageous: America's Phone Customers Are Being Overcharged By Their Local Bell Companies About $200 Per Household"
  • In 2002, New Networks published "Regional Bell Operating Company (RBOC) Revenues, Expenditures and Profits: The Bell Companies are Misleading Congress, the FCC, and the Public with a Shell Game of Statistics." This report found that the Bell companies are misleading the public by presenting statistics that are designed to give a false impression of the companies financial health. Meanwhile, In the last three years, the Bells’ will have cut 100,000 staffers, Construction budgets for 2002 were cut 50%, and the overall profits from local phone services are still over anything that might be considered ‘fair and reasonable’.
  • In 2002, Teletruth filed In New York, New Jersey and Massachusetts about to investigate "Vaporware" --- missing equipment that has been added to the price of service. In 2000, the FCC released a series of audits that showed $19 billion dollars of missing equipment. This was only ¼ of the potential audits, however, because of political pressure, the FCC turned it over to the states. We estimate that $2.5 billion was collected in New York alone. Teletruth has also filed with the IRS and the SEC on this matter. To read our filings and related materials see:

Other Sources:

  • In 2001 New Networks filed Comments backing the Communications Workers of America published report on the deteriorating conditions of the current networks in New York, which were being exasperated by slashes in construction and staff cuts see:
  • In 2002, The Communications Workers of America issued another report, showing that proposed additional staff cuts and slashing construction budgets would deepen the problems. See:


Book IV The Regulators and The Laws. From the FCC to the Telecom Act. ---Competition 101

As we pointed out in the book "telecommunications laws of the land have been built more through campaign financing than the Public Interest." And at the time we also pointed out that the Bells were, in fact, repeating their anti-competitive behavior that had started with early local phone service competition as well as competition in the voicemail industry, with harming the newer providers of Internet services and data competitors.

Since the books’ publication, unfortunately the situation in 2002 is clearly continuing a downward spiral. For example, anyone reading this most likely knows about the crash of the Tech and Telecom sector and has heard of the hundreds of competitors that have gone our of business. And today, less than 7% of phonelines are competitive and almost all of these still use some part of the Bells’ networks. Also, the new laws being proposed by the FCC and Congress are more like putting the nail on the coffin than helping competitors by enforcing the laws.

On the FCC side, the current FCC Commission under Michael Powell has been a do-nothing group who are proposing a series of very bad regulations that will block broadband competition.

On the competition side

  • Summary Report: In 2001, New Networks Institute published a report on competition. "The Bells Harmed The CLEC Industry: Bell Funded Study by Brooking's Crandall on CLECs Is Flawed."

New Networks Institute has been conducting surveys of Internet Providers since 1999.

  • In 2001, New Networks released a survey which clearly showed that ISPs were being harmed by the Bell companies:
  • In 2000, New Networks published an analysis "Putting the Survey into Perspective: FCC and DOJ Data Corroborates Findings" using data from the Department of Justice and filings by competitors in Massachusetts and other states which shows that the problems competitors were experiencing was wide spread and matched the findings of the survey.

FCC Filings on this Topic:

Other Sources:

Congressional Next Steps:

In the Unauthorized bio we only touched on how the Telecom Act was created via campaign-financing. It is now clear that the situation is a great deal more insidious. There are hundreds of bills related to telecommunications and broadband, but in some of these, there is a clear bias toward helping the monopolies over customers.

  • In 2001-2002, New Networks created "Tauzin-Dingell is Evil" a website dedicated to a bill in the House proposed by Reps. Billy Tauzin and John Dingell. An analysis by Open Secrets showed that the vote was cast, not based on political party lines but who got money from the Bell companies. This bill is terrible because it blocks competition. It will be back in 2002.

Book V Overcharging by the Numbers: Do the Math. Overcharging is in the Eye of the Beholder or Just Better Lawyers

This section lays out overcharging claims as told by numerous sources as well as our own analysis, using excess profits from the state Alternate Regulation plans. In reviewing the current plans, it is clear that our analysis continues to be correct and that the Bell companies’ profits from the local subscriber continues to grow. In updates for Section One you can find numerous cases of Alternate Regulations that have been created to deploy fiber-optic based services – and which backfired, costing customers hundreds of dollars per customer.

  • In 2001, New Networks report on Bell Revenues and Profits found that $17 billion was being overcharged. This is up from the $14 billion we found for 1997. From Bell Monopoly Profits Are Outrageous:

Other Sources:

Book VI Overcharging on Your Phonebill and How to Save Money.

As we stated in the book, believe it or not, no regulator looks at the profits of the entire telephone bill. This disturbing fact becomes clear when you compare the profits of the local phone companies to the revenues generated from local phone subscribers. And as we wrote in the book, each part of the phonebill tells a disturbing tale.

  • Phonebill audits – Since the beginning of 2002, Teletruth has been offering FREE phonebill analysis for any small business in the Verizon territories. Working with LTC Consulting, a professional auditing firm, our first survey of phonebills in New Jersey found that 50% of all small business phonebills had mistakes costing the customers money. To learn more see:
  • Phone Rental law suit. As I documented through phonebills, my Aunt Ethel paid over $1000 for a rental phone from 1982-1992 -- a ridiculous amount of money. A law suit was established and in 2002, there was a settlement approaching $300 million dollars---- with customers getting as much as $80. Considering the number of customers harmed, we consider this total amount to be a nice gesture, but totally insufficient for those who were ripped off. To read more about the case see:

FCC Filings on Phonebill Issues:

  • "FCC Subscriber Line Charge" – In 2001, New Networks filed a complaint with the FCC claiming that raising the FCC Subscriber Line Charge, which is a fee on every local phonebill that does not go to the FCC but to the Bell companies, should not happen. Since that time, the FCC has raised the charge to $6 for a residential line. To Read our complaint.
  • In 2001, New Networks filed on the Portability Charge – There is a charge on your phonebill which allows you to keep your phone number when switch to a competitor at your current address. Unfortunately, you can’t take the phone number with you when you move. Everyone who has had to change their stationary, etc. because of an area code change should realize that phone numbers should be "portable"--- keep you own phone number without changing it. Also, customers shouldn’t be paying the current portability charge. To see our FCC Petition:
  • In 2002, Teletruth’s first newsletter featured a story of a woman trying to keep her phone number with her when she moved. She was quoted "a one time fee of $558.00 and a monthly charge of $96.04 every month", to move her phone number across town in Manhattan, New York City.
  • In 1998, New Networks filed pertaining to the "Truth in Billing" laws. The FCC continues to tell everyone that they solved phonebill issues, making phonebills easier to read, with their proposed guidelines known as "Truth in Billing". We filed, using the information in the book, to show that the FCC didn’t have clue about solving these issues.Case in point – can you read your phonebill today? To read our filing, see:

Book VII Customers And Conclusions. What's Broken In Telecom And Why You're Owed Money.

First, join Teletruth.

It’s free and if you have gotten this far in the book or even these updates, it should be obvious that the situation in telecommunication is still deplorable and what we predicted has almost all come true.

Customers still have no idea about their phonebills, prices have increased even though the two major expenses, construction expenditures and staffing has been dramatically cut. The Fiber-optic future still does not exist, and there’s virtually no competition for phone service in the US. The mergers were a joke, helping only the executives stock options and the Bells’ entry into long distance, which was supposed to be done after there was competition and prices for local phone services came down, is now being done because of bad FCC policy.

Worse, the entire competitive market has collapsed (as predicted) and we are left with a situation that is worse off then when the book was penned.

At New Networks Institute’s first press conference in 1992, it was clear then that the Bell companies should be separated from the wiring that goes into customers’ homes because the Bells would never allow a level playing field for competition. And the only thing that is going to change this environment is for customers to make a stand and say --- enough is enough.

It may be time to finish the job that was started with the break up of AT&T and instead of creating new local monopolies, the country should start by Divestiture II – Breaking up the Bell companies. This idea has, over the last five years gotten some traction, and in fact, Senator Hollings proposed a bill to do just that.