Teletruth News Alert. February 22nd, 2007.

Data Quality Act Complaint: Bad FCC Data Created Bad Phone Policies.

Full Complaint:

Report "AT&T and MCI (Verizon) Are Harvesting Customers"

FCC's Data Quality Act Guidelines:

Cartoon: FCC's Bad Math: Why is this Guy Smiling?

Other Teletruth DQA Report and other Links:

Teletruth today filed a formal "Data Quality Act" challenge against the FCC's data on phone rates, statistics and other related data, claiming that the information products are seriously flawed and in need of immediate revision. Teletruth claims that the data fails in being objective, lacks quality and is not reliable, lacks utility, and is not reproducible, thus in violation of the Act.

We note that Data Quality comments require an FCC response within 45 days.

Specifically referenced in the complaint are FCC reports: "Trends in Telephone Service", February 2007, "Reference Book of Rates, Price Indices, and Household Expenditures for Telephone Service", testimony presented by Chairman Martin, press releases, and every other document that uses the FCC phone rate information.

This Data Quality Act complaint is based on Teletruth's report "AT&T and MCI (Verizon) Are Harvesting Customers" and outlines how bad data has created bad and harmful policies. As we will show, Teletruth has found that over 1/3 of US households have been harmed because the data is so inaccurate that it has covered over major rate increases and other harms to mostly low volume users and especially seniors.

The flawed data are also being used as part of new proposed plans, such as the "Missoula Intercarrier Compensation" plan that will raise the FCC Line Charge (on every local bill) to (a cap of) $10.00, increase Universal Service and add new fees.

And it is clear that this same bad data was used in the FCC's AT&T-SBC-BellSouth and Verizon-MCI mergers to the detriment of the public interest.

Some of the primary findings:

1) The FCC's Data Can Not Be Cross-Referenced and have the Results Make Sense or be Reproduced.

According to the FCC, the average residential long distance bill per month is $8.00, the average household only makes 32 minutes of interstate/intrastate calls, (long distance and toll calls) and the average cost per minute is $.06. If this is true, then the total cost should be $1.92, ($.06 times 32 minutes). But with the average of $8.00, there is a difference of $6.08. Where is the FCC's data on the difference -- plan fees, single bill fee, etc.? All missing.

Next, if you examine the cost per minute ($.06) as the division of the monthly cost ($8.00) and the number of minutes, you have a new fact - that the actual cost per minute is $.28, not $.06. Therefore, there is so much inconsistency between these numbers as to make them useless and the FCC does not supply enough other data to demystify these numbers. But it gets worse.

2) The FCC fails to 'unbundle' some local and long distance packages and so it has made additional mathematical errors, skewing both local and long distance statistics.

According to the FCC's "Trends in Telephone Service": "For some households taking bundled local and long distance service, it was impossible to separate the bill into its component parts. In those cases, the entire bill was allocated to the local exchange service provider."

As we explain in our complaint, separating local and long distance is trivial. a) Just read the phone bills, b) examine the taxes and surcharges that are specifically applied to long distance service, or c) contact the carrier and get the information from them.

See a Verizon phone bill outlining the Verizon local and long distance break outs of a bundle.

Besides skewing both local and long distance data, it makes the data unreproducible, even with source information.

Truth-in-billing violations - If the FCC, the experts, can't discern the separate parts of the bill, how are customers supposed to make sense of this same data?

3) The FCC claims that long distance service costs are going down. Chairman Martin, in his testimony to the Senate February 2007 claimed that long distance prices decreased since 2000. He states:

"In 2005, the price of Long distance was 2/3 of what it was in 2000."

Here's a chart taken from phone bills which shows that AT&T prices for 'basic rate' services increased since 2000, going from $.19 to $.42.

Teletruth's data outlines how AT&T and MCI prices have increase 200+% for low volume users, many paying $.50 to $1.00 a minute. According to the FCC's own data, in 2005, AT&T and MCI had 26% of all US households for long distance service.

4) The FCC's Data Is Biased Towards "High-Volume Users", Harming Everyone Else.

In the FCC's official reference book on phone bill prices, we find that the term "low volume" could not be found. However, we find that the FCC wants to show the good impacts of their decisions which help "high volume" customers. In fact, the FCC claims that "basic schedule" rates are "obsolete" for high-volume customers.

There is no mention of how many customers are 'high volume' customers, and there is no indication of the impacts on low volume or medium volume customers.

And this data is important to get right. In the Missoula plan, AT&T claims that the average low volume user makes $10.00 a month not counting taxes and surcharge, even though the FCC's average per month is $8.00 -- $2.00 lower than AT&T's low volume stats.

5) Direct Harms Caused By Biased Research. Failure to Detect Intentional Harms to 1/3 of the US Households.

Chairman Martin's recent testimony in front of the Senate, February 2007 stated:

"Third, we must continue to protect consumers. We must always be on alert for companies intentionally or unintentionally harming consumers."

And yet the FCC knew in advance that AT&T and MCI were "harvesting" their customers based on data filed during the AT&T-SBC and Verizon-MCI mergers.

"Harvesting refers to AT&T's increasing price increases to encourage customers to discontinue service."

Did the FCC know that the 25-40 million customers were going to have price increases or be forced to leave their service - but still continued to allow the mergers to go through regardless? Or did the FCC not see the magnitude of the issue because the FCC failed to do a separate examination of how many customers would be impacted?

6) Competitive Choices Are an FCC Fantasy. The FCC claims that competition is robust and lowering prices. Then how is AT&T and MCI (Verizon), raising both local and long distance rates?

Teletruth's survey data found that there is little brand-name choices, especially for low volume users. For low volume users, especially seniors, wireless is not an option. VOIP (voice over the Internet) requires broadband and is not an option. Cable only sells bundles and requires cable service (or higher rates). More to the point, why should a customer pay for package when they make less than 15 minutes of calls a month, the average number of minutes for low volume users?

And, the FCC has no data on how many customers have been pushed onto more expensive choices by the phone companies. Teletruth has found millions of customers on packages where they make few, if any calls.

Conclusion: The FCC has created a fantasy world, the data is being used to make political statements about its own successes, while the actual data from customer phone bills tells a much different story --- prices are increasing, especially for a large swath of the population and the FCC is clueless.

Having accurate data is paramount for making accurate policies. Congress should take the initiative and require an overhaul of the FCC's data, but also examine how the past and current decisions were influenced by bad data.

Bad Data Equals Bad Policy.

Bruce Kushnick, executive director,

New Networks Institute

[email protected]

Tom Allibone, president

LTC Consulting

[email protected]