Read the Report:
Phone Bill Survey Reveals Market Failure: Less Choice Equals, Continuous Rate Increases.
In 2004, Teletruth and UCAN, a San Diego-based consumer advocacy group, working under a grant from the California Consumer Protection fund, created a survey collecting actual local, long distance, broadband, wireless and cable bills, then interviewing these customers. In 2008 we repeated the process and the findings are disturbing and startling.
Since 2004, the two largest competitors, AT&T and MCI, were merged into the former SBC and Verizon respectively. On the wireless side, AT&T was purchased by Cingular (a joint venture of SBC and BellSouth) and Sprint acquired Nextel.
Because of these mergers, long distance prices have been able to have continuous increases; and as of 2008, there are few, if any choices being offered customers. And through faulty state deregulation, local service has also had major increases.
Based on over 700 wireline, local, long
distance, wireless and broadband bills from
A one minute long distance call averaged $.55 cents. This price per minute is higher than in 1980, before the break up of AT&T. How can this be? Its easy. AT&T currently controls the long distance market for wireline service and there are few competitors left. And because AT&T has loyal customers and they receive unreadable phone bills, most customers dont realize that the company has not only increased the cost per minute, but also increased all of the ancillary costs like plan fees or additional, questionable cost recovery charges. Right now AT&Ts basic long distance rate is $.42 a minute, not counting all of the other fees. But even customers on $.05 or $.10 minute plans, can be paying $20.00 plan fees, not counting taxes and surcharges.
The other major problem is the actual usage of customers. While it is believed that most people are heavy users, the average customer only makes 87 minutes of long distance or intra-lata calls (in-state long distance) --- and this means that only 15% of the population are heavy users. And at the other extreme, over 60% would be considered low usage customers --- i.e., the majority.
As we discussed in a previous article about AT&T increases, the company is harvesting their customers raising rates post the AT&T-SBC mergers. The survey clearly shows that the increases to AT&T long distance service, especially when the old AT&T customers have been combined with the previous SBC Long Distance service, have directly harmed customers.
What about packages? What about VOIP
our survey, there were virtually no AT&T packages
the old AT&T before the merger and MCI offered local and
long distance combination packages; i.e. one price for both
services. As we discovered in a previous survey of
And VOIP services are also not competitive because they require the customer to already have a broadband connectionand in order to get a reasonable price; the customer has to also purchase local service.
Local Service Increases Occurred On All Services. Since 2004, the California Public Service Commission has simply allowed a continuous set of increases on virtually all parts of local service. Our survey found that Call Waiting has increased 86%, unlisted numbers 346% and directory assistance (DA) went up. 1630%. For example, in 2004, local service included 3 free DA calls then $.46 cents. Today, the cost is $1.99 per directory call.
We note that more recently, at the end of 2008, there have been new increases to the phone charges by the state commission. It includes, Flat Rate up to 24% per month, while Measured Rate went up 25%. This cost doesnt include the taxes or surcharges that also go up.
There Were A Host Of Other Disturbing
Findings. Over 10% of the customers were charged over
$12.00 a month for a service that they never ordered. Known
as cramming, where the customer is charged by a
different phone company for a service they never ordered,
this problem is happening throughout the
Cable Services and Competition. Cox is the only serious competitor to AT&Ts local and long distance service and they have an estimated 20% of the market. (Nationwide, the cable companies only have 15% of the local and long distance markets.) However, the average cable bill was $70 and AT&T does not offer a competitive, read lower cost service except for some satellite TV customers. Thus cable rates continue to rise as well.
Wireless Services. On average, a one minute wireless call came to $3.02 --- and like long distance service, the reason this cost per minute is so high is that average wireless bill for 1 line was $37 dollars while 2 line accounts came to over $80.00. And like long distance over 30% of customers make less than 10 minutes of calls. However, one piece of good news for talkative families with more than one line --- over 50% of customers are paying less than $.25 per minute for a wireless call.
One interesting note was that in our 2004 survey we found over 30% of customers were going over their plan minutes, known as overages, In our survey it was less than 5%. However, customers have compensated buy purchasing plans that are too large and thus customers are only utilizing 32% of their plan allowance.
Lifeline Customers Were Particularly Hit By These Increases. In all of these increases, it is clear that the Lifeline customers were hit the hardest in terms of increases. Lifeline is a federal and state plan to give low income households phone service with some discounts. It is funded through the Universal Service Fund as well as the state Lifeline funds and it is totally broken. First, the discounts are only on some services. It doesnt cover actual phone calls, local or long distance and it doesnt cover any features, including the popular inside wiring or the calling features, like Call Waiting, so the average Lifeline bill is almost as much as the regular phone bill. According to AARP only 30% of those eligible are on Lifeline because it cost too much when the total is added up.
Customer Confusion Makes Money. Even though all of those surveyed were UCAN members and thus a more educated group, the reality is that phone bills are unreadable, that there is no enough information given to the customer to make any decision, such as a comparison of prices and offerings. For example, the AT&T or Verizon web site information does not include many of the plans, the actual costs of the plans or even make suggestions of better plans. The links provided on the phone bill are generic links to nowhere useful.
DSL Scam. One other significant finding was about the selling of DSL. Under the AT&T-BellSouth merger, AT&T was required to offer DSL at speeds of 200K in one direction for a $10.00 per month charge to new customers. In our interviews, only 1 in 30 were paying $10.00 and it was clear that this offer was never made publicly, persons who called to get this discount were told that it didnt exist by AT&T representatives, and only a few were persistent enough to get the service. You would think with all this talk of getting broadband to customers, some regulator would have noticed and taken some action.
The FCCs Flawed Methodologies Used on Phone Bill Charges Hide the Issues. The FCC has created a myth about long distance as well as wireless charges..
On long distance, the Agency claimed that there arent any long distance customers left, but the worst part of their fantasy is that they claim that the cost of a long distance call is $.06. a minute.Teletruth filed a complaint about this issue.
How can it be that the FCCs numbers so dramatically misses what happens in phone bills? First, the FCC doesnt collect its own phone bills; it uses an outside service and only publishes top level data. Next, the FCC doesnt add the fees, taxes and surcharges that come with the phone bill. Some plans are $20.00 and have multiple, additional, questionable fees. And finally, the FCC doesnt distinguish between low, medium and high volume customers or minutes it adds everything together So, a high volume customer making 3000 calls a month is replacing 300 customers making only 10 minutes of calls.
The FCCs wireless report, published in January 2009 claims that the cost for a wireless call was $.06 in 2009. With wireless the data is simply made up and has no relationship to phone bill charges. http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-09-54A1.pdf
The FCC states that it uses an estimate of minutes against an estimate of the revenue per minute, not through actual bills but through 3rd party data, in this case the CTIA, the wireless industry association.
Some analysts believe average revenue per minute (RPM) is a good proxy for mobile pricing. This is calculated by dividing a providers estimate of average monthly revenue per subscriber (often referred to as average revenue per unit, or ARPU) by its estimate of MOUs (minutes of use), yielding the RPM that the provider is receiving. Using estimates of industry-wide ARPU and MOUs from CTIAs survey, (the wireless association) we estimate that RPM was $.06 in December of 2007, which is a decrease of one percent from December of 2006."
The Methodology We Used to Calculate Cost Per Minute: Account-based.
As this report gets covered by the media, many have their own methods on how to calculate cost per minute, including the FCC. Our analysis is consumer-simple:
To read about our methodology and issues with the FCC and other data analysis in detail: http://www.newnetworks.com/Methodteletruthsurvey.htm
We are also proposing a per-minute box on every phone bill --- imagine a customer finding out that are paying $4.50 a minute for calls.
Deregulation, Consolidation and No Competition. In 2004, AT&T, MCI, Cox and even Sprint were all selling against SBC-California, formerly Pacific Bell. Today, only Cox offers local and long distance to about 20% of customers. There are no other major players to help lower rates or explain to customers they are being gouged.
Meanwhile, the state commission has not confronted the cost increases, and simply increases local service, which is now the cornerstone of multiple revenue streams --- Local, long distance, DSL/Internet connectivity, and it can be argued wireless and sometimes satellite (DISH) as some customers get one bill with these services.
Worse, the California Public Utility Commission has 'deregulated' AT&T so much that they are detariffed'. They claim that AT&T is now a free market company, no longer a utility, and customers now get contracts instead of the traditional tariffs. All because there is serious competition.
In light of competition in the telephone marketplace by new providers, the CPUC allowed landline phone companies to detariff their service offerings and to do business in this new way to further promote competition and empower consumers in the rapidly changing telecommunications market.
What is detarrifing A landline phone company is no longer required to file tariffs with the CPUC. Instead, the company may enter into Service Agreements with consumers. These Service Agreements contain the prices, terms, and conditions for services. The telephone company must still file tariffs for basic residential telephone service (the dial tone and local service of a residential customers phone service, exclusive of special options) with the CPUC, but can detariff other types of services, such as Call Waiting, Call Forwarding, and Caller ID.
In short, in
Competition must mean there are
competitors offering service through the media that a
customer can actually get. We found no serious competition
The state never put through a
comprehensive truth-in-billing plan that would
have cleaned up some of the confusion and misrepresentation
of the carriers about the costs of services, and so, today,
were now back to the Old West every customer
for themselves. We note one bright spot are the active
consumer groups, such as UCAN and TURN in