Bruce Murphy
Murphy’s Law

Telephone Company Rip-Off

Now that the telecom industry is deregulated, AT&T can gouge customers with late fees.

By - Jan 7th, 2014 01:24 pm
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Not many Democrats objected when the Republican-led legislature deregulated the telecom industry in May, 2011. The bill passed overwhelmingly in the Assembly, by 80-13, and in the Senate on a 25-8 vote.

Republicans drafted the plan at Gov. Scott Walker‘s request and secured support from AT&T Wisconsin and the Wisconsin State Telecommunications Association. “AT&T, through its political action committee and employees, contributed more than $78,000 during 2009 and the first 10 month of 2010 to current lawmakers and the governor, the Wisconsin Democracy Campaign says. Of that amount, more than $20,000 went to Walker,” wrote reporter Mary Spicuzza for the Wisconsin State Journal, which did the best reporting on the bill.

The passage of the bill demonstrated the might of industry insiders and the negligible impact of those who are supposed to protect consumers. The state Public Service Commission,  the “independent regulatory agency dedicated to serving the public interest,” took no position on the bill. The PSC often seems more responsive to the public utilities it oversees (which until this law included the telecom industry) than to the public. Indeed, it was in recognition of this that the nonprofit Citizens Utility Board was formed decades ago to fight for consumers.

But CUB, which called the law “a giveaway to the telecom industry, and the takeaway of grandma’s phone,” was overwhelmed by industry lobbyists. Moreover, CUB’s objections mostly related to rural customers. The PSC “has capped the price of basic voice (phone) service in the many areas of the state in which competition is scarce or nonexistent,” and the law would eliminate this protection, CUB complained.

Indeed, it was mostly the rural Democrats who opposed the law, while others, including Kenosha-based Assembly Minority Leader Peter Barca, supported the bill.  “We’re pitting urban against rural,” Sen. Kathleen Vinehout (D-Alma) told Business Week. “The consumer has absolutely no recourse under this bill.”

One exception was state Sen. Chris Larson (D-Milwaukee), who complained that the bill was “put together in secrecy behind closed doors” and “cut off regular folks.”

Some time after the law was passed, AT&T began gouging customers with high late fees. I’m one of them. I was charged an $8 late fee on a $96.12 monthly bill. Annualized, that amounts to an interest rate of 100 percent. But look closer and you’ll see that the rate is charged after just 25 days of service. So the actual annualized interest rate is 116.5 percent. Wow.

That’s not as high as the stratospheric rates of interest charged by check-cashing stores or the rent-to-own industry. But they don’t start charging interest or a late penalty before you’ve received the service or product. AT&T actually charges a late penalty five days before you have received a full month of service. About one-seventh of the interest it charges is for service that hasn’t yet been provided. (AT&T’s media team did not respond to my request for comments, but the person who answered my call to complain indicated the $8 late fee was a standard charge for the company.)

Prior to passage of the 2011 bill, the state law capped any such late fees. In fact, until 2005, state law forbid companies from charging any late penalty. After a new law was passed in 2005, telecom companies could charge up to 1.5 percent on the principal balance of a bill and PSC spokesman Nathan Conrad says that “we are of the understanding that (AT&T) was using the 1.5%” on late fees.

Annualized, that amounts to an 18 percent rate of interest. Since the 2011 bill, that rate of interest has risen more than six-fold, by 647 percent.

And don’t bother to complain about this. The new law repealed the old requirement that telecommunications companies provide reasonable and adequate service at fair prices and blocks the PSC from setting rates and investigating consumer complaints or suspected violations.

Sen. Rich Zipperer

Sen. Rich Zipperer

Walker promised the new law would “update Wisconsin’s regulation of the telephone industry for the broadband age,” while reducing red tape and encouraging competition and bringing more jobs and investment to the state. Sen. Rich Zipperer (R-Pewaukee), one of the measure’s main sponsors, promised it would bring 50,000 new jobs to Wisconsin, citing a study which supposedly proved this, a claim the Journal Sentinel’s Politifact labeled “mostly false.”

Before the law, I found it a nightmare dealing with telecom companies and their endlessly complicated pricing structures for broadband, phone, cable, etc. It still seems like a nightmare, but now we have the added indignity of outrageous late fees. I have also heard horror stories of other charges being added by these companies, which I haven’t had a chance to track down. Please feel to share those stories in comments or if you prefer to do it privately, by email to bruce@urbanmilwaukee.com

I’d also be interested in any improvements you’ve seen in the telecom industry in Wisconsin since passage of this law.

Update 2:45 p.m. January 7:  The Corporate Communications office of AT& T emailed me this statement in response to my questions: “Like many providers, AT&T charges a late fee if full payment isn’t applied to a customer’s account on or before the bill’s due date. The late payment fee details are listed in a customer’s bill in the Important Information section.”

Short Take

Annual property tax bills have arrived and the city helpfully provides a run-down of the increase for each governmental unit. In 2013, property taxes were raised 3.1 percent by the City of Milwaukee, 1.5 percent by Milwaukee Public Schools, 1.7 percent by Milwaukee County, 0.5 percent by Milwaukee Area Technical College and 4.5 percent by the Milwaukee Metropolitan Sewerage District.

Categories: Murphy's Law, Politics

12 thoughts on “Murphy’s Law: Telephone Company Rip-Off”

  1. Big Al says:

    Has anyone asked Senator Zipperer about his promised 50,000 jobs and where they are?

    Or was it just a goal, not a promise?

  2. Gee says:

    Big Al speaks for me.

    (Senator Zipperer and the more than 100 other legislators who voted for this do not.)

  3. Erik Gunn says:

    Peter Barca represents Kenosha, not Racine.

  4. Bruce Murphy says:

    Erik, thanks, we corrected this.

  5. Mariothepoet says:

    between the towers no longer being on PUBLIC LAND and this “effective” rate hike we are losing and the telecom companies are winning.
    50,000 jobs we won’t ever see. THANKS SCOTTY!

  6. tim haering says:

    Late fees make me scream, too, Bruce, but that’s business. I pay Wells effen Fargo $35 each time my $25 check hits the bank even hours ahead of my regular bi-weekly direct deposits. We will just have to be more disciplined in our payment habits. Don’t expect mercy from John Galt.

  7. Jeffrey Jordan says:

    Urba n v Rural. Behind closed doors. Deregulation. Promised jobs that never materialize. It’s basic Machiavellian tactics. divide and conquer. I’ll give you the right to carry handguns. I will protect the unborn. I will make sure your child can pray in school. I will make sure that all of the young black men, you are so unreasonably afraid of, are put in jail where they can’t hurt you.
    When will people realize that this is the same scenario we’ve seen from the far right since 1980. Many of us vote against our own best interest and it’s coming home to rest with income inequality, destruction of the middle class and giving corporations the same status as you and I .
    If we don’t like what is happening, we have to look at whom we have put in office and tell them to change things or vote them out of office.
    In the mean time, as soon as you get that late fee, change vendors and let them know why you are changing.

  8. Andy says:

    Why are we ignoring the fact that this bill passed with a very wide bipartisan margin? Blaming Walker and Republicans because you don’t like this bill doesn’t absolve any democrats of their support of the bill.

    I think the loss of oversight on consumer complaints is a big one… but I’m less concerned w/ late fees and losing coverage in rural areas because there are actually Federal controls regarding “carrier of last resort” that ensures coverage.

    As far as equating late fees to an interest rate… can I then complain that Whitefish Bay charges over 1000% equivalent interest on an unpaid parking ticket? Sure, I forgot to pay it… but that “interest rate” is outrageous…

  9. Edith Wagner says:

    Time Warner falsely declared me late twice a year ago. After much backing and forthing, I was required to present front and back copies of cancelled checks to prove them wrong. BUT they keep charging the (false) late fees which are adding up. And the robo calls keep threatening unspeakable horrors, if I don’t call and pay up within 24 hours! Hopefully, a letter to the president of TWC might help. We’ll see.

  10. jake says:

    Bipartisan or not it was and is a give away to multibillion dollar corporations. Reverse Robin Hood or we call him Scott Walker.

  11. Bill Sell says:

    One of the reasons we fired Senator Jeff Plale and elected an upstart (Chris Larson) to take his place was his hawking to obtain cable rights for AT&T. AT&T (sort of) promised to wire the state but they have mostly concentrated on areas which already have service, leaving the rural folks, again, to have slow internet connections.

    City and rural have much in common, but it serves some corporations to find a soft point and to exploit it and bank the fire in Madison. Cable bills have not gone down, as Senator Plale promised they would. My own phone service provider decided to not compete in the city because (as I understand it) they could not afford to lease AT&T cables at rates which would allow my provider to make a profit.

    The law is written such that AT&T can eat its way through the state, one region supporting AT&T where it cuts rates below costs until it wears out the competition. Wisconsin did well for AT&T and Uverse was only the beginning. Those late fees are avoidable but not uncompetitive broadband. When AT&T owns this state, they may easily move on to others. Hello, Ma Bell.

    We have given AT&T the status of a utility (nonprofit) but done nothing to leverage its monopoly into a responsible state-wide utility.

  12. Jeff says:

    They also gutted local authorities ability to regulate cell towers so these companies can put them wherever they want with little regard to whether they are actually needed.

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