Telephone Company Rip-Off

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.

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.