The Infobahn…Round 2
By the early 90’s, none of the promises to build the “Information Super Highway” by the Bells had been delivered, yet these companies had retained the profits that were allocated for the project. What was done about it? Nothing. In fact, it was forgotten about. The entire negotiation was utterly forgotten about, yet the Bells were allowed to gain additional profits from this “memory.”
Seeing how easily they were able to effect change in their “restrictions”, it was during this early period in the ’90’s that they sought to do exactly the same thing again. That is just what they did.
The Bells submitted proposals to the individual states asking, “Allow us to retain more profits, and we will build your high-speed infrastructure.” The Bells claimed the highway would be a technological revolution, and it would be done with the simplest of compromises. *further information*
What did the states say after they had already eased restrictions a first time, made the Bells more profitable and never received an ounce of the first promise? The states agreed. Yes, you read this correctly…the states agreed to the proposal…again.
What was the incentive this time? The language was slightly different in each case, however the common denominator was the same. The Bells had worked out arrangements whereby their basic services had price caps, profits were no longer fixed, and in some cases, other services were no longer regulated. What did this mean exactly?
Poor Service and lots of $$$
Price caps are a ceiling on the amount that you can be charged for a service. In theory it’s a great concept, however it made life miserable for a great, many people. If you are asking yourself why, then you have demonstrated why it was a great tactic for the phone companies to use on the public.
Remember, a very important part of the arrangement was to allow the Bells to profit as much as they wanted. If they could not profit further by raising rates, can you think of another way that they could increase their profit margins? They did it by cutting jobs. Those of you who were in a Nynex/Bell Atlantic area know this all too well.
These companies were already vastly profitable. They out performed most fortune 500 organizations, yet after this agreement was established, they suddenly began cutting their staff numbers. What happens when you do not have adequate staffing? According to an LA Times article, (6/18/95) the Ohio’s PUC received 10 times the number of complaints in 1994 than the previous year, while NYNEX missed 142,000 appointments in the last three months of 1994 alone. In fact, according to NYNEX’s 1996 3rd quarter report:
“New York Telephone will be required to issue rebates to customers of at least $102 million for not maintaining adequate service standards.”
As a New York Post columnist, Irwin Stelzer, put it:,
2/26/97 “NYNEX fails to show up at about 1,000 repair appointments every business day.”
Additionally, although the domain is now defunct, www.nynexsucks.com was registered and became a popular catch-phrase that described the situation at that time.
At this point, the Bells had it good. Every, local customer in the country belonged to them, profits were sky high *further information* and complaints about service mattered little because there was no competition for anyone to turn to.
Finally regulators stepped in. They came up with a bill that ultimately gave the Bells an incentive to open up their local markets to competitors called the Telecommunications Act. It was also hoped that this bill would foster deregulation and allow market forces to control prices of Bell companies. The bill sets forth 14 various checkpoints, that when fulfilled, will allow the Bells to compete in other markets that they have been excluded from. Many argue that it has not been enforced, while others feel that it should be removed completely.