Consumer group claims 'Baby Bells' will use new freedom to raise rates

December 18, 1991|By Leslie Cauley

The court decision allowing the "Baby Bells" into information services gives the nation's seven regional telephone monopolies greater opportunities to rip off consumers and drive out competition, a new report from the Consumer Federation of America charged yesterday.

"This year's federal court decision allowing the Bell companies into the electronic information business provides them greater opportunities to drive up phone rates and reduce competition," concluded Mark Cooper, CFA's research director.

Mr. Cooper, who wrote the report, claims the Baby Bells continue to overcharge consumers by about $30 billion a year, a figure that will grow if the Bells "continue to behave as they have for the eight years since the breakup of American Telephone & Telegraph Co."

The report urges Congress to pass legislation pending in the House and the Senate that would prevent the billion-dollar Bells from using their monopoly muscle to hamper competition and drive up phone rates.

The report, titled "Divestiture Plus Eight: The Record of Bell Company Abuses Since the Break-Up of AT&T," charged that the Bells engage in numerous abuses:

* Excessive rates and profits: The Bells routinely overcharge customers and "inappropriately" write off expenses, CFA said. The group estimates the Bells pull in excessive profits of about $1.5 billion a year.

* Ratepayer abuse: The Bells force consumers to foot the bill for "unnecessary" equipment, services and network upgrades, according to the group. In Florida, Southern Bell, a unit of BellSouth Corp., used this ploy to justify a "speculative" $100 million investment in fiber optic transmission lines, the report said.

* Consumer abuse: The Bells engage in deceptive practices, CFA claimed. The report noted that Bell of Pennsylvania, a unit of Bell Atlantic Corp., the parent of Chesapeake & Potomac Telephone Company of Maryland, paid $42 million to settle charges by the state's attorney's office that it used deceptive practices to sell consumers services they didn't want and didn't need.

Washington-based CFA, one of the nation's largest consumer advocacy groups, is a vocal opponent of loosening restrictions imposed on the regional phone companies at the time of the court-ordered breakup of AT&T in 1984. CFA has recently aligned itself with the newspaper and cable lobby to keep the Bells out of information services.

Yesterday's report is one of a series of annual reports that has taken the Baby Bells to task for engaging in practices that CFA claims are detrimental to consumers.

Bell Atlantic said yesterday that the report used "the same scare tactic that CFA has been using for years."

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