Eye on the Carriers By Johna Till Johnson, Network World, 09/11/06

The great thing about tracking the telcos is that if you wait long enough, they're guaranteed to pull some really dumb stunts. This week's cases in point: Verizon and BellSouth.

Consumer customers of both companies recently noticed the fine print on their telecom bills that basically said: "We are no longer charging you the Universal Services Fund tax. However, we're replacing it with our own mysterious surcharge, so you won't be seeing any savings."

Talk about a tactic that ticks off customers! This move generated some major responses, including the creation of a Web site named (appropriately enough) Stop the DSL Rip-off. It also merited a mention in The Onion, a satirical online magazine.

The upshot? Under pressure from the FCC and consumer groups, the companies late last month removed the mystery charges from consumer phone bills.

Now, here's the thing. Are the telcos just plain dumb? Or are they dumb like the proverbial rabbit that begged not to be thrown into the briar patch? At first blush, telling your customers to their faces that you're ripping them off would seem forehead-slapping stupid.

Consider the endgame, however: It's in the telcos' best interests to keep telecom a highly regulated industry. Judging from the results, they're succeeding: A great way to stay regulated is to incite your customers to call for it.

Why would the telcos want regulation, you ask? Think about it: Regulation ultimately benefits the parties with the most expensive lawyers and lobbyists. Guess what? That ain't Joe and Jane consumer. Telcos have had decades of experience tweaking and tuning regulations to their favor. They thrive under regulation. If you doubt me, compare their profit margins before and after deregulation. No matter what you think of the Telecommunications Act of 1996, one thing it did for sure was cut into telecom margins.

It's Economics 101: In a competitive market, regulation leads to stagnation and fat margins for the regulated entity. Deregulation leads to competition, which results in lower fees and better service.

That's why I'm pushing back on folks who keep insisting the solution to moves like Verizon's and BellSouth's is to increase regulation. A representative for the Stop the DSL Rip-off site wrote me to say, "It is time for consumers to speak up and demand FCC action!"

With all due respect: No, it's not. It's time for consumers to decide to stop doing business with companies that rip them off.

A decade ago, one might have been able to make the argument that the telcos were the only game in town for communications services. Now that's no longer true. In Verizon's territory, Comcast is saturating the airwaves with ads encouraging folks to switch to its new triple-play services. (My favorite: Two attractive young women are discussing a cute guy. One says to the other, "But did you hear? He uses Verizon." Both make disgusted faces.) And the satellite companies are serving folks in the boonies.

Competition is a wonderful thing. We should support it. Leave regulation to the lawyers.