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Current issue : #38 | Release date : 1992-04-26 | Editor : Dispater
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Title : Standing Up To Fight The Bells
Author : Knight Lightning
                                ==Phrack Inc.==

                 Volume Four, Issue Thirty-Eight, File 10 of 15

                         Standing Up To Fight The Bells

                              by Knight Lightning

Did you hear about 1-800-54-Privacy?  Did you decide to call?  I did and the
following is the information I received a few weeks later.  It outlines some of
the serious ramifications of what is going to happen if we do not actively
support Congressional bills S 2112 and HR 3515.

The information comes from the American Newspaper Publisher's Association
(ANPA).  Keep in mind, they have a vested financial interest in information
services as do many others, and in many ways, the newspaper industry can be and
has been just as bad as the Regional Bell Operating Companies.  However, in
this particular situation, the ANPA has the right idea and does a pretty good
job in explaining why we need to act now and act fast.

You know who I am, and what I've been through.  My experiences have given me a
unique perspective and insight into the methods and goals of the Regional Bell
Operating Companies.  They are inherently deceptive and if given even the
slightest chance, they will screw the consumer and engage in anti-competitive
market practices.  Additionally, their tactics threaten our personal privacy as

The RBOCs must be stopped before it's too late.

:Knight Lightning

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

444 N. Michigan Avenue
Suite 900
Chicago, Illinois  60611

February 14, 1992

Dear Consumer:

If you're like many people, you may have been hesitant about leaving your name
and address on our 1-800-54-PRIVACY phone line.


Quite simply, no one wants to give out information about themselves without
knowing exactly how that information is going to be used.

But the truth is, you reveal information about yourself EACH AND EVERY TIME YOU
PICK UP THE PHONE.  By tracking who you call, how often you call and how long
each conversation lasts, the seven regional Bell telephone companies have the
capability to learn and know more about you than even the IRS.

In fact, with modern computer technology, there is practically no limit to what
the Bells can learn about your personal life every time you pick up the phone.
And there is virtually no limit -- only one's imagination -- to the ways they
can take advantage of all the information they glean.

Of course its one thing to have the capability to do this snooping.  It's
another thing to have the incentive to actually do it.

Until October 7, 1991, the incentive just didn't exist for the Bells.  Prior to
this date, the vast electronic networks of the Bell monopolies were just
neutral carriers of phone messages, data, and other companies' fax, audiotex,
and videotex services.

For example, when you last called a 1-900 or 1-800 line to get the latest stock
quotes, sports scores, or headlines, your local phone company served simply as
the pipeline for moving the billions of electrons in your call.  The company
that provided you with the information over the phone line was not -- and by
law, could not be -- the phone company.

And that's the way things had been since 1984, when U.S. District Court Judge
Harold Greene issued his now-famous decree breaking up the AT&T monopoly and
spinning off control of local phone service to seven regional Bell companies.

In the decree, the Court expressly prohibited the individual Bells from
entering three businesses -- cable TV, telephone manufacturing, and electronic
information services.


After presiding over the lengthy AT&T anti-trust case and being exposed to
hundreds upon hundreds of monopolistic abuses by AT&T, Judge Greene's Court was
firmly convinced that, if allowed to enter any of these three current areas,
the Bells would undoubtedly engage in the same monopolistic behavior that
characterized their former parent.

In other words, while cutting off the hydra-like AT&T head, Judge Greene was
fearful that, given too much leeway, AT&T's seven so-called "Baby Bell"
off-spring might become equal or worse monsters themselves.

>From day one, however, the Bells undertook a long-term, multi-million dollar
lobbying campaign to fight Judge Greene's ruling and try to convince the
Justice Department, the higher courts, and even the U.S. Congress that they
should be permitted to enter the content end of the information service

And, so, on October 7, 1991, after years of heavy lobbying, a higher court came
through for the Bells and practically ordered Judge Greene to overturn his 1984
decree and open up the information services industry to the Bells.

In the 71-page ruling, a very reluctant Judge Greene devoted two-thirds of his
decision to explaining why allowing the Bells to sell information services was
bad for consumers and bad for America.

For example, he went to great length to discount the Bells' claim that, once
given the green light, they would be better able to serve the public than the
thousands of already existing electronic information services.  To quote from
his decision.

     "In the first place, the contention that it will take the Regional
     Companies (the Bells) to provide better information services to the
     American public can only be described as preposterous."

Judge Green also wrote:

     "Moreover, the Court considers the claim that the Regional Companies'
     entry into information services would usher in an era of sophisticated
     information services available to all as so much hype."

His decision also contains a warning regarding the prices consumers will be
forced to pay for Bell-provided services:

     "The Regional Companies would be able to raise price by increasing their
     competitors' costs, and they could raise such costs by virtue of the
     dependence of their rivals' information services on local network access."

Finally, here's what Judge Greene had to say about his court's decision and the
public good:

     "Were the Court free to exercise its own judgment, it would conclude
      without hesitation that removal of the information services restriction
      is incompatible with the decree and the public interest."

If Judge Greene's warnings as well as his profound reluctance to issue this
ruling scare you, they should.

That's because the newly freed Bells now have the incentive, which they never
had before, to engage in the anti-competitive, anti-consumer practices that
Judge Greene feared.

Besides using your calling records to sell you information services they think
you're predisposed to buy, the Bell's may well try to auction off your phone
records to the highest bidder.

As a result, anyone who ever uses a phone could well be a potential victim of
the Bell's abuse.

Consider the simple act of making a telephone call to an auto repair shop to
schedule body work or a tune-up.  By knowing that you made that call, your
phone company might conclude that you're in the market for a new car and sell
your name to local car dealers.

Another example.  Think about calling a real estate broker for information on
mortgage rates.  Knowing you must be in the market for a house, the Bells could
sell your name to other brokers.  Or they could try to sell you their own
electronic mortgage rate service.

Now let's say you and your spouse are having some problems and one of you calls
a marriage counselor.  Tipped off by information purchased from the phone
company, a divorce lawyer shows up on your doorstep the next morning.

Finally, think about calling your favorite weather service hotline -- a
competitor to the weather service operated by your local phone company.  By
keeping track of people who use its competitor's service, the phone company
might just try to get you to buy its weather service instead.

Far-fetched?  Not at all.

Nefarious?  You bet.

That doesn't mean that, starting tomorrow, your phone company is going to start
tracking who you call, how long your calls last, and who calls you.  However,
they could do it if they wanted to.  And, based on past experience, some of
them probably will do so at one point or another.

That's because the protest of gaining an unfair edge over the competition --
companies that have no choice but to depend upon the Bells' wires -- is just
too tantalizing a temptation for the Bells to ignore.

As you might expect, the Bells claim that these fears are totally unfounded and
that strict regulations are in place to prevent them from abusing your
telephone privacy.

However, there simply aren't enough regulators in the world to control the
monopolistic tendencies and practices of the Bells.  Every single one of the
seven Bells has already abused its position as a regulated monopoly.  There is
no reason to believe they won't in the future.

For example, the Georgia Public Service Commission recently found that
BellSouth had abused its monopoly position in promoting its MemoryCall voice
mail system.  Apparently, operators would try to sell MemoryCall when customers
called to arrange for hook-up to competitors' voice-mail services.  Likewise,
while on service calls, BellSouth repair personnel would try to sell MemoryCall
to people using competitors' systems.  BellSouth even used competitors' orders
for network features as sales leads to steal customers.

In February 1991, US West admitted it had violated the law by providing
prohibited information services, by designing and selling telecommunications
equipment and by discriminating against a competitor.  The Justice Department
imposed a $10 million fine -- 10 times larger than the largest fine imposed in
any previous anti-trust division contempt case.

In February 1990, the Federal Communications Commission found that one of
Nynex's subsidiaries systematically overcharged another Nynex company $118
million for goods and services and passed that extra cost on to ratepayers.

The abuses go on and on.

In this brave new world, however, it's just not consumers who will suffer.
Besides invading your privacy, the Bells could abuse their position as
monopolies to destroy the wide range of useful information services already

Right now, there are some 12,000 information services providing valuable news,
information, and entertainment to millions of consumers.  Every one of these
services depends on lines owned and controlled by Bell monopolies.

This makes fair competition with the Bells impossible.

It would be like saying that Domino's Pizzas could only be delivered by Pizza

It would be like asking a rival to deliver a love note to your sweetheart.

It would be a disaster.

If the Bells aren't stopped, they will make it difficult -- if not impossible
-- for competitors to use Bell wires to enter your home.

They could deny competitors the latest technological advances and delay the
introduction of new features.  They could even undercut competitor's prices by
inflating local phone bills to finance the cost of their own new information

In the end, the Bells could drive other information services out of business,
thereby dictating every bit of information you receive and depriving the
American public out of the diversity of information sources it deserves and
that our form of government demands.

Can something be done to stop the Bells?

Yes, absolutely.

You can take several immediate steps to register your views on this issue.
Those steps are described in the attached "Action Guidelines" sheet.  Please
act right away.

In the meantime, on behalf of our growing coalition of consumer groups,
information services providers, and newspapers, thank you for your interest in
this important issue.


Cathleen Black
President and Chief Executive Officer
American Newspaper Publishers Association

- - - - - - - - - - - - - - - - - - - - - - - - -  - - - - - - - - - - - - - -

                               ACTION GUIDELINES

Something is very wrong when a monopoly is put into the position where it can
abuse your privacy, drive competitors from the market, and even force you, the
captive telephone ratepayer, to subsidize the costs of new information services

Can something be done to stop this potential abuse?


WHAT YOU CAN DO.  The first step is to call or write your local telephone
company to assert your right to privacy.

The second step is to write your U.S. Representative and U.S. Senators and urge
them to support House bill 3515 and Senate bill 2112.

Since the purpose of both HR 3515 and S 2112 is to prevent the Bells from
abusing their monopoly position, not to prevent legitimate competition, the
Bells would be free to sell information services in any area of the country
where they do not have a monopoly -- in other words, 6/7 of the country.

However, the bills would delay entry of the Bell companies into the information
services industry in their own regions until they no longer held a monopoly
over local phone service.  As soon as consumers were offered a real choice in
local phone service -- whether it be cellular phones, satellite communications,
or other new technology -- the Bells would be free to offer any information
services they wanted.

Both bills are fair to everyone.  They protect consumer privacy and ensure that
the thriving information services industry will remain competitive.

Quick action is need to pass these bills.  A hand-written letter stating your
views is the most effective way of reaching elected officials.  It is proof
positive that you are deeply concerned about the issue.


You may wish to use some or all of the following points:

     A phone call should be a personal and private thing -- not a sales
     marketing tool for the phone company.

     The Bells should not be allowed to take unfair advantage of information
     they can obtain about you by virtue of owning and controlling the wires
     that come into homes.

     The Bells must not be allowed to abuse their position as monopolies to
     drive existing information services out of business.

     The Bells should not be permitted to engage in activities that would
     deprive Americans of the information diversity they deserve and that our
     form of government demands.

     The Bells should not be permitted to finance information services ventures
     by inflating the phone bills of captive telephone ratepayers.


After you've written your letter or made your phone call, please send us a
letter and tell us.  By sending us your name and address, you'll receive
occasional updates on the massive effort underway to prevent the Bells from
invading your privacy and turning into the monopolistic monsters that Judge
Greene warned about.

There's one more thing you can do.  Please ask your friends, relatives,
neighbors, and co-workers to urge their U.S. Representatives and Senators to
support HR 3515 and S 2112.  We need everyone's help if we're going to stop the

444 N. Michigan Avenue
Suite #900
Chicago, Illinois  60611

* * * * * * ** * * * * * ** * * * * * * * * * * * * * * * * * * * * * * * * * *

                           Support HR 3515 and S 2112

                                 by Toby Nixon

                                February 7, 1992

DISCLAIMER:  The following is my personal position on this matter, and not
             necessarily that of my employer.

I am appalled at the RBOC's disinformation regarding HR 3515/S 2112, which
propose to limit RBOC entry into information services until fair competition is
possible.  Every time one of the RBOC ads has played on the TV or radio,
appeared in the newspaper, and now in the information they mailed to me, I
can't help but stand up out of my chair and scream because of the contemptible

Clearly, all of the services they claim are being held back are, or could be,
available TODAY.  We are IN the Information Age; where have they been?  It's
HERE, not "just over the horizon."  We don't need the RBOCs to provide these
services; all the RBOCs need to do is continue to provide the transmission
services, which they do today.  Unfortunately, the majority of the citizens of
the USA don't know that these services are already available WITHOUT RBOC HELP
-- and the RBOCs are taking advantage of this lack of knowledge to try to gain
popular support for their positions.

What would happen if the RBOCs were to enter these markets?  It is clear to me,
based on their past performance in similar situations (such as voicemail) that
they would leverage their monopoly on local telephone service to force
competitors out of the market.  They will use their guaranteed return on
investment income from their monopoly on POTS to subsidize their information
services (even providing co-location with central office switches is a
subsidy), thereby indeed providing the "affordability" they talk about -- until
the competition is driven out of the marketplace.  Then the RBOCs will be free
to raise the rates as high as they wish!  With their monopoly on access, they
could easily sabotage access to competitive services and make the RBOC services
look better (just being co-located will provide better circuit quality and
response times).  While all of the competition would have to pay exorbitant
rates for ONA services (to obtain ANI information, billing to phone accounts,
etc.), the phone company has this free.  Free competition?  Hardly!

Many of you know that I am a Libertarian, and strongly oppose government
regulation of business.  The logical position for a Libertarian might appear to
be to support the RBOC's fight against further regulation.  But the fact is
that they've enjoyed this GOVERNMENT-IMPOSED monopoly for decades; in too many
ways, the RBOCs function as though they were an arm of the government.  They
have effectively no competition for local access.  Every competitive service
MUST use the RBOCs' facilities to reach their customers.  This places the RBOCs
in the position of being able to effectively control their competition --
meaning there would be no effective competition at all.

Despite their protestations that the proposed legislation would limit "consumer
choice" and "competition", the reality is that provision of such services by
RBOCs, so long as they remain the sole provider of local telephone service in
most of the country, would be anti-choice and anti-competitive, plain and
simple.  It would be ABSOLUTELY UNFAIR for the government to turn them loose to
use their monopoly-guaranteed income to try to put independent information
services (even BBSes) out of business, when it is the government that has
permitted (required!) them to get the monopoly in the first place.

It absolutely disgusts me that in their printed materials the RBOCs go so far
as to forment class warfare.  They talk about "the spectre of 'information
rich' versus 'information poor'".  They say that minorities, the aged, and the
disabled support their position, to raise liberal guilt and stir up class envy
(but without disclosing what have certainly been massive contributions to these
groups in return for their support).  They further stir up class envy by making
the point that Prodigy and CompuServe customers are "... highly educated
professionals with above average incomes, owning homes valued above national
norms ... the world's most affluent, professional, and acquisitive people," as
though this were somehow evil!  They attack, without stating any evidence, the
alleged "reality" that the only reason this legislation is proposed is to prop
up newspaper advertising revenues (the whole attitude of "evil profits" is so
hypocritical coming from those for whom profits are guaranteed, and whom never
mention the fact that they're not entering information services out of altruism
but only because they seek to expand their own profits!).  They invoke
jingoistic fervor by talking about services "already being enjoyed by citizens
of other countries" (but at what incredible cost?).

The materials are packed with this politically-charged rhetoric, but completely
lacking in facts or reasonable explanation of the basis for the positions of
either side.  Their letter isn't written for a politically and technologically
aware audience, but for those who are attuned to the anti-capitalistic culture
of envy and redistribution.  It isn't written for those trying to make an
informed decision on the issues, but is intended simply to rally the ignorant
into flooding Congressional offices with demands for services that most of the
writers wouldn't know the first thing to do with, and which the writers don't
realize are available without the RBOCs.

They talk about some supposed "right" of individuals to participate in "the
Information Age", regardless of, among other things, INCOME.  Does all of this
appeal to the plight of the poor and disadvantaged mean that these services
will be available regardless of ability to pay?  Hardly!  WE, the taxpayers,
WE, the RBOC customers, without any choice of who provides our local phone
service, will pay -- through the nose -- either in the form of cross-
subsidization of "lifeline" (!) information services by those of us paying
"full" residential rates or business rates, or by tax-funded government
subsidies or credits going directly to the RBOCs.  Does anybody really think
that the RBOCs will cover the cost of providing these services to the
"information poor" out of their profits?  What a ridiculous idea!

The fact that the RBOC position is supported by groups like the NAACP and the
National Council on Aging -- representing the most politically-favored, most
tax-subsidized groups in America -- make it clear that they fully intend for
the cost of such services to be born by the middle class and small business-
people of America.  Once again, the productive segments of society get screwed.
Once again, private businesses which have fought to build themselves WITHOUT
any government-granted monopoly will be forced out, to be replaced with
politically-favored and politically-controllable socialized services.  Once
again, America edges closer to the fascist system which has been so soundly
rejected elsewhere.  When will we ever learn?

We SHOULD all write to our Congressmen and Senators.  We should demand that
they pass HR 3515 and S 2112, and keep them in force unless and until the RBOCs
give up their local telephone monopolies and allow truly free competition --
which means long after the monopolies are broken up, until the lingering
advantages of the monopoly are dissipated.  Of course, the RBOCs could spin off
entirely independent companies to provide information services -- with no
common management and no favored treatment in data transmission over the other
independent information services -- and I would cheer.  But so long as they
have a chokehold on the primary _delivery vehicle_ for information services in
America, their protestations for "free competition" ring incredibly hollow.

Toby Nixon                      | Voice   +1-404-840-9200  Telex 151243420
2595 Waterford Park Drive       | Fax     +1-404-447-0178  CIS   70271,404
Lawrenceville, Georgia  30244   | BBS     +1-404-446-6336  AT&T    !tnixon
USA                             | Internet                tnixon@hayes.com

 RHC Tactics Blamed For Failure Of Information Services Bill      April 1, 1992
 Taken from Communications Daily (Page 4)

Rep. Cooper (D-Tenn.) said that his legislation to put conditions on RHC
provision of information services (HR-3515) didn't have much chance of success
>from time bill was introduced.  At panel discussion in Washington sponsored by
National Press Forum, he said outlook for bill was "pretty grim," and that only
hope for success would be if powerful committee chairman came to rescue. That's
unlikely, he said.

Cooper said he has about 48 co-sponsors for bill and Senate version (S-2112)
has none.  In strong attack on RHCs, he said RHCs were responsible for lack of
support and said members of Congress were intimidated by ad campaign against
sponsors and co-sponsors of HR-3515 -- what he termed "a $150,000 penalty" for
sponsoring legislation.  Cooper also criticized RHCs for sponsoring
organizations without letting the public know of their interest, naming
specifically Small Business for Advertising Choice, with headquarters in
Washington.  He said he didn't mind legitimate "grass-roots" campaigns, but
objected to "Astroturf campaigns."

Disputes with RHCs broke into the open dramatically during Cooper's intense
exchange with Southwestern Bell Vice-President Horace Wilkins, head of RHC's
Washington office.  Cooper said that if RHCs were truly interested in providing
information services, they would push for sponsorship of amendment to cable
reregulation legislation to allow telco entry.  But Bells were "AWOL" on issue,
Cooper said, even though there are members of House Telecom Subcommittee who
would introduce such amendment if RHCs asked.  Wilkins said one House chairman,
whom he declined to name, had told RHCs not to participate by pushing telco
entry amendment.  Cooper responded:  "Who told you?"  He told Wilkins:  "You
have the opportunity of a lifetime."

Wilkins challenged Cooper:  "Why don't you take the lead" and introduce
amendment?  Cooper replied he would do so if SWB would promise its support.
Wilkins responded:  "If it's the right thing, we'll be with you."  Cooper
replied that RHCs reportedly had been told not to push for such amendment, and
neither he nor Wilkins would say which powerful House figure was against telco
entry.  Without RHC backing, any introduction of telco entry amendment "would
have zero support," Cooper said.  He said RHCs have backed away from active
support of legislation to lift the MFJ manufacturing bar because they're afraid
his measure might be attached to it.  Wilkins disagreed, saying RHCs were
backing the bill.

Mark MacCarthy, Cap/ABC vice-president, said the strongest argument against RHC
entry into information services is that there's no evidence that "new and
better information" would be provided to public.  RHCs could provide more
efficient network architectures and distribution, he said, but "not better
programming."  There's a historical example of "dark side of diversity" in
which radio programmers once supported live symphony orchestras and provided
quality content, MacCarthy said, but now, in an era in which there are many
competitors, most stations obtain most of their programming free, on tape from
record companies.
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