Consumer advocates slam Verizon's 'profits before people' track record

--Saying Verizon's history shows the company targets the rich neighborhoods at the public's expense, advocates urge cities and counties to closely scrutinize the company's plans as its seeks franchise agreements in the Bay area--

June 22, 2005

TAMPA - A coalition led by America's top consumer advocate took direct aim Wednesday at telecommunications giant Verizon for "anti-consumer actions" in Florida and elsewhere. The advocates warned that Verizon's pending plans to win local governments' approval to provide video service in the region must be weighed against the company's history of putting its corporate profits ahead of the public interest.

Walter Dartland, executive director of the Consumer Federation of the Southeast, said that while Verizon says its entry into the television services market could offer consumers greater choices and competition, its track record in other states suggests that's only true - if you happen to live in an affluent area. Companies like Verizon, he said, try to circumvent local and state requirements governing other service providers so they can carve out service areas in the most-wealthy neighborhoods.

"Targeting neighborhoods based on economics is a discriminatory practice that lets companies avoid selling services in lower-income areas. This means only the rich will enjoy the benefits of competition," said Dartland, who was recently named "Consumer Advocate of the Year" by the Consumer Federation of America. "Verizon has been evasive about its plans to expand to other parts of the community, and given its history, we have every reason to be wary."

In Manatee, county officials are still waiting for required information about Verizon's plans to build out, and Sarasota County is having similar trouble getting assurances that the company plans to offer service to all customers. The documents filed contain no specifics about the build-out plan, and no timeline for doing so.

Dartland said Mike Twomey of Florida Utility Watch Inc., who represented consumers in the Verizon rate case before the Public Service Commission, has blasted Verizon for leading the charge for passing the unprecedented $355.5 million annual increase in local phone rates in 2003. According to estimates, Verizon's "land-line" customers will see their rates increase by $54 to $60 a year per household - and those rates can keep increasing up to 20 percent a year without having to seek any regulatory approval.

"Even as the Florida Supreme Court is reviewing the legality of that blatantly anti-consumer law, Verizon is trying to fly under the radar with similar tactics in our own backyard," said Dartland. "If we couldn't trust them with our phone rates, how can we trust them to do the right thing now in an area of service for which they have no track record to speak of?"

Verizon is on record in neighboring counties saying it should be treated differently than other service providers because the market is changing. But consumer advocates say the only way to ensure that everyone enjoys the benefit of emerging technology is to require all providers to play by the same rules just as state law requires.

"Franchise agreements exist for a good reason: To make sure the public interest is served," said Bill Newton, executive director of the Tampa-based FCAN. "These agreements ensure that services are offered not just to those who can most afford them, but also to those who can least afford them."

Existing local franchise contracts vary from place to place, Newton said, but most require that companies serve the entire community. The advocates said they believe all competitors should meet the public's expected social obligation to serve the public interest by making services affordable to seniors and low-income residents and requiring all parties to offer non-discriminatory access.

"In my community, we've seen these kinds of business tactics before. We've seen it in banking and lending. We've seen it in the real-estate development. We have a word for it: Redlining," said community activist Trenia Byrd Cox. "And redlining means minorities aren't offered the same products, services and opportunities as other people."

Verizon's business plan for Florida mirrors its plans in other states. In New Jersey and Massachusetts, roll-out plans are in overwhelmingly white, well-off suburbs and cities. In California, Verizon is trying to pass a measure that would allow it to offer video service over its fiber-optic network without having to secure a local franchise contract, thereby trampling on local governments' traditional role in regulating such service. And in Texas, the company launched a failed effort to circumvent local governments by enacting a "statewide" franchise agreement.

"We're here today to urge city and county officials not to believe promises of lower prices and 'eventual' services for all," said Dartland, noting that if that were really true, Verizon wouldn't try to sneak in opt-out clauses that let it leave the market if profit goals aren't met within a certain time period. "Don't rush into agreements with phone companies that do more to protect profits than public interest."

The advocates stressed that they believe competition is best for consumers, and they fully support informed efforts to increase competition, especially since consumers have too few choices because of the concentrated ownership of cable companies.

"Bottom line is, Verizon has a history that shows they say one thing and do another," said Dartland. "Verizon is fighting at every turn to dismantle existing franchise agreements that govern how companies operate. We simply can't rely on the word of a company that endangered the limited budgets of seniors and low-income residents in order to inflate its own profits."