A couple of weeks ago the FBI raided an outfit called Long Distance Service of Washington, Inc., which was identified in news stories as "a reseller of long-distance services." The FBI said the raid was a part of an investigation into complaints that the company had been padding its bills to its customers.
The firm's lawyer confirmed that records had been seized, but he emphasized that no criminal charge had been brought. And in fact, it's likely no crime was committed, unless perhaps a pattern purposeful fraud can be found. The reason: In the age of deregulation, independent operators can charge pretty much what the traffic will bear.
The episode caught my attention because I had just undergone a frustrating experience with one of these so-called "resellers of long-distance services." Here is the story:
On the evening of May 25, my daughter was driving to Baltimore from her college in Virginia. Running a little behind schedule, she stopped just outside Washington and, using our AT&T; credit card, placed a call to our home from a roadside pay telephone. She left a one-sentence message on the automatic answering machine that she would be home in an hour. The call lasted for 27 seconds.
Last week I got my telephone bill -- one of those 19-page things that would mystify a CPA -- and the fine print listed my daughter's call as being of two-minute duration, and costing $4.92. Moreover, the company which supplied the service was not AT&T;, whose credit card we used. Rather, it was something called "Capital Network Systems."
Now, $4.92 will not throw me into personal bankruptcy Nevertheless the charge was grossly exorbitant -- roughly five times as much as AT&T; would have charged for a 27-second call from the Washington area. Moreover, this wasn't the first experience I'd had with these mysterious charges turning up on my monthly telephone statement; for some time I had been getting peculiar billings, at very high costs, for credit-card calls from pay phones, chiefly in airports.
So I decided to pursue the matter by calling the 800 number listed on the bill. Sorry, I was told, we are only a billing service. I was given another number, which, after much soothing recorded music, eventually produced someone in Austin, Texas; I demanded an explanation for the huge overcharge.
A flustered young man explained that my daughter had used a "privately owned" pay telephone. As I pursued this bewildering conversation, I began to grasp that for all practical purposes, there was no meaningful regulation of the rates charged by Capital Network Systems; if they had so chosen, they could have charged me $49.20 for the 27-second call instead of $4.92.
In theory, of course, deregulation was supposed to place AT&T; and other established telephone services in competition so as to reduce the cost of services. If my experience related here is any guide, it's obvious the deregulation has had exactly the opposite effect. A call which would have cost 92 cents if I had used AT&T; costs $4.92 from the "competitive" reseller. To add insult to injury, I had been "resold" telephone time which had been bought from AT&T; at a "bulk rate" in order to give me a discount!
There is no telling how many times my experience is replicated in America as millions of telephone customers each day make calls thinking they are using one service and wind up being billed by another. But we do know that there are more than 500 of these "resellers" out there, most of them presumably buying AT&T; telephone time cheaply and selling it exorbitantly. Most people, I suspect, just don't go to the trouble to traverse the tricky paths of the murky world of deregulated telephone service.
You can still get an argument as to whether the break-up of AT&T; -- replacing the world's largest corporation with a patchwork of market-oriented competing companies -- was good bad public policy. Perhaps the privately owned but regulated monopoly would have proved, in time, to be more efficient and ultimately less expensive to the customer in delivering the panoply of telephone services in an age when coast-to-coast calls have become as routine as yesterday's across-town calls. For my part, I still put my faith in a deregulated system.
But the problem is, during the Reagan years deregulation came to mean virtually no regulation; the Reagan philosophy venerated the discarded old concept of caveat emptor -- let the customer beware.
If deregulation is to work, there must be mechanisms to control abuses by fast-buck artists who stick it to you on lonely roads in the dead of the night. If we don't have such mechanisms, then I for one would prefer to go back to the regulated monopoly. At least you know who you're dealing with, and can get them on the telephone.