AT&T’s “Harvesting” Scam

Photograph Source: Mike Mozart – CC BY 2.0

If you live in California and still use legacy Plain Old Telephone Service (“POTS”) from AT&T, you are likely getting ripped-off big time. And if you are an AT&T POTS customer anywhere in the U.S., you are also likely getting ripped-off.

In April 2019, the California Public Utilities Commission (CPUC) undertook an exhaustive examination of the policies and practices of Pacific Bell Telephone Company (dba AT&T California [AT&T]) and Verizon California Inc. (dba Frontier California) and found they ”consistently failed to meet existing service quality metrics.”

“AT&T appears to have adopted a ‘harvesting strategy’ for its legacy POTS services,” the CPUC noted. It added, “the company has ceased active marketing of POTS, has degraded POTS service quality, and instead relies upon successive price increases and customer inertia to maintain its declining POTS revenue stream. [CPUC/17-18] Ars Technica reports that the study was “written in April 2019 but kept private because data submitted by the carriers was deemed confidential and proprietary.” When it was finally released, it was heavily redacted.

The CPUC’s assessment is a straight forward indictment:

AT&T’s overarching approach to its stewardship of the California ILEC [Incumbent Local Exchange Carrier] infrastructure has been a “harvesting strategy” that relies upon customer captivity and inertia, rather than providing good quality service.

It goes on to declare, “’Harvesting’ of this legacy service customer base allows AT&T to maintain revenue levels and to extract the maximum amount of capital from the California ILEC entity in order to support the parent company’s wireless, video distribution, video content, and other business initiatives – activities that have captured the overwhelming bulk of management’s attention.

The state oversite agency goes further, noting that “to support its ‘harvesting’ strategy and maintain revenues despite a massive drop-off in demand, AT&T California has raised its rates for legacy flat-rate residential service by [blacked out]% since the service was de-tariffed by the CPUC in 2009.”

In the telecommunications world, “harvesting” as a number of very different meanings. The most well-known is data aggregation, the collecting of user or customer information (e.g., location data) and selling it to third parties. A second takes place when a telecom company (e.g., AT&T) decided to upgrade or replace an older network (e.g., 2G) and convert users to a new frequency (e.g., 3G). A third and more pernicious form of harvesting is exemplified by how AT&T treats POTS customers.

Two examples of the overcharging that characterize AT&T’s harvesting campaign are illustrative. The fee for “Local Service” (i.e., basic service) for 2004 was $10.69 and for 2021 was $27.00 – an increase of 153 percent; the fee for “Call Waiting” in 2004 was $3.23 but by 2021 it was $11.99, a 271 percent increase. (The inflation rate for the 2004-2021 period was 40.2 percent.)

Compounding the issue of overcharging, the CPUC reports that, since 2010, AT&T failed to meet the state “requirement to clear a minimum 90% of out-of-service reports within 24 hours has never been met …. Verizon/Frontier met the OOS standard in only two of the 96 months covered by this study.”

Why, one might ask, did AT&T fail to deal with service problems? The California agency does not pull any punches: “Whether deliberate or not, AT&T’s investment policies have tended to favor higher-income communities, and have thus had a disproportionate impact upon the state’s lowest income areas.” It then notes, “Wire Centers serving areas with the lowest household incomes tend to have the highest trouble report rates, the longest out-of-service durations, the lowest percentages of outages cleared within 24 hours, and the longest times required to clear 90% of service outages. The opposite is the case for the highest income communities.”

And it adds:

AT&T’s record on service outages has deteriorated over the 2010-2017 period (the subject of this study). AT&T’s overarching approach to its stewardship of the California ILEC infrastructure has been a “harvesting strategy” that relies upon customer captivity and inertia, rather than providing good quality service.

Unfortunately, the AT&T’s harvesting scheme is likely being played out across the country. The Irregulators, a group of independent telecom experts that includes former FCC officials, estimated that AT&T’s California harvesting campaign for the five-year period ending in 2019 could range from a low estimate of $2.3 billion to as high as $10.3 billion.

There are an estimated 22 million wireline (DSL or other) telephone users in the U.S. as of 2020. One can only wonder how many are being harvested by AT&T and other providers.

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