[February 3, 2005]

3. Business Practices

The scenario is that a BOC has an unregulated subsidiary that competes in the open market with companies that have a wholesale (or retail) contract with the parent BOC for the same service. In this instance, I am addressing DSL where, for example, Verizon has roughly 600 entities that have a contract to resell DSL as provided by Verizon Advanced Services, or so I have heard. The true number may be less.

One of those entities is Verizon Online. And only Verizon Online enjoys the following:

a. Each caller to the business office of the phone company hears a pitch for DSL and referrals ONLY go to Verizon Online. It doesn't matter if you are calling for new service, to pay a bill, or whatever, you will hear a pitch for Verizon Online through music-on-hold or from the representative you speak with.

b. Verizon field personnel get credit for referrals that result in the installation of DSL, but only in areas where Verizon Online operates and only if the customer subscribes to Verizon Online. Some field personnel are quick to allege that repairs will be more prompt and successful if the subscriber switched to Verizon Online—this during repair procedures advanced by wholesale contractors.

c. Verizon.com features prominent mention of DSL on its home pages—and links to Verizon Online exclusively.

d. Verizon offers "bundles" that include VOL DSL service at a discount. I understand this is not illegal or against regulations—but should be if true competition is to work—at least until competitors can offer Verizon-like phone services, perhaps through VoIP

e. Verizon telemarketers, presumably under contract with Verizon Online, contact each Verizon retail customer, including those currently serviced by another company under a Verizon LEC DSL contract and, when they discover that one of "their competitors" is furnishing service, offer discounts if the customer will switch.

f. Verizon Online can turn in an order to switch a Verizon DSL customer from another provider to themselves without challenge.

g. Many Verizon LEC repair personnel have a DSL modem as part of their issued equipment. I have heard of cases where that same modem is left at a customer premise when a VOL customer's modem has failed. I have been unable to determine if this is general practice or just something that the repairperson is doing on his or her own initiative.

h. Verizon Online calls each new customer I turn in with a lower price offer.

i. All of the above practices are limited to Verizon Online, period.

I am unable to find any FCC reference advancing the notion that any of the above practices are allowed by regulation or not allowed except for "Bundling," which, according to Cannon, is allowed. It seems to me that it is in the power of the FCC to force the LECs to bundle with all of their wholesale entities, not just the subsidiaries, but the FCC has not chosen to insure competition with that approach.

Many years ago, a regulated LEC was prohibited from marketing or co-marketing its unregulated subsidiary's services. I have no clue when these practices became legal or how. And yes, I have asked any number of people, including Attorneys, without receiving an explanation I could understand.

 

1. Background

what the RBOCs really think about competition

missing the Internet revolution

Robert Cannon

2. Pricing and Cost Issues: predatory prices crush competition

RBOC costs, for the record

3. Business Practices

>4. Slamming and other dubious business practices

5. Networks

6. Customer Service

7. VNXX

8. Verizon's Petition for Forbearance

9. Unintended Consequences

10. Conclusion

RBOCs, why you need me