ANALYSIS: Attorney general slams ‘cheating’ telcos on ‘60 Minutes’

In a biting indictment of the telecom industry, Connecticut Attorney General Richard Blumenthal charges that an intense competitive environment causes major telcos such as AT&T, Sprint and WorldCom to trick and cheat consumers through various "scams," in an interview on "60 Minutes," broadcast this Sunday (Dec. 16).

"Competing by cheating has become a way of life for the telecommunications industry, for many of these corporations, many of the most reputable of them," Blumenthal tells "60 Minutes" reporter Steve Kroft.

Blumenthal, who notes in the interview that he is currently "investigating" major carriers, cites several dubious practices, including continuing to send bills after service is terminated, billing for services never ordered and television commercials with attractive claims undercut by small type that appears briefly on the screen.

"Because it’s done by AT&T, MCI or Sprint, people are reluctant to use that word, but when all is said and done… these are scams," he says.

Blumenthal has some familiarity with taking on major US corporations. He is one of the chief crusaders battling Microsoft and alleged "misuse of its monopoly power" in the US Justice Department’s antitrust suit.

In recent years, Blumenthal has sued AT&T for billing non-customers and Qwest Communicatons for stealing competitors’ customers by forging their signatures – part of the well-known industry practice of "slamming."

David Bolger, speaking as vice president of the US Telecom Association (he left the trade group after the "60 Minutes" interview), argues that slamming is done by third-party distributors without the knowledge of the telecom clients who hire them. "Local telephone companies have nothing to do with slamming violations; these are all done through third-party marketers," he says.

Blumenthal disagrees, arguing that corporations "have knowledge of a lot of these problems. We hold corporations responsible."

Charges of slamming are not new to telecom, but the fact that a high-profile state attorney appears to be taking on the problem could be unsettling for the legal departments at big carriers.

In an interview with America’s Network newsletter, William Van Hefner, an industry analyst who has extensively researched slamming practices, says carriers continue to maintain relationships with third-party distributors, even after abuse has been uncovered. "Most are aware of specific resellers or agents who have an established track record of abuse. Many times these companies are allowed to continue their relationships," says Van Hefner, whose "TeleConfidential" column appears regularly in America’s Network magazine.

New FCC regulations have taken some of the financial incentives out of slamming, but that it is still "a profitable venture," he says.

He terms the new legislation a good start, but calls for stiffer penalties and enforcement. "What we really need is for the FCC to have the authority to levy much higher fines and give them the ability to file federal, criminal charges against scam artists," says Van Hefner.

If Blumenthal has hopes of sparking an offensive against major carriers and expects the Justice Department to provide firepower, his party affiliation may be a liability. Blumenthal, who recently withdrew his candidacy for governor of Connecticut, is a Democrat. – Kirk Laughlin