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March 09, 2006

AT&T is Ripping Off American Soldiers

It’s bad enough that they overcharge domestic customers but we have alternatives.  The soldiers don’t because, according to The Prepaid Press, AT&T has an EXCLUSIVE contract to put payphones in PXes in Iraq and Afghanistan. But, you ask, can’t the soldiers get cheap calling cards to call the US? No! Because AT&T is using (abusing!) its position as monopoly supplier of payphones to block the 800 numbers necessary to use nonAT&T calling cards. 

This blocking is illegal in the US but, AT&T told our friend Gene Retske, editor of The Prepaid Press, the rules are different in Iraq.  Right.

The soldiers could probably call cheaper if they used Iraqi pay phones.  But, assuming there are any working payphones on the streets of Iraq, it’s still not a good idea for American soldiers to be standing on the corners talking on them.  That’s why there are phones in PXes.  Too bad the soldiers have to pay $.21/minute to call home on them.

The wholesale rate for calls to the US is less than one cent a minute.  Skype charges about 1.5 two euro cents RETAIL to call the US from anywhere in the world.  You can buy prepaid cards almost anywhere in the world to call the US for less than two cents a minute.  AT&T charges soldiers in Iraq twenty-one cents.

Since AT&T isn’t very good at using the Internet, it may cost them another penny to get the calls back from Iraq to the US over traditional circuits.  They argue that payphones cost money to put in (BTW, I have nothing but respect for whomever went to Iraq to install the payphones).  Of course, you’re not supposed to recover the cost of payphones by overcharging for a calling card; that’s called doubledipping and abuse of monopoly power.

So let’s say AT&T, since it’s not very efficient, has three cents a minute of cost.  How does that justify charging the soldiers twenty-one cents?

I asked Gene if the soldiers could simply use Skype on computers or Vonage ATAs.  He said his son’s experience was that the IP available to the troops (which is not provided by AT&T) is barely adequate for email so not an option for voice.

Mary and I first became aware of the AT&T rates when we got a VFW solicitation to buy AT&T calling cards as gifts for soldiers – that’s a nice idea.  But we’re old telco folk so we looked at the price per minute.  Did I mention that it’s twenty-one cents?  That’s a gift to AT&T.

A source familiar with the VFW’s efforts to help soldiers call home told Mary that they had run a test with another carrier which supplied cheaper minutes but AT&T was using their position as payphone provider to exact a $1.50 per call surcharge (note that this is different than reports of AT&T blocking other carriers completely.  We can’t independently resolve this apparent contradiction.  It is possible they took different steps at different time but I don’t know that).  Also according to our source, who wishes to remain anonymous, VFW is looking at making a deal with a company which operates Internet cafes in two Iraqi cities where AT&T doesn’t have a presence.  They are talking about four cent a minute calls, much more reasonable although still, I’m sure, quite profitable.

That’s when we emailed Gene.

Turns out his son was in Iraq and he was already on the story.  Gene understands the economics of the prepaid business better than anyone I know.  He contacted his congressmen and senators.  They said they’d look into but went no further than the first bland excuses from the FCC and DoD.  This isn’t Halliburton ripping off taxpayers, you know; it’s AT&T ripping off the soldiers directly.  The Prepaid Press article last year estimated AT&T’s take at $46 million/year – peanuts in their grand scheme of things.

If I sound foaming-at-the-mouth mad it’s because I am.

The Newark Star Ledger did some investigative reporting following up on Gene’s lead.  Their embed reporter, Wayne Wolley is the one who calculated the twenty-one cent a minute rate; charging on the card is not exactly straightforward.  Some more congressmen said they would look into it. No action.  You suppose the inaction has anything to do with lobbies and PAC contributions?

But there is some hope according to the latest article in the Feb. 15 issue of ThePrepaid Press. The American Legion does listen to complaints from soldiers.  Jeanne Gilbert, the Co-Chairman of Public Relations for the American Legion Department of New York State, is leading an effort there to gather the information on the ripoffs from soldiers’ reports and blogs.  The goal is a resolution at the national convention in June.

The Prepaid Press quotes Gilbert as saying: “With the resolution put in place and passed. The American Legion will vigorously go through the legislative process.  I feel it the American Legion’s responsibility, at the very least, to inform the citizens of the United States of exactly what is going on when they are going to the stores to purchase these products, even knowing that AT&T is the only game in town right now, and what they are buying.”

Of course, now that at&t wants to extend its monopoly over more of the country, it’s a good time to ask how at&t uses monopoly power.

To be fair, this all started in the old AT&T – the one with capital letters.  Ed Whitacre and the old SBC may well not have known this was happening when they bought the company.  So the questions to him are: now that you know, what are you going to do about it?  lower prices?  give rebates?  assure that such things never happen again?

These would all be good questions to ask in hearings.

[full disclosure: I used to work at the old AT&T.  Most of the people I knew there were very decent and are, I’m sure, horrified by this.  They took both brand and social responsibility seriously.

Gene Retske worked eighteen years at AT&T but we weren’t there at the same time.]

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» Twenty cents a minute for our boys to call home from LUX.ET.UMBRA
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