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.]

Comments

[An]

Today I got a call from a california collection agency regarding an ATT bill for 14.14, it's very funny that I got the refund check today in my mail box from ATT for 14.14. Here I will repeat the same question as last 10 times to ATT: What the hell is going on? This is a joke, right? U guys send me to a collection agency while send me a refund check for 14.14? This is freaking unbeliable. This is the reason why I cancelled all my ATT services, including iphone cellphone plan and DSL internet. You guys are messed up! I got to put that on my blog and put it on the web to let other people hear about this joke.
The reason I cancelled all my services with At&T is that they messed up my bill many times, they were sending my charge of my cellphone to the DSL and send the DSL charge to my iphone cellphone bill, and when i called back, they just transfer me from one dept to another dept, took hours to figure out it was their mistake. After I cancelled all the services and paid all my final bills, now they send me this! At&T really messed up and it is the worst company I ever dealt with!

[Tim]

I myself have set up phone centers in Baghdad Iraq for the soldiers to use. we used VSAT and VOIP phones and the cost to the soldiers is 9 cents a minute.

[musa]

Simply put what AT&T stand for American Telecommunication Terrerist A.T.T.

By: Not a Terrrerist consumer!!

[Misty]

Ok, someone explain this. My fiancé just arrived in Iraq on Monday. He bought the AT&T phone card from the px. It ran out of minutes with only using it one time on a 10 minute phone call. I added minutes to the phone card which cost me 46.00 for 500 minutes but when it converted over to him it only gave him 50 minutes. You do the math! That is not .21/per minute. They charge a 5.00 recharge fee. Shame on you AT&T! Some of the stupid people asking
"Who this is gouging?” not you, unless you have a family member serving your country in Iraq. This is an all volunteer military and we should take care of these young people so maybe we will never have a draft again. These soldiers’ salaries are around 20,000 a year. If we can pay to get Americans out of Lebanon then we should be able to help our men and women and give them the ability to call home at an affordable rate. These soldiers are missing so much. All they want is to hear their family on the phone. Is that just too much to ask! These brave men are women are sometimes paying the ultimate sacrifice. They are doing their job. Please help them be able to call home occasionally.

[Ben]

AT&T does suck, thats for sure. My minor daughter was calling her friend who lives very close to us and I didnt think anything of it. The bad part is the calls were made to the friends cell phone which is billed from a location about 17 miles from my house. AT&T called these calls local toll calls and charged us 7 cents per minute. Not a big deal right? Wrong! By the time I figured out we were being charged 7 cents per minute for these calls, We owed AT&T over $500.00 in long distance charges! This took place over several months and I should have noticed after the first bill was so high but my wife took over the bills and paid no attention. I figured since I was out of work for so long AT&T would probably be reasonable and give us a credit or adjust our bill to make the $500 plus in long distance charges go away if I explained my situation. Boy was I wrong! They did give us a credit of just over $100 which I said would be a help but I really needed more than that. They have explained to me just how fair that was and that they normally wouldnt do that much. After calling them many times and spending two hours on the phone with them last time, they wont budge. They had me on hold for over 30 minutes waiting to speak to a supervisor! Incredible. I bought thier unlimited long distance plan from one of thier reps to avoid this same thing in the future. He assured me he would backdate the service one month and thats how I got the credit of just over $100 from them. After the effective date of the change I received another bill with a lot of long distance charges again. When I called to dispute the charges they told me they already gave me a one time courtesy credit and couldnt help me, then another rep offered me almost a 50% discount on the bogus charges which I declined, then another rep said the other rep couldnt backdate a service change and I must pay the charges in full, then they claimed my original credit actually applied to these charges, another rep told me dont worry there is a second credit pending that will be on your next bill or the bill after that for over $100 again, now another rep says that rep made a mistake and there is no other credit being issued. This whole thing just makes me sick. Im tired of arguing with them on the phone and of course they are saying they will disconnect us if these charges arent paid. They couldnt simply drop the charges as I thought they would because of the greed factor they must take advantage of their customers!What a pathetic company! Im struggling to feed my kids and trying to keep my house and they are sending me phone bills in the hundreds of dollars each month. What a sad day when you have to choose between a phone or food. And AT&T could care less, they just want the money. Well Im disgusted with them and probably wont send them another dime. It is time to look at other companies and tell AT&T to shove it!

[James]

AT&T isn't that good, I like rogers a lot its more efficient!!!

[Mick]

Tom, My comment re: VOIP lacked the perspective of your broad view. Further reading on the net enlightens me. Thanks

[Kevin D. Korenthal]

Don't ask me how I know this, but in the jail system here in Los Angeles they block 800 numbers so that inmates are less likly to be able to commit fraud using calling acrds, the more traditional ones that you get when you start up land-line service and bill directly to your home phone bill.

[Tom Evslin]

Mick:

Good catch. Have fixed that and some other typos. The phones are in PXes.

However, you are not quite right about VoIP and COs. If a call originates as VoIP (Skype or Vonage, for example) it never touches an originating CO. May go to a terminating CO near the callee if it is terminating PSTN.

However, many calls which originate and terminate as PSTN on ordinary phones ARE converted to VoIP in the originating CO and back to PSTN at or close to the terminating CO. A big part of the business of my company, ITXC, was putting equipment in carrier COs precisely to convert PSTN calls to VoIP for the long haul in the middle of the call to reduce cost (I am no longer in this business).

Accoring to Telegeograpy a significant percentage of international calls which originate and terminate as PSTN are VoIP in the middle - without the caller or callee being aware.

Acording to Gene Retske at Prepaid Press, AT&T is not doing this with the Iraq calls. However, they could if backhaul cost is significant.

[Mick]

When someone starts talking about putting payphones in PBX's I start questioning their knowledge re. the subject they are talking about. PBX's are Private Branch Exchanges, large telephone systems you might find at a hospital or large business. PX's are post exchanges, retail outlets on the Army post that serve the soldiers needs for TV's or DVD's or shaving cream. A rather large difference wouldn't you say. What other "facts" has he gotten wrong? Also VOIP does not get converted in the C.O.. It just rides the broadband pipe through the C.O. like all internet traffic.

[Psumoni]

I am in Iraq. Right Now.

My options to call home are:
#1 - AT&T Phones: Sometimes laggy, sometimes poor connection, expensive. Also the phone trailer smells terrible inside.
#2 - MWR VOIP Phones (Available in most posts): $0.01/minute, small lag, connection quality is pretty darn good.
#3 - Government DSN phones: $0.00/min, no lag, very good connection quality. Requires you to call a military operator nearby your intended phone number, and have them forward it, also requires that your DSN phone work to call out. You can also call 800#'s to use a regular phone card using non-surcharged "US->US" calling rates.
#4 - Iraqi Cell Phones: Yes, they exist. I do not know the pricing for them, and coverage varies based on what towers the terrorists are destroying at the time, but pretty good coverage on-post.
#5 - Webcams/Internet voice chat: $0.00 - Available at most MWRs on most posts.
#6 - Thuraya (Satellite Phones): Very expensive, but coverage is everywhere.

So why does anyone use AT&T? Good question. My only guess is simply that people do it because the phone cards are sent by family and friends, or the soldier doesn't know about the other, much, much cheaper options available to them.

Smaller posts may be more limited in their commercial VOIP phones and internet accessability, however, the DSN option should be available to more soldiers in some form.

[just a jigilo]

uhhh, this IS gouging, as most certainly all voice is converted to VOIP @ the C.O., which is essentially a free call! You think AT&T put up all the infrastructure on their own dime?

[Check yourself]

Give me a break. They're getting a significant discount. What, do you want them to provide the service for free, or perhaps under a government subsidy? Oh, I don't think people reading this article like that word. Tisk, tisk.

And what's this "with the going wholesale cost of voice minutes under a penny per minute" load? If you look at this article, his assertion that it's under a penny a minute is a complete fabrication. He cites no sources, and admits that he is speculating on the price. The most precious quote is "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." Right. Do you have *any* idea of the scope of costs that goes into producing infrastructure, especially when it was decimated by combat and looting, and may not have even been firmly established in the first place?

In reality, he has no idea what the true cost of a phone call is in terms of it compensating for operating capacity, especially overseas. There are international land lines that must be maintained, routers that must be preserved in a war zone environment, etc..

I'd like to see realistic estimates here from the source before I'll begin to believe that the significant discount they are recieving is somehow a rip-off. Can anyone provide that? And what do you think about civillians in that area being charged as much as twice that amount? Aren't they getting even more ripped off?

And as far as this irrational assumption that VOIP bandwidth could be used by AT&T, I think Tom should listen to the very thing he was saying. He said that Skype wasn't an option because the lines provided to troops is barely adequate even for E-Mail.

Well guess what? Those would be the same lines AT&T would have to use! AT&T using VOIP isn't going to be an option because the infrastructure and bandwidth needed don't exist! It's not like they have some magical stick they can waive to give themselves free bandwidth everywhere in the world. So calm down.

[paulfromatlanta]

The 2 cent per minute is not a fair comparison because that presumes you are using a PC with an internet connection on the Iraqi side.

The 30 cents per minute is the rate when you are using a local Iraqi phone so that's a more fair cost comparison.

The extra cost is on the infrastructure side in iraq.

Now, I still think even 21 cents per minute is high but it's not ATT&T ripping anybody off. Call from Payphones can cost that much in most foreign countrues.

[Tom Evslin]

Dear PaulFromAtlanta:

The correct rate to compare t the twenty-one sents American soldiers are being charged to call home is the two euro cents per minute SkypeOut rate to the US from ANYWHERE.

See my next post on this subject.

[paulfromatlanta]

What a seriously misleading if not downright dishonest article.

The Skype out rate for Iraq is 30 Euro cents not the 1.5 cents the article claims. that is because of heavy infrastructure costs in iraq.

"Iraq € 0.302"

http://www.skype.com/products/skypeout/rates/all_rates.html#listing-I

[jesus]

Uh.. 1 cent per minute *domestically* - thats with an existing infrastructure and tons of peers. Assuming they're putting up the payphones and infrastructure from scratch (I remember something about us bombing the crap out of it), 21 cents per minute from a land line in a combat area seems damn reasonable.

[Bill Bradford]

21 cents a minute is a darn good rate for international long distance...

[rob]

So what? Pretty much all Americans who aren't actually out there fighting the dirty wars that America fights in America's name are in some sense "ripping off" US "forces" (good word to describe them).

What's new? Watch public US funds flow to private pockets, and when it's uncovered, nobody gives a damn.

Come on Tom, you should be onto it enough to see what's going on - even the old Neocons are starting to slink away and look for other things to do ...

[AlonFW]

Is this really gouging?
As a point of reference I checked Verizon's rates from CA to
Iraq .98
Iran .61
UAE .41
Kuwait .51

so .21/min is at least half off, and possibly as much as 80% off.

[Chris Yeh]

This is revolting! How do we start a movement to fix this?

[lickedcat]

What happens now that AT&T is being reconstituted? Do expect more arrogant, unilateral, monopololistic behavior from this behemoth?

Do legislators need to break the new AT&T apart again?

[Aswath]

A "putting a finger in the dykes" solution based on the assumption that usually GIs line up to make a call. If so, can't we setup a system whereby it is a single call as far as at&t is concerned, but a sequence of calls for as far as the indidual GIs are concerned? This way, $1.50 becomes a set up fee for n calls. After all AT&T's public phones had this mechanism to simplify authentication of the card.

By the way, I also used to work for "old, old" AT&T and Telephone Pioneers were a classy volunteer organization.