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Your world. Delivered. For a Rapidly Increasing Price

By Matt Wood in News on Aug 31, 2006 7:06PM

chicagoist_2006_08_phoneman.gifThe Illinois Commerce Commission voted yesterday to deregulate home phone service in Chicago, declaring the market competitive enough to swim in the seas of capitalism. This is a perfect storm for AT&T, which has been rocking the boat for removal of price controls for years. Under the new agreement, they will be able to raise local rates $12 annually for the next three years--effectively doubling the average customer's plan. AT&T did agree to offer "safe harbor" plans with prices that will be frozen for four years, but customers have to switch plans themselves, meaning these low rates won't be available to people who aren't inclined to spend two hours on the phone with customer service, wait from 9 a.m. to 12 p.m. for a technician who shows up late, and spend another three hours on the phone to correct billing mistakes--a.k.a. everyone.

The ICC deemed the local phone market competitive because of the emergence of wireless providers, digital cable, and internet phone options. In theory, this competition will force AT&T to lower their prices. This would be true if they were offering the same kind of service to the same groups of people. Arguably, AT&T's biggest threat comes from cellular providers, but they can only eat into the Baby (Huey) Bell's profits when people are willing to ditch their land line completely for mobile, which many people are loath to do because of spotty wireless coverage. Other threats to AT&T, like phone services from digital cable companies or IP phone providers like Vonage, are only available to those who already have high-speed internet service. Those choices require an even greater leap of faith for a customer to drop their land line completely than doing so for a cell phone. So as it turns out, only the most adventurous, flexible, tech-savvy, and well to-do customers have any real choices besides a traditional AT&T land line. Better yet for AT&T, the type of customer most likely to be stuck with just one phone option--the elderly and the poor--are also the least likely to duck the price hikes by signing up for those "safe harbor" plans.

Sweet deal huh? "Free market" in this case means AT&T is now free to exploit its relative monopoly. Any notion of true competition is just a tease. As if they ever did much to treat their customers well in the first place. It took Chicagoist three weeks to set up phone service and get the billing right after we moved this summer. Unfortunately, we needed a land line for our home office and the other options weren't available in our area. The service was a nightmare: missed appointments, overcharges, wrong billing statements, the works.

So what do you think? Does AT&T really have sufficient competition to let them set their own prices? And for those of you who have ditched a land line for alternatives, how has it worked out?