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Facts and figures for Valentine’s Day 2014

AT&T, Verizon overcharging consumers more than $16 billion annually, consumer group says

The Consumer Federation of America has released a report showing that the recent analyses of broadband prices and services from the Phoenix Center and the Information Technology and Innovation Foundation are flawed and misleading.

Verizon“CFA’s comprehensive, fact-based analysis stands in stark contrast to the error and bluster we’ve seen from the Phoenix Center and ITIF,” Mark Cooper, Ph.D., director of research at federation and author of the report, said.

The federation’s latest report was filed as a supplement to the record in ongoing Federal Communications Commission proceedings on broadband policy.

“The FCC prides itself on being a data-driven organization, and in these proceedings seeks an accurate picture of the status of prices and product offerings in broadband Internet access service to inform sound broadband policy,” Cooper said. “However, there is little factual data to be found in the Phoenix Center/ITIF reports. Indeed, by simply correcting their math, we show that the dominant incumbents [AT&T and Verizon] actually overcharge customers by about $15 billion per year for wireless service.”

“Utilizing data from the New America Foundation global survey of rates, terms, and conditions of wireline and wireless service, CFA found that U.S. providers charge more, offer slower speeds and, in the case of mobile broadband, have lower caps and more onerous penalties for exceeding those caps than their non-U.S. counterparts,” he said.

The federation’s report, called “Abuse of Market Power for Broadband Internet Access Service: Blind Theory and Bonehead Analysis Can’t Hide the Problem,” offers the following evidence of errors in the Phoenix Center and ITIF’s analyses, Cooper said.

Phoenix Center errors

By using an erroneous number from a FCC report, the Phoenix Center “showed” that the capital expenditure data in a recent FCC report demonstrated how the two largest providers, AT&T and Verizon, were supposedly investing more to deliver a higher quality service than their competitors. However, using a model of competitor finances to correct the Phoenix Center mistake shows excessive cash flow for AT&T/Verizon of about $6 per subscriber per month.

To evaluate broadband products and prices from the consumer point of view, the federation analyzed the product attributes that are important to consumers as reported in a global survey of rates, terms, and conditions for wireline and wireless broadband serviced conducted by NAF.

ITIF errors

The federation’s filing also rebuts a critique by ITIF of the federation’s previous analysis.

“ITIF completely ignores the careful definition of variables and econometric analysis we utilized,” Cooper said. “They assert incorrectly that differences we observe in pricing and product traits can be explained by omitted variables. Since we included the important variables, this is a glaring error; they cannot explain the outcome.”


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