In this, the summertime of our business discontent, some corporate bullies -- Enron Corp., Providian Financial Corp., and WorldCom Inc. come to mind -- are being held to account, but far too late. For years, these behemoths used their weight to get what they wanted from smaller boy and girl firms, and they didn't get punished until the damage was long done.
The bullying was made possible by a failure to reasonably regulate the business world -- a failure that continues, exacerbated, in Republican times. Example No. 1: our local phone company, Pacific Bell, and its parent company, SBC Communications.
New information released last week by the Office of Ratepayer Advocate, an ombudsman within the California Public Utilities Commission, suggests that SBC may have lied on official customer service reports it is required to submit to the government. This is the latest in a series of public charges that the company has flouted the law. The most egregious such violation involved using SBC's monopoly power over local telephone lines to ruin companies whose business plans involved delivering high-speed Internet or other telecommunications services.
"In my mind, the battle is already over, so all the [local competitors] are dead. The laws have already been disobeyed. The companies have already been put out of business, and their assets were bought with pennies on the dollar by entrenched monopolies," says Mark Anderson, a technology analyst. "A huge amount of investor money was destroyed because the government did not regulate, and did not enforce the law. I wouldn't be surprised if the total loss wasn't $300 billion to $500 billion. There was a terrific amount of economic damage done."
Given the anti-corporate-cheater rhetoric now emanating from Washington, one could be forgiven for thinking that politicians will line up to investigate, and perhaps punish, SBC for its various depredations. Instead, members of Congress have been calling for legislation that would grow the SBC bully, allowing it to enter, unfettered, the lucrative market for long-distance telephone service, a move that would add immensely to the power of the $12.5 billion company.
I've written in the past how Pac Bell has pushed and bullied and intimidated its competitors in the markets for local telephone service and high-speed Internet access, violating the 1996 federal law that was supposed to allow competitors into the local telephone market. And Pac Bell's bullying behavior apparently hasn't stopped, even though its victims are all but dead and gone now. According to testimony filed Friday by the Office of Ratepayer Advocate, Pac Bell has provided regulators with false information that hides the company's shoddy treatment of retail customers. "Once again, we find that customer service is not a priority for SBC Pacific Bell," according to Regina Birdsell, director of the Office of Ratepayer Advocate. "Were we to assign grades they would get a 'D' for their treatment of customers."
According to the testimony, Pac Bell altered records that would have shown the company frequently forces consumers to wait much longer than the currently reported average of four days for installation of a new phone line. Rather than file reports with the Public Utilities Commission revealing how long frustrated customers were waiting for phones, Pac Bell in some cases would "close" the customer's service order before a phone line was actually installed, then "open" a new service order, restarting the customer-wait clock at zero. The company would then "close" the record again once the line was installed, showing two minor-seeming delays, instead of one long one.
In response to a request for comment, a Pac Bell spokeswoman sent a statement saying that the Office of Ratepayer Advocate had its "wires crossed" and that Pac Bell is "focused on delivering the difference to our customers, and we're proud of our performance." The statement did not directly address charges that Pac Bell may have illegally falsified data submitted to regulators.
Fudging this kind of information is more important than it might seem at first glance. Just as phony accounting can convince the stock market to boost a company's share price, falsifying information required by regulators can create a misleadingly favorable impression that adds to a company's bottom line.
In the case of SBC, being able to argue that the company is improving customer service has the potential to influence regulatory decisions worth billions of dollars. Among these are decisions on the rates that Pac Bell can charge customers. Also, SBC has been fighting a PUC ruling that requires Pac Bell to cut the rate it charges competing local service providers to connect into its phone loop. State and federal regulators, meanwhile, are considering whether, and when, local carriers such as Pac Bell should be allowed to enter the lucrative long-distance market.
"Given that all of these are essentially political decisions, the court of public opinion is key," says Denise Mann, a telecommunications specialist at the Office of Ratepayer Advocate. "I think it would be pretty obvious that Pac Bell/SBC is going to do better if they look like they care about California customers."
Pac Bell's misfilings occurred in a way that makes it difficult to believe the firm could have supplied the incorrect information by accident. In fact, data parsed by analysts for the Ratepayer Advocate hint at the possibility of systematic deception. In the year 2000, by way of example, Pac Bell filed 235,351 phone-installation reports that included "opening" records and "closing" records -- but didn't include the date that the phone company promised to install the line in the first place, thereby obscuring how long it actually took Pac Bell to put in phones.
"The data provided by Pacific is unreliable and inaccurate," the Ratepayer Advocate testified. "When regulators assess utility performance, they rely on the utility to provide accurate, reliable data. ... The analysis of information provided by Pacific shows that the data is highly inaccurate and consistently biased in Pacific's favor."
The Ratepayer Advocate has recommended that regulators audit Pac Bell's records to determine whether the observed irregularities are the result of accident -- or fraud. The PUC should launch such an inquiry immediately, and the born-again corporate watchdogs in Congress should beat back SBC's efforts to obtain permission to sell long-distance service. Otherwise, we may be faced by a long, hot summer ruled by the telecom Lord of the Flies.
For me, thoughts of summers past evoke the balmy year of 1985, when I was assistant manager of an apartment complex in Carmichael, a sweltering Sacramento suburb made up mostly of strip malls and garden apartments. I'd spend my days watching residents lounge poolside, responding occasionally to a tenant's leaky-toilet complaint, calling upon the odd late-payer, and telling move-outs firmly that no, they weren't going to get any of their deposit back. We almost never returned deposits, or portions thereof.
While it was illegal for landlords to keep the money for themselves, it was considered legit to almost always repaint the entire unit, have drapes dry-cleaned, and bring in a steam crew to freshen up the carpet -- every time a tenant moved out, and whether the work was needed or not. The idea, if I remember the owner's instructions correctly, was to spend as much tenant money as possible sprucing the place up as a mean-spirited way of improving the building's bottom line.
In hindsight, it seems clear that this policy, while personally empowering, was unfair. Now that I'm older and able to build inner strength without following instructions to rip off small people, I'm encouraged to hear that S.F. Assemblywoman Carole Migden is sponsoring legislation that would make it more difficult for landlords to unfairly withhold security deposits. I discussed this issue with the assemblywoman by phone last week.
"I'm a 'political money matron'? What the heck is that supposed to mean?" Migden said, reminding me that it might be necessary to discuss her appearance in last week's column, which criticized Migden's role in Gov. Gray Davis' attempts to plug current budget holes by mortgaging the state's fiscal future.
"Hey, I'm on the phone with a writer from SF Weekly -- the guy who took a bite out of me last week," Migden yelled toward an unnamed aide. "I want you to send him a fax."
And so she did, and it contained the specifics of a Migden bill that would force landlords to do a walk-through before tenants move out, so tenants would have a chance to take care of, on their own, any cleaning or repairs the landlord might have funded out of deposit money. This provision alone would have put the kibosh on my keep-the-entire-deposit scam at Woodbridge Apartments 17 years ago. The bill would increase the fine for illegally withholding security deposits. It would allow some tenants to use part of their deposits as emergency rent payments. And it would shorten the amount of time landlords have to return a deposit after a tenant vacates.
As virtuous as these stipulations may sound in tenant-friendly San Francisco, Migden faces an uphill battle at the Statehouse, where politicians tend to be skeptical of such landlord-defanging measures. Migden says her bill risks a Davis veto. I've gone on record opposing rent control because it unfairly jacks up the rents of whoever isn't already under its umbrella. But I support landlord control. With playground monitors on vacation for the summer, and bullies roaming free, we need protection, whether it's provided by the Ratepayer Advocate or a local political money matron.