US Government Suing AT&T for Fraud

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| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

US Government Suing AT&T for Fraud

Is Fraud rampant at Ma Bell?

ARS wrote an article titled, AT&T collected millions from taxpayers in fraudulent charges, US says. "AT&T improperly received millions of dollars from a government reimbursement fund by ignoring fraudulent use of the IP Relay call system provided free of charge to hearing- and speech-impaired US residents, the US government alleged this week."

Another item ripped from the headlines:

DOJ Sues AT&T For Not Keeping Scammers Off Deaf Phone Service

CRN reports, "The Justice Department this week filed a lawsuit against AT&T on the grounds that the carrier did not do enough to keep international swindlers from abusing a government-mandated service that allows deaf people to make free calls to hearing people via text message over the Web, Reuters reported this week.... The FCC reimburses carriers for the service, to the tune of $1.30 per minute. However, the Justice Department claims that the vast majority of callers using the service were fraudsters in other countries, and that AT&T did not take measures to stop this from happening."

"This claim was initially made in a whistle-blower lawsuit against AT&T brought by a former call center employee, according to Reuters".

Too big to fail also means too big to know what is going on.

This is but a symptom of how poorly managed these big companies are. It's all about the stock price. When you have $64 Billion in debt, you need to watch the stock price or your debt starts costing more. One percent is $640 million extra. But you can be a slave to it or everything else falls apart.

AT&T is facing competition from VZW and the cablecos. If the SpectrumCo deal gets approval from the FCC, VZW will be co-marketing (read colluding with) three MSO's to take revenue from AT&T. All the mass markets are flat: voice, TV, cellular and broadband. It's a game of take-away now. That's expensive. So customer acquisition costs increase. Subsidies on cell phones go up. Everything goes up except ARPU! Do you see the problem?

If any other cellco - T-Mobile, Sprint, MetroPCS or even Tracfone - could get its act together, it would add pressure. The MSo's have their act together and are winning the battle for the SMB space under $500. The CLEC's used to own this business, which meant wholesale revenue for the ILEC's (Qwest, VZ, ATT), but even that revenue will start to decline as less T1's are sold by the CLEC's.

Wireline revenues, especially DSL, are in decline. Where does the new revenue come from?

Windstream and CenturyLink made big moves to counter their wireline shortfalls. What have the RBOC's done? Mainly gone cellular including spectrum acquisitions. Comcast bought content (NBCU). It's a race.

Short note for CLEC's: if wireline is declining and the sub-$500 customer is going to cable, what are you going to do?

One last note: VZ already had a union strike and had to settle. ATT is in the midst of negotiating a CWA union contract. How does that help or hinder future growth? For VZ, VZW and FiOS are non-union shops.



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