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The Hidden Phonebook Tax

Mises Daily: Tuesday, January 25, 2000 by

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Life is full of hidden costs, taxes, and other annoyances that hit us hard in the wallet, but one gnat in particular has been biting at me since the day I set up my first residential telephone line. It's the "phonebook fee," a monthly charge BellSouth, GTE and other telephone companies exact for the privilege of keeping our private information out of their public databases and phonebooks.

Unlisted numbers have been popular among many Americans for most of the last century. A single galvanizing event, in fact, may have been the largest force behind our culture's obsession with privacy and the urge to keep our information out of public view. The event was the kidnapping and murder of Charles Lindbergh's twenty-month-old son in 1932.

"The Lindberg case created paranoia among public figures, the rich and the elites; any and everyone now saw real danger in being out there in public and letting people have access to their personal information," said George Thomas, a writer and University of Pennsylvania professor.

The trend towards privacy sparked by the Lindbergh case was strengthened by the modern surge in telemarketing, crank calls (police documented over one million last year), and other nuisances that can be traced to a residential telephone number listing. Today, over 25% of the nation's 90 million telephone customers pay a monthly phonebook fee to keep their information secret.

Since telephone directories are free, the phonebook fee is somewhat of a misnomer. What customers are paying for is the privilege and the "process of not being in the phonebook," according to BellSouth spokesman Spero Canton. "That's sort of like making me pay you not to wash my car," said Bob Bulmash, president of Private Citizen, an Illinois-based privacy rights organization.

Paying the telephone company to do nothing is also silly. So silly, in fact, economists have a special word for the practice: dead-weight loss. That is because this "non-service" has no economic value. In exchange for our money, BellSouth and GTE are not building anything or creating value. The money merely goes from our pockets to theirs.

Nor are we talking about spare change. According to government statistics, about one-quarter of the 90 million residential telephone subscribers pay an average of $1.50 per month to keep their numbers unlisted. That puts the telephone companies' take at over $400 million a year. For non-published listings, BellSouth charges $1.45 per month while GTE charges $2.00.

There may be another name for the imaginative non-service GTE and BellSouth offer their 8.6 million Florida customers: extortion.

A company is guilty of extortion when it obtains or attempts to obtain the property of another by means of a threat. In Florida, the rule includes divulging "secrets affecting another" as part of the crime. Since the telephone companies are forcing us to pay them under the threat that they will circulate, publish and sell our personal information to telemarketing companies, it may come under the law.

If challenged, Florida courts may also take a dim view of the telephone companies' billing practices. One reason is that state law makes it unlawful for telemarketers to call residents who have paid to unlist their numbers.

But this privacy and protection has a price not everyone can pay. And since BellSouth and GTE are charging Florida residents for a statutory right, they are therefore discriminating against anyone who can't afford their fees.

Allowing companies to exact money for their inaction is also a poor and reckless precedent. Even if just applied to phonebooks and directories, countless scams--all variations on this same theme--could eventually swindle millions from consumers across the country.

Another way to view the phonebook fee makes the idea appear all the more demonic. In essence it is a tax with the proceeds going to private corporations and their stockholders. Yet this tax was never ratified, nor even considered by the legislature. Nevertheless, with so many Floridians paying it, few of whom have any meaningful alternatives, who can disagree about its nature?

Despite the hype, Florida residential phone competition is a fiction. Less than 1% of Florida residents have the option to choose between competing local providers, according to a state report. And even after state and federal laws passed ordering competition, BellSouth and GTE's army of lobbyists in Tallahassee have managed to preserve the labyrinth of stilted regulations that makes Florida unattractive to new companies.

In the past two years, Time-Warner, MCI and Global Crossing, companies who are eager to compete against Baby Bells in other markets, scorned the Florida local phone business to seek greener pastures elsewhere.

BellSouth and GTE are still monopolies in every sense of the word, said Jack Spooner, President of the 17,000-member Florida Coalition for Competition. "Things have to change if we're going to move towards a competitive market," said Spooner. Ernie Bach, executive director of the Florida Action Coalition Team, agrees: "There simply is no meaningful residential phone competition in our state."

Both BellSouth and GTE contend that the phonebook fee goes towards a legitimate service. When customers elect not to list their information "a series of steps have to be taken and those numbers need to be deleted from BellSouth's database on a manual basis," said BellSouth's Canton. "There is programming that must take place," he said. GTE's Bob Ellick had a similar explanation adding that removing a listing from the database is "a service that's out of the norm, requiring ongoing maintenance."

That is simply not the case, according to a senior executive at a company to whom BellSouth out-sources features of their ordering and billing software. He said the process is already automated and can be performed without human intervention.

The telephone companies' argument is also suspect as they are willing to add additional listings under the same telephone number for free. It is not clear why adding a name is without cost but deleting names is a $400 million per year ordeal.

One BellSouth database programmer said that any costs BellSouth incurs associated with unlisted numbers is due to their own negligence. "Inserts and deletes of records are implemented routinely, easily and automatically unless when you're talking about systems that were implemented very inefficiently - I'd say that's the case here."

Even if these companies are telling the truth, inefficient computer systems are not our problem. It defies reason to make Floridians pay for the telephone companies' internal computer hang-ups. And as a matter of public policy, holding the public accountable for difficulties and expenses encountered by private companies with whom they do business is a disincentive to innovation and efficiency.

Both BellSouth and GTE further argue that since regulations permit them to charge customers for opting out of the phonebook, it is a kosher practice. Yet just because these companies can soak consumers does not mean they ought to. Unlike BellSouth and GTE, most Florida companies are free to charge whatever prices the market will bear. But who can think of a single example of another company in another industry charging monopoly prices for a non-service?

There are no such shenanigans on the Internet, where each of the online phone and email telephone directories I surveyed let you remove your name and information from their databases for free. Most make it easy by letting you fill out a form online.

The ease, comfort and honesty of the Internet is refreshing and at the same time metaphorical, as customers who are fed-up with residential telephone monopolies continue flock to alternative venues and technologies like the Internet, wireless and satellite.

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Jay Chris Robbins is a Miami-based writer and Internet consultant. He uses a wireless phone.