Study shows Ameritech cut investment in Illinois

Study shows Ameritech cut investment in Illinois

By Joe Baker

By Joe Baker

Senior Editor

The state of Illinois has released a new study aimed at outlining the causes of Ameritech’s customer service shortcomings. The study was commissioned by the Illinois Coalition for Competitive Telecommunications.

The study reveals a pattern by Ameritech of strong disinvestment in local telephone infrastructure over a 10-year period. During that time the company’s profits were soaring while their service sank to abysmal levels.

The pattern worsened under alternative regulation, which removed caps on Ameritech’s profits. The study compared Ameritech with other Bell companies and clearly shows Ameritech’s profits and expenditures are way out of line with the rest of the industry.

A recent analysis by Merrill Lynch found underinvestment between 1990 and 1998 to be between A $3 billion to $4.9 billion.

Ameritech spokesmen could not be reached for comment.

“The data contained in this study is proof positive that Ameritech has for years consciously underinvested in Illinois network infrastructure. We now know that the excuses they’ve been offering for their horrendous service have been fabrications,” said Gary Mack, executive director of ICCT.

“What’s most striking about the study is that it very clearly shows how much worse things have gotten for consumers since Illinois approved alternative regulation, which is really just another word for deregulation,” said Jim Howard, policy director for ICCT.

“Ameritech lobbied hard for a new regulatory scheme but never fulfilled its end of the bargain. Illinois needs a more effective law. Ameritech has made the current law a failure,” Howard said.

The study showed Ameritech’s force reductions were 25 percent greater than other Bell companies and even accelerated between 1995 and 1999.

Ameritech’s investments in its network fell far behind other companies. After so-called alternative regulation, most companies increased these investments. Ameritech’s dropped.

They also enjoyed a much greater return on investment than the other companies. The industry average was about 16 percent, while in Illinois Ameritech enjoyed a return of 44.6 percent.

The study showed Ameritech invested more than $5 billion less in its network than the average. In 1999, Illinois ranked 49 out of 50 states in expenditures per line. Ameritech’s customers registered 10 times more complaints after alternative regulation than in the period from 1991 to 1994.

“The failure to invest in the network will continue to haunt consumers, both in terms of further deterioration of service and in stifling competition for local phone service that would give consumers real, practical alternatives,” Mack said. “Ameritech’s behavior in the ’90s has both degraded service and blocked the possibility for real competition—the only long-term solution for long-suffering consumers,” he added.

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