Mises Daily

A
A
Home | Library | The Hidden Phonebook Tax

The Hidden Phonebook Tax

January 25, 2000

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.

* * * * *

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


Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

Follow Mises Institute