Have the telephone companies traded our rights to privacy for government favors?

Just weeks ago, we were struck with the unnerving revelation that Verizon, Bell South and AT&T may have enabled the National Security Agency to monitor private calling patterns of 200 million Americans. Congress may soon convene hearings to explore the matter.

Since the story came out, the Bells have chosen their words carefully when asked about the scope of their cooperation. For instance, Verizon says it has not turned over data on “local” calls to the NSA. AT&T says it has “no contract” with the NSA. But such comments do little to quell concerns that the Bells have enabled NSA to conduct what – in the words of a former AT&T technician – “amounts to vacuum-cleaner surveillance of all the data crossing the Internet,” whether e-mail, Web surfing or telephone calls.

Many are asking whether, in exchange for allowing the NSA to monitor network traffic, the three Bell companies have sought significant benefits from the federal government. Have the telephone companies traded our rights to telephone privacy in return for government favors? And has Qwest – the one company that openly bucked the NSA’s program – suffered reprisals?

In 1996, Congress enacted bipartisan legislation that opened the Bell phone monopolies to competition. Competition was intended to lower prices and introduce innovative telecommunications services. Until 2001, the FCC followed congressional intent, requiring the Bells to open their networks to nascent competitors, and consumers reaped billions in savings as a result.

But, since 2002 when the NSA first sought the Bells’ calling records, the FCC has embarked on a steady path of decisions giving the Bells a favored position in the marketplace. In a series of orders, the FCC reversed rules that had given competitors access to the publicly-funded Bell telephone networks. The Bells even persuaded the White House and the Department of Justice not to defend in the courts the few competition provisions that the FCC had left in place – a move that cost the millions of customers served by competitive providers billions of dollars in annual savings.

Unlike its three cooperating Bell brethren, the less compliant Qwest has been handed a series of disturbing defeats at the FCC and DOJ. While AT&T and Verizon were able to merge with their largest competitors without divesting one single telephone line, Qwest’s attempt to acquire a much smaller company was met with such onerous Justice Department conditions on divestiture that Qwest canceled the deal.

Similarly, when Qwest sought relief from certain regulatory obligations in a single city – Omaha – the FCC refused. Yet, when Verizon asked for the same relief, the FCC quickly granted a form of relief that exceeded Verizon’s request, and applied that relief to every state where Verizon provides service.

In February, FCC Chairman Kevin Martin told the Senate Commerce Committee that he would “take strong enforcement action to address any noncompliance by telecommunications carriers” with the FCC’s privacy rules. Indeed, citing those rules, the FCC recently fined a small competitor to the Bell companies $100,000 for failing to submit a one-page form to the FCC. Notably, the FCC did not accuse the company of disclosing a single customer record improperly.

Now the FCC’s decision not to investigate in the face of a much deeper invasion into our privacy is telling. Also, the FCC is signaling it will approve AT&T’s merger with BellSouth, continuing AT&T’s drive to recreate the old Bell one-telephone-company monopoly. Not a peep has been heard from the FCC (nor from DOJ) about the consumer harms that could result.

We wonder whether rewards for the Bell’s cooperation continue to be doled out.

William C. Black is the deputy public advocate in Maine.