AT&T threatened with fraud inquiry in Florida: complaints stem from customer service problems in Jacksonville

Cable World, Feb 11, 2002 by Staci O. Kramer

An eight-month scuffle over AT&T Broadband's handling of customer grievances in its 260,000-subscriber Jacksonville, Fla., system escalated last week as Florida's attorney general agreed to consider a request from local government officials that he launch a fraud investigation into AT&Ts customer service practices in the city.

Jacksonville is one of several AT&T customer service hot spots in Florida since big changes the MSO made last summer in installations, customer billing and call center services. Local government officials there are irate that AT&T--in the process of completing a $72 billion merger of its nationwide network of cable TV operations with Comcast Corp.--has not adequately redressed a tidal wave of complaints made in the wake of its service changes.

The AT&T-Jacksonville face-off: Local officials are demanding cash credits for consumers in return for AT&Ts 2001 service woes, while AT&Ts proposal includes a donation to charity, coupons for free pay-per-view-movies and a free premium channel for a week. Whether the matter remains a minor headache for AT&T or blossoms into a full-bore migraine depends somewhat on whether Florida Attorney General Robert Butterworth enters the fray by opening a fraud inquiry, which in turn could attract franchise authorities from other communities, in a widening AT&T investigation.

"I don't think it has any ramifications outside of Jacksonville," says Rick Bailey, senior vice president and chief counsel of AT&T Broadband. "We feel very comfortable with our position in Jacksonville. We feel at all times we acted appropriately and correctly." Bailey said AT&T is cooperating with the city and would continue to do so if the attorney general starts an inquiry.

Saber-rattling tactics among franchise officials and their representatives have increased as government authorities look to gain an upper hand in the local tussle. Local governments have begun pressing for more leverage in some of the 5,000 or so franchises involved in the AT&T-Comcast merger nationally as the behemoths seek transfer of local franchise ownerships into the new parent organization.

"This could be a multiheaded dragon that's going to be approaching AT&T and Comcast," says Matt Leibowitz, a veteran Florida cable attorney and franchise consultant who represents a number of Florida franchise authorities including Miami. His newest client is Jacksonville, which is not required to approve the transfer.

In Florida's Broward County, which hosts 23 franchise authorities, officials were so incensed by AT&Ts customer service fall-off that they banded together to weigh the viability of attracting a competitor to AT&T. Clay County paid for a feasibility study to determine whether it would make sense to run its own cable system and recently decided the financial risk would be too high. Ft. Lauderdale used the leverage of a franchise renewal to solve its problems.

"If we'd been moving in a more positive manner, we wouldn't be in this place," admits Mario Taylor, director of the city's Department of Regulatory and Environmental Services. The number of complaints made directly to the city ballooned to more than 1,200 a month before dropping below 200, but were still four times the monthly average in prior years. Lately those numbers have started to rise again, Taylor says, adding to their concern.

Jacksonville City Council President Matt Carlucci wrote the attorney general last week, alleging that AT&T "may have violated" a Florida statute regarding false, deceptive or unfair trade practices. The matter was turned over to the Tallahassee office of the state's Economic Crimes Unit for consideration.

"At this point I can't say whether we will or will not pursue this as a full-scale investigation," said Joe Bizzaro, a spokesman for the Florida attorney general.

The request for an inquiry hints indirectly at claims a former AT&T employee filed in U.S. District Court that state AT&T falsified customer service records given to the city in 2001. Late last year Kelli McAnany sued AT&T over employment practices and alleges she was forced to falsify records; she has provided the city with data that she says back up her claim. Carlucci's letter refers to "voluminous records, and further examples of business practices by AT&T, which are of grave concern to the city."

Taylor says the lawsuit is "only tangentially related" to the city's request. "We're letting that run its course on its own," he says. But the allegations encouraged the city to try to reconcile its own data with reports furnished by AT&T and the material McAnany provided. "When we tried to verify those numbers, we started to realize it was very different," Taylor says.

The local spat may get ironed out this week as Jacksonville officials meet for the first time with Ellen Filipiak, the newly appointed AT&T SVP for Florida (see SMITH, FILIPIAK JOIN AT&T). "AT&T could not have a better person than Ellen in that position," says Leibowitz. "The question from me is whether Ellen has been given the appropriate resources." He adds, "AT&T and Comcast have to address this on a larger basis ... there has to be a substantial commitment of money and resources to fix the call centers."