AT&T; Sues MCI, Claims Top Rival Is Stealing Customers

American Telephone & Telegraph charged Wednesday that its leading competitor, MCI Communications, has been stealing AT&T; long-distance customers.

“People are being hoodwinked,” claimed Merrill Tutton, AT&T; vice president for consumer services, in announcing the firm’s filing of a deceptive-practices lawsuit in U.S. District Court in Newark, N.J.

The suit alleges that MCI or its agent, Pioneer Teletechnologies, have used “false and misleading” direct-sales practices and, in some cases, signed up AT&T; customers without the customers’ authorization. Separately, AT&T; asked the Federal Communications Commission to require that customers authorize in writing any changes of long-distance carriers.

AT&T; claims that up to 15% of the customers who shifted to MCI in recent months either were duped by sales representatives or had never talked to an MCI agent.

MCI spokesman John Houser acknowledged that deceptive practices occur in direct marketing programs but insisted that MCI and Pioneer punish or fire anyone who uses them. He also noted that AT&T; sales agents have used similar tactics. He said AT&T; was just “whining” because it is losing market share.

Spokesmen for federal and state regulatory agencies said they were aware of such problems, but said they were common to many direct-sales campaigns and are corrected when consumers complain.

Since the 1984 breakup of the Bell System, customers must choose a primary long-distance carrier for their telephone service. They can change carriers at will--either by calling their local phone company and requesting a new primary long-distance carrier, or by telling the new carrier to make the change for them.

Local phone companies charge customers a state-authorized fee for making the computer change that automatically routes long-distance calls to the designated carrier’s network.

According to AT&T;’s lawsuit, which seeks unspecified damages, MCI sales agents told some AT&T; customers that AT&T; no longer handled long-distance calls. In some cases, the suit said, the agents said AT&T; was going out of business. In still others, however, AT&T; customers had their accounts changed without any contact from a sales agent, the suit alleged.

Houser of MCI called AT&T;’s examples of false sales claims “ludicrous.” But he acknowledged that fraudulent sales--claimed by agents who work on commission--likely occur in any direct-marketing campaign.

“This has always been a concern,” Houser said. “It’s nothing new.”

He added that MCI’s customers “have on occasion told us that they have been switched over to AT&T;” without authorization.

But given the “millions of calls a month” made by carriers to solicit customers, he added, the number of complaints on all sides “is not large.” Houser added that “It definitely is not a corporate strategy.” He said the vast majority of customers who are switched to MCI have no complaints.

Houser said MCI would “evaluate” AT&T;’s petition that the FCC require customers to make written authorization, but considers the present situation adequate and convenient to consumers.

Duane Filer, who supervises telecommunications for the consumer affairs branch of the California Public Utilities Commission, said the problem is not unique to AT&T; or MCI. “It is industrywide,” he said. Nonetheless, he added, many customers prefer handling a change by phone “and letting the carrier do the legwork.”

While saying deceptive sales practices are “a growing problem,” Filer said he had heard nothing about it from AT&T; “until about 10 days ago.”

Houser countered by claiming that AT&T; was stunned by the numbers of defecting customers. “They talk about promoting competition on the one hand, but when they get it they complain,” he said.

AT&T;’s lawsuit is not the first pitting it against its original long-distance competitor reaching back two decades. MCI sued and AT&T; countersued last October over what each called the other’s false claims in television ads. Those cases are pending.

LONG-DISTANCE MARKET SHARE

AT&T;: 71%

MCI: 13%

US Sprint: 10%

Other (300 regional and specialty carriers)

Source: Industry estimates / Los Angeles Times