Bell Atlantic Rejects Latest AT&T Smear Attempt

Bell Atlantic Rejects Latest AT&T Smear

Allegheny Institute, Spouting AT&T Prose, is Dead
Wrong and
Out of Date

August 17, 1999


Sharon Shaffer,

BACKGROUND -- At a news conference in Harrisburg
this morning the Allegheny Institute attempted to smear Bell Atlantic.
The Allegheny Institute is a Pittsburgh based "think tank"
funded in large part by AT&T. The Institute has discovered an old and
badly discredited FCC staff "audit" that purported to show
Bell Atlantic and other telephone companies had lost track of company
equipment. In fact, the auditors ignored evidence provided by Bell
Atlantic proving the existence of the "missing" equipment.
Additionally, independent auditors found the FCC staff audit was
statistically invalid.

The following response should be attributed to Dan Whelan, president and
CEO of Bell Atlantic Pennsylvania.

The Allegheny Institute "think tank" should start thinking.
Not only does this staff audit go back more than six years, it was
completely discredited when finally released by the FCC in early 1999.
The audit is so flawed that the FCC itself has never adopted it.

As we noted last March, the staff auditors did not follow generally
accepted auditing standards. They suggested conclusions and
recommendations that cannot be supported. In addition, the FCC staff
refused to sit at the table and discuss the documentation we supplied in
response to its draft audit.

Ernst and Young conducted an independent evaluation of the audit staff's
sampling procedure and concluded that the FCC's report "contains
biases, and is highly inaccurate in other ways too. Given these errors and
biases, the conclusions in the reports concerning the amount of overstated
investment are unsound and cannot be fairly relied upon."

The most important point is this: even if the audit report could be relied
upon, it would be irrelevant, because it would not affect rates. The FCC
now sets rates using a price cap formula that is independent of property
valuations. Moreover, the staff's audit was of our inventory records,
which were never used to set rates, not our financial records.

Recently legislation has begun to move through Congress that would
eliminate any such frivolous audits in the future. We strongly encourage
its passage.