IRREGULATORS & NNI Reading Library

READING LIBRARY

The Case to Break up Big Telecom & Cable, April 2021

Summary for Normal People:

 Communications Prices

Wireless Prices are Out of Control

 The “Triple Play” Prices are Out of Control.

Added Made Up Fees with No Audits and No Government Mandates

No Truth in Billing

No More Taxes, Fees, Surcharges

MARKET POWER: Takeover of FCC, State Legislatures, Media

The takeover of the FCC ro the capture and control of the Consumer Advisory Committee, as ewll as state legislatures and commissions.

 

IRREGULATORS vs FCC.

  • In 2019, the IRREGULATORS took the FCC to court over the FCC accounting rules that have become deformed but are still in use. The DC Court of Appeals gave us the decision we wanted—the states are independent of using the FCC’s FCC USOA, Uniform Standard of Accounting and can go after the massive cros-subsidy scheme we uncovered.

History of Fiber Optic Deployment Failure in America     

This trilogy of books started in 1999, but the first book was based on one of the largest research projects undertaken to examine the break up of AT&T and the formation of the Bell companies, with Probe Research,1993-1995

Broadband and Accounting States Covered

New Jersey

Pennsylvania

California

New York

Massachusetts

California Recent Activities, 2021

Articles on 5G and Wireless

Aug 11, 2020 The FCC has decided that it should give $9 billion for the deployment of wireless 5G, but the FCC has never …

Access Line Accounting has been Manipulated

  • Bell Access Line Accounting Manipulation 1984-2018
  • Description: Verizon, AT&T, CenturyLink, and their association, USTelecom, with the help of the FCC, have manipulated the basic accounting of access lines, and have removed or hidden 80% of all lines, including all Business Data Services, (special access) DSL, competitor lines, FiOS, U-Verse, all of the wires to the cell sites or WiFi hot spots, alarm circuits, and this has been done to reinforce a claim that the utility networks are unprofitable.

Killed Off Competition

Statements by Executives and Regulators

What the Bell executives tell the investors, but hides from the public.

  • 5G: The Wireline-Wireless Bait & Switch: Because It Makes Them More Money. A full report detailing statements of executives pertaining to the deployment of Wireless – as a money maker and highlighting what the companies do  not what they tell the public.

Bell Mergers and Outcomes

Business Data Services and Accounting Overcharges

Consumer Federation of America (CFA) New Networks Institute (NNI)

  • Consumer Federation Ex Parte Meeting with the FCC, September 2016
  • Reply Comments Filed, August 2016
  • Joint Comments Filed
  • BUSINESS DATA SERVICE MARKET PLAGUED BY ILLEGAL COST ALLOCATIONS, OVERCHARGES AND EXCESS PROFITS
  • Consumer Federation of America and New Networks Institute data show deeply anti-competitive, anti-consumer practices On June 28th, 2016  New Networks Institute and Consumer Federation Filed Joint Comments in the FCC’s Business Data Services Proceeding.

Joint Press Release: Consumer Federation of America and NNI

Decade of Examination: Verizon NY Reports & Filings, 2010-

New York is the only state that requires a full financial annual report. Starting in 2010, NNI’s team started to find some unsettling financial transactions and business practices, which we later uncovered was happening in every state.

  • Verizon’s State-Based Financial Issues & Tax Losses: The Destruction of America’s Telecommunications Utilities
  • In 2010, NNI started an investigation of the financial books of five Verizon’s state-based utility phone companies, including Verizon New York and Verizon New Jersey and the ties to Verizon Communications affiliate companies, (subsidiaries) including Verizon Wireless, Verizon Online, Verizon Services, among others. Published in 2012
  • Verizon Wireless and the Other Verizon Affiliate Companies Are Harming Verizon New York’s (The State-based Utility) Customers & the State.
  • In September 2013, our next report focused on Verizon New York and was the centerpiece of a filing by Common Cause, Consumer Union, CWA, and the Fire Island Association, which called for an investigation of Verizon’s financials and business practices, Alexander Goldman, Esq. co-authored the report.
  • It’s All Interconnected”,
  • In May 2014, Public Utility Law Project, (PULP) published “It’s all Interconnected”, written by New Networks (with assistance by David Bergmann, Esq.) and it relied on unexamined data from Verizon New York using different Verizon supplied financials books.
  • The Verge: Game of Phones: How Verizon is playing the FCC and its customers, May 2014
  • The Connect New York Coalition, filed a Petition with the NY State Public Service Commission to do a formal investigation of Verizon New York. July 1, 2014. The Petition is based, in part, on NNI’s continuing research.
  • Coalition members include AARP, Consumer Union, Common Cause, CWA, and NY state politicians.
  • NNI & IRREGULATOR FILINGS, NYPSC: August 8th, 2017, we submitted 3 documents: Comment 1 has a short overview as well as a bibliography of our research, which is directly tied to this proceeding. It also gives a brief discussion of issues that have been overlooked or are missing and need to be part of the next steps the State should be implementing. Comment 2 is a more detailed view (that has been published in Huffington Post) of the current proceeding and a Verizon settlement. Comment 3 is a full report based on our analysis of the Verizon NY’s 2016 Annual Report.
  • COMMENT 1: Overview and bibliography
  • COMMENT 2: Huffington Post: Verizon NY in Multi-Billion Dollar Settlement Tangle, Underway in NY State, August 4th 2017
  • COMMENT 3: Full Report: Verizon NY 2016 Annual Report: Follow the Money: Financial Analysis and Implications.
  • Verizon New York 2017 Annual Report: An Analysis of Cross-Subsidies and Customer Overcharging
  • DESCRIPTION: This report, based on the Annual Report, shows that there is a utility and that it is hemorrhaging money because of the FCC.
  • Verizon NY Settlement Story, July 2018. The investigation concluded and Verizon NY settled the case. Estimated at $300-500 million dollars, the settlement called for an estimated 30,000 lines of fiber optics to be installed and the existing copper networks maintained.

Other New York Articles and Filings

FIXING TELECOM REPORTS: 2015-

How the FCC Accounting Formulas Overcharge America

  • Report 1: Executive Summary: Verizon’s Manipulated Financial Accounting & the FCC’s Big “Freeze”
  • Report 2: Full Data Report
  • Report 3: SPECIAL REPORT How Municipalities and the States can Fund Fiber Optic Wireline and Wireless Broadband Networks.

Proving the Cross Subsidies of Wireless by Wireline Utility and Customers

  • REPORT 4: Data Report Verizon’s Wireline Networks Diverted Capex for Wireless Instead of Wiring Municipalities, and Charged Local Phone Customers.

The Manipulation of the FCC Accounting Rules, Expert Analysis

  • Report 5: The Hartman Memorandum proves that the FCC’s own cost allocation rules created massive financial cross subsidies.

The History and Rules of Setting Rates in America

  • Report 6: The History & Rules of Setting Phone Rates in America
  • Report 7: SUMMARY REPORT: Verizon Massachusetts & Boston: Investigate the Wireless-Wireline Bait-n-Switch, January 17th, 2017
  • Report 8: Verizon NY 2016 Annual Report Analyzed, June 2017.

The Digital Divide by Design The Formation of the Digital Divide by Design

  •  FILED WITH COMMENTS: REPORT 1:  Did AT&T, Verizon, CenturyLink & the FCC Intentionally Create the Digital Divide?

Overcharging: Manipulated Accounting: Cooked Books Nationwide

  • FILED AS REPLY COMMENTS:  REPORT 2: Verizon New York 2017 Annual Report: An Analysis of Cross-Subsidies and Customer Overcharging
  • DESCRIPTION: This report, based on the Annual Report shows that there is a utility and that it is hemorrhaging money because of the FCC.

FCC $9 Billion 5G Giveaway.

The FCC has decided that it should give $9 billion for the deployment of wireless 5G, but the FCC has never examined that there has been a massive cross-subsidies of the wireless networks, where Local phone customers have ended up being charged for the fiber optic networks used by Verizon and AT&T wireless. We filed for the FCC to investigate these cross-subsidies, which include 5G wireless. Click to Read the Filing

FACT SHEET: Verizon Massachusetts Fiber Optic Failure

FACT SHEET:

Verizon Massachusetts Fiber Optic Failure, 1994-2020

1994: Verizon Massachusetts files with the Mass Department of Public Utilities to have fiber optic services, to replace the existing copper wires. The included colleges and universities, hospitals, as well as 330,000 residence and businesses.

1994: This same plan was also filed with the FCC known as “Video Dialtone”, and claimed the majority of the entire state would be finished by 2010.

“NYNEX proposes to deploy hybrid fiber optic and coaxial (HFC) broadband networks that will provide advanced voice, data, and video services, including interactive video entertainment, multimedia education and health care services… “NYNEX plans to deploy this type of network to the majority of its customers by the year 2010.”

1995: Verizon filed and was granted “alternative regulations”, which gave the company

1999: In New Networks institute filed a complaint in Massachusetts outlining how Verizon (then New England Telephone) convinced regulators that they would rewire the state starting in 1995 if the company got massive financial incentives – Deregulation — the removal of regulation that examined and limited their profits. The Massachusetts Department of Telecommunications and Energy, never acted on our complaint.

2005: Verizon announces FiOS and gets some municipality franchises for cable TV

2007: We presented testimony in front of the Massachusetts Joint Committee on Telecommunications Utilities and Energy.

2010: Verizon announces it is halting the fiber optic deployments in all states.

2016:  Bait and Switch: Verizon announced it would be upgrading 100% of Boston and spend $300 million dollars.  Instead, most of this has been a bait and switch to use the fiber optic wires that should go to homes to instead roll out wireless, and 5G Wireless.

We documented the story in articles in Huff Post and Medium.

IRREGULATORS Big WIN: We Freed the States from the FCC

Bruce Kushnick, Managing Director bruce at New Networks dot com

Scott McCollough, Esq. Counsel  wsmc at dotlaw dot biz

FOR IMMEDIATE RELEASE

IRREGULATORS BIG WIN: We Freed the States to Get the Money Back from AT&T, Verizon & CenturyLink

(This is similar to the DC Circuit decision that freed Net Neutrality from the FCC’s control to become a state issue.)

  • We got the decision that we wanted—billions of dollars per state can now be freed to solve the Digital Divide, lower prices and bring in competition.
  • All wireless cross-subsidies can be stopped — 5G is no longer profitable.

IRREGULATORS v FCC: DC Court of Appeals Opinion, March 13th, 2020

WE CAN NOW TAKE THE NEXT STEPS 

WHAT WE NEEDED TO FIX: Unknown to most, AT&T, Verizon and CenturyLink control America’s telecommunications utilities, and over the last decade they have used the FCC’s accounting rules and formulas to charge the majority of all company-wide expenses to the local wired state-based telecommunications utilities, while the other services that are also using the same wired copper and fiber utility facilities, like broadband, internet and wireless, do not pay their fair share.

This financial shell game has made the entire state-based utility infrastructure appear unprofitable and they have relied on these distorted financial results to argue that they cannot upgrade rural areas or even inner cities, and it has been used to justify local rate increases multiple times, as well as save billions in taxes. More importantly, it is also the excuse to “shut off” the wired networks and go wireless with 5G.

Over the last five years we filed more than 18 separate pleadings and reports to stop the continuing use of these obsolete and now deformed rules. The FCC refused to take action, claiming that the rules didn’t apply, even though the companies still use them and the state commissions still accept them to the detriment of utility customers.

We brought this case to expose one of the largest accounting scandals in American history and to get a decision by the U.S. Court of Appeals – D.C. Circuit—and we won. The Court made clear that the FCC does not have control over the state accounting and the states are free to adopt new regulations. This also allows the states to go after the billions in cross-subsidies and overcharging that has been costing America an estimated $50-60 billion annually.

This is one of the largest victories for consumers in recent years. The states now clearly have the authority to pick up the mantle and act to narrow the Digital Divide, promote Digital Inclusion, lower prices, bring in competition and end the cross subsidization of 5G by the public utility. And it provides a national broadband plan which is not funded by government subsidies but by dismantling this financial shell game.

This is a partial list of what this decision means going forward:

  • We help to take down the billions in Corporate Operations overcharging: In NY, Verizon Local Service was overcharged an estimated $1.5 billion dollars a year for the corporate jets, the executive pay, and the lawyers and lobbyists pushing anti-customer agendas. Now a state can now stop the billions of dollars in unrelated expenses that has been put into local service and caused rate increases.
  • We help to take down billions in tax losses: Today, the state utility pays the majority of expenses, even if it has nothing to do with Local Service. In NY, Verizon has been showing artificial losses of $2 billion annually. The states can stop the cross-subsidies and let these companies pay their fair share of taxes.
  • All subsidies to wireless can now be stopped by the states: The states are free to stop the cross subsidies where the fiber optic networks are being built for the benefit of the wireless company, instead of properly upgrading cities and towns, especially in more rural areas.
  • 5G Is Not Profitable Once We Do This.
  • We take down the 75-25% rule with this decision: Today, 75% of the costs of the wired network expenses (even for wireless, broadband and internet) are dumped into ‘local service’; wireless and these other services got a free ride — Not anymore. The states can come up with their own allocation factors.
  • We just lowered prices billions of dollars if the state decides to go after the money: After all of this shell game is exposed and removed, a state can make the price be ‘incremental’ — and it can decide that local service and the wired networks should only be based on the actual costs, and not made up expenses.
  • We now present billions in new found cash to solve the Digital Divide:  Removing this long standing shell game means billions can now be properly allocated to build out the wired state-utility infrastructure for broadband to EVERYONE in the state.
  • Cities can now build out their networks. NYC’s Master Internet Plan to solve the Digital Divide requires government funds and never held Verizon NY accountable. The City of New York, like all cities across America trying to get a digital future for every citizen, should have examined the financial cross-subsidies that were exposed in this case and the bait-and-switch funding for wireless. Now, NYC can go after the money and provide a fiber optic future to everyone.

NOTE: We lost this DC Court decision on standing: Since the rules don’t apply, we can’t be harmed.  We now have clarity about these cost accounting rules. The states are free to do what they want. Our strategy in bringing this case was to secure a definitive answer about the rights of states vs the control by the FCC over the financial accounting. The Court made it clear that the states are independent from the FCC and from the application of the federal accounting formulas known as “Part 36”.

“This means that any injuries the petitioners suffer through the application of outmoded Part 36 rules to price-cap carriers are traceable not to the Commission’s freeze order but to the states’ voluntary and independent decisions to use the rules of Part 36 for their own purposes.” (PAGE 9)

“Price Caps” Need Investigation and Repair: AT&T et al. and the states may say: “We are under price caps and the utility expenses are no longer examined.”

ANSWER: The States can now go back, do the audits, and stop the financial shell game. “Price caps” is a form of regulation that was supposed to keep prices capped and reasonable, which never worked. This was to increase the companies’ profits, which were supposed to be used to replace the existing copper wires with fiber optics—and that never happened. Instead, using the FCC’s corrupted formulas, it allowed for this massive overcharging.  Prices are no longer ‘just and reasonable’ when you can charge local phone customers to build the wireless networks or pay for the corporate jets.

AT&T CALIFORNIA DEEP DIVE ARCHIVES, 2002-2019

DEEP DIVE ARCHIVE:

Huffington Post/Medium articles about AT&T and California

BACK IN THE STACKS: 2002-2010

https://newnetworks.com/mergersandoutcomes.htm

 

FCC Accounting Rules Caused Verizon NY Cross-Subsidies

IRREGULATORS Take the FCC to Court Based on Verizon New York 2017 Annual Report. Billions Revealed in Cross-Subsidies Caused by the FCC’s Manipulated Accounting Rules. This is Happening Nationwide.

On June 3rd, 2019, the IRREGULATORS won Round 1, the right to take the FCC to court over their cost accounting rules. However, the case relies on the Verizon New York financial annual reports, the latest published May 30th, 2019. It is one of the largest accounting scandals in American history and it impacts all telecommunications in the United States – and all FCC decisions and proceedings, and almost all state decisions that relied on the FCC’s work.

PRESS: We created a by-the-numbers walk-through of the official Verizon New York 2017 Annual Report to spotlight some of the specific harms.

http://irregulators.org/verizonnywalkthrough/

The FCC’s rules were supposed to divide up the expenses that are to be paid by the different lines of business, such as Verizon Wireless or Verizon Online, for the use of the infrastructure and services of the state telecommunications utility – Verizon New York.

Unfortunately, the rules became corrupted and the expenses to be paid are set, “frozen”, to reflect the year 2000, 19 years ago. Using the Verizon New York annual reports, we prove that the rules are still in use and they now divert the majority of all expenses into Local Service, the basic POTS, phone service category. This has caused billions of dollars annually to be misallocated by charging phone customers excessive Corporate Operations expenses, everything from the corporate jets and golf tournaments to executive pay. It also diverted the construction budgets to pay for the wireless deployments. And Verizon was able to create losses that were used not only for rate increases, but to avoid paying billions in taxes. Ultimately, Verizon claims it is not profitable to upgrade rural or low income areas and is now planning a bait-and-switch, claiming 5G wireless will fix everything.

How crazy does it get?

  • Verizon NY 2017 Local Service was charged $1.8 billion, 61%, of Corporate Operations expense, making it unprofitable. Local Service had revenues of $1.1 billion. (“61%” is based entirely on the FCC’s FREEZE and it has been this way for 2 decades.)
  • Taxes: The Verizon NY 2017 Annual Report showed losses of $2.6 billion and a tax benefit of over $900 million. Verizon NY has shown losses of over $2 billion a year for almost the last decade, (with caveats).
  • Construction: Local Service paid the majority, $1.2 billion, in construction and maintenance, but only an estimated hundred million was attributed to the copper wires.
  • The NY Attorney General’s Office in 2012 found 75% of the utility construction budgets were being diverted to wireless or FiOS video services. This is instead of upgrading the NYC and NY State infrastructure.
  • Rates Increases of Over 100%: Since 2005, every wireline customer paid over $3,000 a line based on increases granted using artificial losses, through 2018.
  • It Created the Digital Divide by claiming areas of the state utility were unprofitable, when, in reality, there was enough money to have been doing continuous upgrades. In fact, rates should have been in steep decline.
  • This happened in every state because the FCC rules are federal. The last available data in 2007 matched in every state-based utility.
  • Customer overcharging, nationwide, is estimated to be $50-60 billion annually, based on what is happening in New York.

IRREGULATORS v FCC — In December, 2018, the FCC decided to extend the FREEZE rules for 6 more years. We could not let this stand and get worse. We have the actual financial books as well as the expertise to figure out what happened, but it has taken almost a decade of investigation to understand this accounting puzzle. No other state we know of still publishes financial reports; the FCC stopped publishing the financials in 2007.  We filed 18 separate reports and comments in this proceeding (Docket 80-286) to document our claims since 2015, which the FCC has mostly ignored. http://irregulators.org/our-work-reports-filings/

Settlement with Verizon NY and the NY Public Service Commission, July 2018: Our analysis and methodology was used in an investigation of Verizon New York that started in 2015 and was settled in July 2018. Estimated at $300-$500 million, 32,000 lines of fiber optics will be deployed in unserved areas and the existing networks will be maintained. But this settlement did not go far enough to fix the existing problems or deal with the FCC’s corrupted accounting.  https://bit.ly/2O25OqQ

The Bottom Line: No one knows or understands that the FCC’s rules have become corrupted over the last 2 decades, that they actually control the state-utility accounting and that they are still in use, nationwide. Stopping the Corporate Operations expenses, the cross-subsidies of the other Verizon lines of business with the state telecommunications utility, especially wireless, and making them pay market prices, will immediately lower rates on all services – not just basic phone service, and could bring billions back to do full upgrades of the telecommunication wired infrastructure. Cleaning up this long standing financial shell game also solves some of the Digital Divide concerns and could even create financial support as part of any settlement.

5G is not profitable once the cross-subsidies for wireless are removed. 5G is nothing more than another technology promise-them-anything bait-and-switch to get rid of state and federal regulations at the FCC and in state legislatures. (This is on top of the health concerns of putting a microwave antenna, always on, on a lamppost directly outside someone’s bedroom window.)

Nationwide Problem: These are federal rules that have been manipulated by the FCC, either by negligence or design.  Thus, all states, not only in the Verizon service area, but in the AT&T and CenturyLink territories, have the same financial issues that need to be fixed immediately. Taking the FCC to court is the first step in this direction.

IRREGULATORS is an independent consortium of retired and semi-retired senior telecom experts, analysts, forensic auditors, and lawyers who are former staffers from the FCC, state advocate and Attorneys General Office, as well as telecom auditors and consultants.

http://irregulators.org/who-we-are/