FREE DOWNLOAD: “The Book of Broken Promises: $400 Billion Broadband Scandal & Free the Net”
NOTE: We have just formed a new group: IRREGULATORS, and are giving away a free PDF copy of The Book of Broken Promises. What follows is a summary of the book and how the facts directly contradict the FCC’s biased, distorted and fake history of broadband in America.
And see Part II: It’s Time to Take the FCC to Court
The Book of Broken Promises
“A regulated company will always renege on promises to provide public benefits tomorrow in exchange for regulatory and financial benefits today.”
America’s households and businesses have been overcharged at least nine times for broadband/fiber optic services, including the wiring of schools, libraries, and hospitals— about $4000-$7000 per household, and the total is way over ½ trillion dollars by 2016. You can thank just a few companies: AT&T, Verizon and Centurylink, who control the state-based utilities, along with the cable companies, Comcast and now-Spectrum et al. And this is the low number.
The 3rd book in a trilogy that started in 1998, “The Book of Broken Promises” by Bruce Kushnick, proves that few have a clue about the factual history of broadband, much less fiber optic deployments in America that customers paid for, especially the FCC.
April 2017 was Infrastructure Month at the FCC; shame you weren’t told the truth. FCC Chairman Ajit Pai, a former Verizon attorney, has been making sure you hear the fake history of broadband and the Internet, which is being used to create exceedingly harmful public policies, and this needs to be stopped, now.
And regardless of what you heard, Verizon, AT&T and CenturyLink control the state telecommunications utilities, such as Verizon NY or AT&T-California, a fact that has been erased. And the copper wires, as well as most of the fiber optic wires are part of these state utilities, including those used for FiOS or the wires to the cell sites, or all of the other ‘business data services’ (BDS). And they have been funded mainly by local phone customers—and are classified as something called “Title II”.
(Yes, AT&T and Verizon are also wireless companies, and ISPs, and cable companies, and broadband companies, and more recently ad-tech and entertainment companies. However, almost all of it uses the state utility wires, especially in their own territories.)
More importantly, your wireless phone service requires a fiber optic wire. Your cell phone call or selfie or streaming video goes from your phone and tablet to a wireless antenna or cell site, which are attached to the wired networks. Thus, 5G requires a wire, 4G requires a wire, 3G requires a wire; even WiFi requires a wire. It does not go into the sky to a satellite, or into the ether, but travels over a physical wire. And this wire is also paid for mainly by the customers of the state utility (which also includes the inflated rates of BDS services), another fact that has been ignored or denied. I’ll get back to this in a moment.
Here’s What Actually Happened (For details, download the book.)
In 1934, the Communications Act passed which mandated that every home, office, school, and library—i.e.; everyone was entitled to phone service, and this would be done via a copper wire. And the copper wire would be part of a state utility because this would make sure that every part of a state—rural, urban and suburban locations would be served at ‘fair and just’ rates.
And by the end of the 1960’s, America had one of the best communications networks in the world, and almost every American could get phone service. Unfortunately, it was a monopoly and it was controlled by the original Ma Bell, AT&T.
AT&T was broken up in 1984, and the state utilities were divided up to be controlled by the “Regional Bell Operating Companies”, (RBOCs) what are now AT&T, Verizon and Centurylink.
Unfortunately, America would pay over and over and over for upgrades of these state utilities, even though most of the money was diverted to help build out the companies’ other lines of business. This is a short list of rate increases, failed commitments to supply broadband, or both. Each state telecom utility had variances on a the same theme: charge more for less, and get away with whatever you can.
A Short, Incomplete List of Broadband Harms: But Who’s Counting?
- Rate increases for “ISDN”: “It Still Does Nothing”, circa 1986
- Information Superhighway State Commitments—charged to customers that were never built, from 1991 and counting
- Merger conditions, such as SBC-Ameritech’s fiber optic “Project Pronto”
- Merger conditions: AT&T-BellSouth’s commitment for 100% broadband coverage of 22 states
- Multiple state-based cable franchise rate increases for broadband
- Government subsidies, from the Universal Service Fund to the E-Rate
- Federal Connect America Funds
- State created separate ‘broadband funds’
- Added taxes supposed to be for broadband
- Charging customers for ‘other lines of business’: Special Access (also called “Business Data Services”)
- Charging customers to build the wireless cell sites
- Dumping wireless construction expenses into the utility caused losses that were used to raise rates.
- Companies didn’t pay basic state or federal income taxes because of claimed losses.
- Charging local phone customers for the majority of “Corporate Operations” expenses, which includes everything from the corporate jet to the lawyers and lobbyists defending the telcos’ interest.
- Increases on cable, broadband and internet because the companies failed to properly upgrade and compete
- Increases on wireless because the companies control the wires to the cell sites, including much of the wires used by competitors
- FCC-Cable companies’ deal called the “Social Contract” to raise rates for broadband starting in 1995
Almost all of these issues occurred because AT&T, Verizon and Centurylink control the state-based utility wired networks and never properly upgraded and maintained these networks, but diverted funds to other lines of business, including more recently ad-tech, advertising and entertainment companies.
Let’s go through some of the major broadband commitments and the failure to deploy fiber optic for which they charged all customers multiple times.
The “Information Superhighway” Scandal
In 1991, the Clinton-Gore ticket ran on deploying the “Information Superhighway”, which was a plan to have the state utilities replace the existing copper wires with a fiber optic wire. This would deliver a whole new world of services, including very-high-speed broadband and Internet. America should have been a fiber optic nation, completed by the year 2010.
By the 1990’s, the copper wires were already in disrepair as they could have been in the ground since before the 1930’s or earlier. Much of the main infrastructure in New York City, for example, was installed a bit after the turn of the century–that’s the 20th Century.
Moreover, the companies were spending their money everywhere else because they had a cash cow and a very friendly set of regulators; the state utility commissions do oversight of the state utilities and the FCC is responsible for ‘interstate’ services.
And now-AT&T, Verizon and Centurylink realized that they could use this promise of a fiber optic ‘fantasy’ to raise rates and remove regulations (deregulation); so they lobbied to not have the government build this fabulous fiber optic future. Instead, they went state to state and claimed that they would replace this aging copper infrastructure with a shiny new glass-based, fiber optic bauble.
And we’re talking massive state and national hype: These facts are directly from the companies’ own annual reports and press statements.
- AT&T California claimed it would spend $16 billion and have 5.5 million households completed with fiber by 2000.
- SNET, which controlled Connecticut, (then owned by AT&T) was to have the entire state done by 2007 and spend $4.5 billion.
- Verizon’s entire East Coast (from then Maine through Virginia) was supposed to have 12 million homes done by 2000 and the company would spend $11 billion.
The Book of Broken Promises supplies all of the gory details about how the companies gamed the regulatory system and were able to essentially say anything, knowing there would be little, if any, repercussions.
Who Would Pay For It? Well, You Would.
The companies weren’t going to do this for free and presented literally million dollar studies showing that if only the state laws were changed to give the companies more financial incentives (profits and deregulation) they would use this new found cash for new investments. But this was nothing more than rate increases on most services. And, as soon as the laws went through, the companies profits went from an average of 10-12% to 29%. The companies also took massive tax deductions and write offs; they were supposed to be replacing the existing copper wire of the state utility with fiber, right?
The Speed of Broadband in 1993 Was 45 Mbps in Both Directions, 24 Years Ago.
This excerpt is from the Verizon Opportunity New Jersey Order of 1993. Verizon was supposed to be offering 45 Mbps, bi-directional services, starting in 1996. And again, this was an upgrade of the state utility, Verizon New Jersey, that would replace the existing copper infrastructure with fiber optic wires. And this was the standard definition of broadband in multiple states.
Schools and Libraries Were Also Supposed to be Wired.
This is from Verizon Massachusetts’s 1995 ‘alternative regulation’ plan which claimed that fiber optic services were supposed to be deployed, starting in 1998, to hospitals and universities. It also claimed it would have 330,000 homes and businesses upgraded.
Rural Areas Were Supposed to be Upgraded: Customers Paid for Fiber Upgrades
And please don’t call this history. In 2015, Verizon PA claimed it had completed 100% of its ‘broadband deployments’ to bring broadband to ‘rural, urban and suburban areas’.
The PA Public Utility Commission had attempted to hold them accountable in 2001 for their filings and stated commitments of 45 Mbps services, as nothing had been built. They wrote:
“In view of Bell’s commitment to providing 45 Mbps for digital video transmission both upstream and downstream, we look forward to Bell’s providing this two-way digital video transmission at 45 Mbps.”
This Information Superhighway was also to go equally to rural, urban and suburban areas. According to the PA PUC:
“Verizon PA has committed to making 20% of its access lines in each of rural, suburban, and urban rate centers broadband capable within five days from the customer request date by end of year 1998; 50% by 2004; and 100% by 2015.”
And again, Verizon gamed the system. In PA and NJ, the companies got politicians and regulators to rewrite the commitments (even though billions were already collected), so that the speed requirement would be that of DSL (the broadband service that uses the existing copper) or slower, or could be substituted using wireless.
And Let Us Not Forget TeleKansas, FCC Chairman Pai’s Home State.
This is an excerpt from a report that was written for AT&T-Kansas. Education, medicine, consumer services were all supposed to benefit and be delivered, even in rural areas. It never happened, but there were rate increases (and deregulation) charged to customers around the 1994 timeframe.
Outcome: We Paid for a Ferrari on the Info-Bahn and Got a Skateboard on a Dirt Road.
And those using the existing networks are still being charged. While it varies by state, no state, as far as we have found, has ever stopped charging customers for network upgrades that were to start in the 1990’s; no state ever got refunds for the failure of AT&T, Verizon and Centurylink for these upgrades, and no state even tracked either the amount of money collected or just how the companies screwed the state’s communications infrastructure build outs.
Merger Commitments Were All Written on Toilet Paper—and Most Promised Broadband.
If the homes, businesses, schools and libraries were all supposed to be upgraded because customers paid for these upgrades via changes in state laws, this was only one of the many scams pulled by the phone companies. In every merger, the companies made commitments to either compete or to build out broadband, or both.
Take the Ameritech-SBC Merger (Now AT&T). SBC (originally Southwestern Bell, which controlled such states as Texas and Kansas) had previously merged with Pacific Telesis (California and Nevada), then SNET (Connecticut) and then would add Ameritech, (which had five Midwest states including Ohio, Illinois Indiana, Wisconsin and Michigan).
SBC was supposed to compete out-of-region for wireline broadband, Internet and phone service in 30 cities in 30 months or pay penalties. At the same time, it announced “Project Pronto” and it would spend $6 billion on fiber-based deployments as part of the mergers.
And it was all just a con. SBC never competed outside the region at this time nor rolled out Pronto – and this was partly because the FCC’s merger conditions under the Republicans stated that six customers were considered the fulfillment of their obligations in any city. I repeat “6”, six customers qualified as completing an area’s competition requirement.
AT&T-BellSouth 100% Broadband Coverage of 22 States. Was this Perjury?
AT&T (which is really SBC, but by now had merged with AT&T and changed its name to AT&T) merged with BellSouth (southern states that included Florida, Mississippi and Georgia, among others) and it was supposed to bring broadband to 100% of 22 states by 2007. It lied and the FCC defended the telco. Even with a very slow speed requirement, it just made up that it had completed this commitment. (We know this because in the AT&T IP Transition trials in rural Carbon Hill, Alabama (around 2015, 2016) AT&T claimed that at least 4% of the territory could not be upgraded even after the trial was completed. Hundreds of people wrote us and various reporters to document that they couldn’t get any broadband at this time from AT&T.)
Telco Broadband/Cable Franchises Screwed Us Again, 2004-
By the end of 2004, while there were some build outs of fiber that were sold off (like Ameritech selling its fiber to WOW), none of America had what was promised and paid for – and the state utilities were still copper wire-based.
In fact, in order to cover over their tracks, in the 1998 timeframe, the companies started to roll out DSL, a slow copper-based service that was only fast in one direction and was considered ‘inferior’ in 1992 as compared to a shiny fiber optic wire.
In the next round, Verizon had announced FiOS and AT&T announced U-Verse, and these were supposedly broadband and cable networks, so they required a ‘franchise’. And in every state, the companies gamed the system by getting ‘city-wide’, ‘state-wide’ or ‘system-wide’ franchises to build out broadband.
To Verizon’s credit, they at least rolled out fiber optics to the home, which stopped in 2011, and left more than ½ of their territories undone.
AT&T, on the other hand, simply pulled a bait-and-switch and rolled out U-verse over the existing copper wires, calling it ‘fiber-based’, as there is a fiber wire within ½ mile of the home; it is the reason it can’t do seriously high speeds and is much slower in the upload direction.
No state bothered to actually examine the commitments made in the previous round of broadband (that we know of) or the failure to fulfill the original obligations or how much customers had already paid.
So, the companies made glorious statements that they would be using these franchises to deliver broadband and cable competition, then they picked and chose who to serve. In some states, the franchises were/are only by city, so whole areas of the states were left abandoned.
In fact, in 2017, Verizon New York is being sued by the City of New York for not completing its cable franchise to have a fiber optic service to 100% of residential consumers.
The Dismantling of the Utility and Privatizing Publicly Funded Networks.
This is where it gets complicated.
There is a copper wire that was part of the state utility and it was originally supposed to be used for ‘phone service’. But, by the 1990’s, the state utility was now being changed to offer broadband and even being used to offer cable service or the build out of the cell sites for the wireless company.
But, in 2005, Verizon stated that the fiber optic upgrades that would be used for FiOS were nothing more than a replacement of the copper and an enhancement to the state utility. This is from a 2005 Verizon NY cable franchise agreement. There it is in black and white; it was an upgrade of the existing telephone network, and therefore was classified as “Title II” as told by the Communications Act of 1934!
That means that the fiber optic wires being deployed are all part of the state utility. But it gets worse as the New York Attorney General’s Office found that Verizon was also using the construction budgets of the state utility to pay for a ‘cable service’, FiOS, as well as the wires to the cell sites.
“Verizon New York’s claim of making over a ‘billion dollars’ in 2011 capital investments to its landline network is misleading. In fact, roughly three-quarters of the money was invested in providing transport facilities to serve wireless cell sites and its FiOS offering. Wireless carriers, including Verizon’s affiliate Verizon Wireless, directly compete with landline telephone service and the company’s FiOS is primarily a video and Internet broadband offering….Therefore, only a fraction of the company’s capital program is dedicated to supporting and upgrading its landline telephone service.”
Moreover, at the same time, these other wires are classified differently. They are called “Special Access” or “Business Data Services” (also called “backhaul” by some)—and are also considered ‘interstate’ and not part of the state’s jurisdiction. But most of these wires are the exaxt same, identical network wires used for the other phone services. Special Access are not special but are wires used to ATM machines or other data services.
However, here’s the kicker; the expenses for these “special access” networks remained being charged to state utility, even when these wires are being used for the companies’ other lines of business and are classified ‘interstate’. And Verizon could charge the state utility for these other businesses’ expenses because they were classified as “Title II”, as told by the law in NY that is part of the Verizon cable franchises.
And kicker two; even though most of these wires are still copper based, all of the ‘special access’ wires (copper and fiber) are not counted as part of the state utility lines in service, and the revenues do not go pay ‘common expenses’ for use of the networks. It is a massive financial and accounting shell game that makes local service lose money while these other services garner obscene profits.
Simply put, if FiOS is a cable service, the construction couldn’t have been charged to local customers. However, as Title II, the expenses are put into the state utility.
So, let me summarize:
- Since the 1930’s and earlier, there have been state telecommunications utilities and the wires are still mostly copper.
- Starting in the 1990’s, these wires were supposed to be replaced multiple times with fiber optics wires.
- Customers have had rate increases multiple times to pay for these upgrades.
- At least ½ of the US was never upgraded, and most of AT&T’s entire U-verse is still based on the existing copper wires that can be 50-90 years in the ground.
- Schools, libraries and hospitals should have had fiber optic services 10-20 years ago as well.
- The majority of the wires that are being put in for the wireless companies were not paid for by the wireless companies, even though the wires are part of the state utility.
- These wires are all Title II, as told by the Communications Act of 1934.
We need to note that Verizon New York is not owned by the state, but by Verizon. However, the utility has obligations to the public because it gets perks, like the rights of way or the ability to use the state commission as a shield against legal actions over broadband, for example. And the state and federal laws are supposed to prohibit charging state utility customers for build outs of the wireless networks and at the same time not making payments for the construction.
Replacing the Wires with ‘Wireless’
While most people in America have a wireless phone, when they go home they don’t run to watch Netflix on their iPhone. The current plan has been in place for years; shut off the copper wires, claiming that they are unprofitable (which is not true), and push the retail consumer and business customers onto wireless service. And there are no longer any serious deployments of fiber to the home. The reasons are simple: a) it eliminates the unions required to fix and repair the retail wires b) there is no upgrade of the wires, and c) they can also charge customers per gigabit vs a wired broadband service, which is mostly still ‘unlimited’.
And, you can mislead customers that these wireless services are a substitute for the fiber-to-the-home service customers paid $4000-$7000 per household to have by now.
The Book of Broken Promises goes into all of the other financial shenanigans mentioned previously. It also covers how the FCC previously killed off most competition for wireline services, including the independent ISPs, among lots of other topics.
See Part II: It is Time to Take the FCC to Court.
To add insult to injury: When I mentioned ‘fake history’ in the opening, everything you have just read in this article has been ignored or rewritten by the FCC. At the same time, the Agency is erasing all consumer protections and removing any obligations to offer service, much less at fair and reasonable rates.
The FCC has a new Order for ‘business data services’; it never mentions that these wires are part of the state utility, so the companies are free to continually raise rates. The FCC is also erasing all of the ‘accounting’ rules to cover over the tracks that customers paid thousands extra for wires to the cell sites and other lines of business, and the FCC wants to allow the companies to shut off the copper without a reasonable substitute or even give any notification.
There will be no investigation as to why there are still copper wires or examining the accounting shell game, etc.
Finally, the Net Neutrality fight, which almost no one understands, really, is about something called Title II. The telcos and their minions claim that Title II harms investment. The Book of Broken Promises shows that the companies have been able to use Title II to have phone customers improperly fund the network investments for wireless, cable and all of the other services, over and over.
We can not let this fake history create harmful policies.
Click to download the Book of Broken Promises, learn more about the IRREGULATORS or to help us take the FCC to court.