California Broadband Comments

California; Halt the AT&T Cross-Subsidies: Solve the Digital Divide with Fiber.

  • California Governor Newsom has called for developing an “Action” plan in order to solve the Digital Divide by upgrading all of California to broadband capable of 100mbps download speed at affordable prices.
    • A separate group, the California Broadband Council, has been collecting comments about the Newsom plan. .
    • The California Public Utility Commission (CAPUC) has a proceeding for input into the Newsom plan.
    • The IRREGULATORS filed Comments about the Newsom plan with CAPUC.
    • The IRREGULATORS also filed with  the CA Broadband Council, calling for audits and a halt to the billions in cross-subsides.  
  • At the same time, the California Public Utility Commission under President Batjer has been questioning AT&T for eliminating “DSL Service”  which will impact over 1.5 million customers who have few if any other options for broadband. And they point to the fact that AT&T has been ‘disinvesting’ in the networks instead of upgrades, especially to fiber optics.

SUMMARY

In order to solve the Digital Divide by upgrading all of California to broadband capable of 100mbps download speed at affordable prices, as proposed by Governor Newsom, the State must address certain fundamental issues.

While we applaud comments from others, our reply lays out a critical new path that focuses on halting billions of dollars in cross-subsidies from AT&T’s state based public telecommunications utility, AT&T California, and the AT&T subsidiaries. This overcharging should be immediately redirected to fund the deployment of very high speed fiber optic services to all citizens of California at affordable rates.

By the end of 2000, Pacific Bell (AT&T California) claimed it would have 5.5 million households wired with fiber optics and spend $16 billion dollars. This is an excerpt from the Pacific Telesis 1994 Fact Book, detailing the deployment schedule. It was never built.

As explained, herein, the graphic at the opening represents what happened the last 2 decades. AT&T has been dismantling the public state telecom utility by using manipulated FCC accounting formulas. Based on other states, we believe AT&T cross-subsidized the other lines of business, making the state utility a ‘cash machine’. Instead of upgrading the networks to fiber optics, it was able to take the construction budgets and shift them to the other lines of business including wireless, while adding other corporate expenses. There have been no audits or investigations of the flows of money in California for at least 15 years.

The Issues that Need to be Investigated and Actions Taken

First, we believe there is massive cross-subsidizing leading to overcharging of the wired networks by AT&T, costing consumers $1.7–2.4 billion annually and that this money can be redirected to fund fiber optic broadband to all, not at 100 Mbps speed for downloads but 1Gbps in both directions, as well lower dramatically lower rates on all communications.

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Our analysis is based on the Verizon New York 2019 Annual Report and previous reports. Both California and New York use the same FCC accounting rules and thus the same formulas for allocating expenses, known as the “USOA”, Uniform System of Accounting, or sometimes called “ARMIS”.

Second, California needs to not just investigate but to take action to halt these cross-subsidies and use the new-found funding to fix the Digital Divide once and for all. There should be enough to upgrade all areas of the AT&T territory with fiber optics.

As stated in the 2013 Annual Digital Infrastructure and Video Competition Act of 2006 DIVCA Report, (we summarize):

  • The California PUC has not investigated AT&T’s cross-subsidization of services, even when the Office of Ratepayer Advocates (ORA) raised the matter years ago. The Commission claimed that the FCC’s accounting, known as ARMIS data, did not include data to determine if there were violations,