Click for the FCC Numbers-Only Version of this Exhibit.
As I stare at the various pie charts and exhibits in the FCC’s latest report on broadband in America, “Internet Access Services: Status as of June 30, 2017”, published November 2018, only one thing comes to mind: Congress needs to investigate how this smoke and mirrors data is being used to create harmful public policies.
Back in March, 2011, I wrote about the FCC’s highly inaccurate National Broadband Map Database, where the companies listed did not offer service at my address or at the speeds listed.
Seven years later, and trying to reverse-engineer the number of broadband services, especially the accounting of the “Fiber to the Premises”, FTTP, here are a few startling long-term issues and new discoveries. In the industry, these are some of the dirty, little secrets.
· “All facilities-based broadband providers are required to file data with the FCC twice a year (Form 477) on where they offer Internet access service at speeds exceeding 200 kbps in at least one direction.
· “Fixed providers file lists of census blocks in which they can or do offer service to at least one location, with additional information about the service.
Please notice the words and phrases: “census blocks”, “200Kbps in at least one direction”, “they can” and “at least one location”. We will address them in a moment.
How Big Is One Census Block?
A census block is sort of like the area of a postal zip code. And it is directly tied to a specific geography with people living and working at specific locations. Sounds obvious until you examine how they count these locations.
“Block groups generally contain between 600 and 3,000 people, with an optimum size of 1,500 people… Each census tract contains at least one block group, and block groups are uniquely numbered within the census tract. A block group is the smallest geographical unit for which the census publishes sample data.”
Smoke & Mirror Competition
The FCC and phone companies claim that there is competition and yet, this next FCC caveat about this data tells us that while the database may show a competitor, you, the customer, may never be able to get service from them.
Some of the most hated companies in America are the ISPs, wireless and cable companies, which include AT&T, Verizon, Comcast, and Charter (Spectrum). However, in 2018 America also has the distinction of having the most expensive, excessive wireless gigabyte prices in the world.
In fact, with the made-up fees and surcharges (that are revenues to the companies or taxes on the companies that are passed through to you) the price of almost all communications services in America continues to rise, even though the FCC claims that there is competition.
At the same time, a new study by the US Census shows that there are large areas of the US, both rural areas as well as inner cities, that have not been properly counted and they don’t have basic broadband-internet services at reasonable rates, creating a much larger amount of people and businesses impacted. Known as the “Digital Divide”, the FCC’s own broadband internet data has been proven to inflate the speed and coverage, covering up the extent of the harms.
This is because the FCC, the Agency that is supposed to be protecting our interests, has been captured by AT&T and Verizon. The Chairman, Ajit Pai, is a former senior Verizon attorney.
Does anyone think that this situation is going to get better under this buffoon’s co-opted guidance? He is aided and abetted by his former staffer and now Commissioner Brendan Carr. While at Wiley Rein, Carr worked as an attorney for Verizon, AT&T, as well as the CTIA, the wireless association. In fact, he was part of the legal team that sued the City of San Francisco over wireless issues — as a first amendment right of the wireless carriers; AT&T and Verizon control the wireless association.
It gets worse. In 2018, Carr introduced the FCC’s new 5G wireless regulations, claiming it would fix the Digital Divide, but all it does is to preempt the cities and states’ rights over wireless deployment in their own towns. These regulations appear to be a copy of ‘model legislation’ created by ALEC, the American Legislative Exchange Council (which was most likely funded by AT&T and Verizon) — Carr’s conflicts and ties to his former clients needs immediate investigations. Read More….
New Networks Institute (NNI) & the IRREGULATORS— just helped to get Verizon to install 10,000 fiber optic lines in Verizon New York’s unserved areas as well as get the needed repairs for the copper networks. — We estimate this to be about $300 million to $1/2 billion dollars over time.
Our research and calls for an investigation started in 2010, and our reports, filings and analytical approach helped to initiate and was used in the investigation.
We are mentioned in the decision and will be taking next steps on this as we filed to block this settlement agreement —it left out billions in cross-subsidies and customer overcharging.
We congratulate Communications Workers of America (CWA) and PULP, Public Utility Law Project, for their dogged persistence and putting our research and analysis to good use.
Press release -- https://on.ny.gov/2L1NccN
"PSC Approves Verizon Service Quality Improvement Plan — Telecommunications Company Agrees to Expand Broadband Service to 32,000 Customers, Helping to
Fulfill Governor Cuomo’s Goal to Expand Broadband Service in New York; Make Much-Needed Repairs to Existing Copper Service; Remove Unused Telephone Poles to Improve Safety —
Settlement --https://on.ny.gov/2mnE8QY
"The Commission declines to follow New Networks Institute’s recommendations to reject the JP, continue investigating
Verizon’s financial practices, and require that wireline customers be reimbursed for the alleged improper cross-subsidization
of Verizon’s wireless affiliates. The Commission’s primary objectives in this proceeding were to investigate and evaluate
the quality of service Verizon is providing to its customers (Core and non-Core).
More particularly, this proceeding was commenced when changing circumstances called into question the Commission’s premise for
continuing Verizon’s service quality focus on Core customers. The Commission was concerned by Verizon’s announced plans to stop
expanding its fiber network beyond areas currently served. The Commission also pointed to data indicating fewer customers were leaving
Verizon’s networks.
Given these indications, and the fact that more than 2 million of Verizon’s current customers remain reliant on an aging copper network,
the Commission decided to examine whether changes to Verizon’s service quality oversight are necessary. The Commission recognized that this
investigation would inherently include an examination as to the state of the copper system and whether Verizon’s investment in its network has
been sufficient to provide adequate levels of service to consumers on regulated services. But, the Commission did not state any intention to
revisit rate-of-return regulation. The Commission did recognize an expectation that the Company will continue to invest in its New York regulated operations
as the Public Service Law unequivocally requires Verizon to provide adequate service. The Commission also made it clear
that it would take the necessary action under the Public Service Law to address shortcomings if the market fails
to provide Verizon an appropriate incentive to meet its statutory obligations. That said, the Commission has broad authority under the
Public Service Law to initiate further investigations if the circumstances so warrant.
The Commission focus has long been on ensuring compliance with minimum standards of service quality for customers lacking competitive
choice. The Commission has previously investigated claims that Verizon has not been adequately investing in its copper network. In that
context, the Commission has acknowledged that, in response to technological advances, the telecommunications landscape has changed
dramatically. The Commission has also recognized that, in evaluating Verizon’s performance, it must consider the extent to which investment in the legacy
copper network would be cost effective when that network is becoming competitively and technologically obsolete.
The terms of the JP will implement specific improvements in Verizon’s system that will directly improve the
service quality deficiencies that led to the commencement of this proceeding. In light of all this, we disagree with New
Network’s recommendation to reject the Joint Proposal. The terms of the JP should result in service quality improvements
that promote the public interest. Moreover, with regard to other commenters’ complaints about Verizon’s maintenance of its copper network and being forced onto more expensive
wireless and fiber networks, the Commission notes that Verizon is required to offer its tariff services and tariffed-based rates regardless of the type of network delivering the telephone call.
Notwithstanding the foregoing, the Commission has long recognized the benefits and resiliency of the fiber network over the older vintage copper network a
nd we note here that the JP will further that goal.
Finally, in the Commission’s Initiating Order, we raised the question of whether “Verizon’s service quality processes and programs pertaining
to all the Company’s regulated customers” are sufficient “to determine if modification of Verizon’s revised SQIP is warranted.”
In light of the JP’s terms and conditions being approved herein, the Commission does not believe any changes are required at this time.
However, as
AT&T, Verizon, Comcast and Charter Got $58.8 Billion in Tax Benefits: We Want Lower Rates — Now!
Here is a chart you might want to start screaming about. Prices are no longer just and reasonable. There is no effort being made to lower prices, even though just these four companies, AT&T, Verizon, Comcast and Charter (Spectrum) garnered $58.8 billion in tax benefits.
The “2016” and “2017” columns supply the “net income” as of the end of December 2017 and they include the “earnings per share”, “EPS”. The next columns are the increases from 2016 to 2017 and the “tax benefit” column is what the companies are reporting. For example, AT&T’s 4th Quarter result had the net income rise from $2.4 billion to $19 billion, and the total tax benefit was $20 billion while the diluted earnings per share went from $.39 to $3.08, increases of about 690%.
NOTE: We still have to wait for the companies to put out their annual reports as there can be differences. And some companies, like Centurylink, (the incumbent phone company for western states like Wyoming, Colorado and North Dakota, still hadn’t posted their 4th quarter results as of this writing.) Also, the earnings per share and other factors will vary based on the number of available stock shares, number of shareholders, etc.)
Historically, when an incumbent telecommunications company had a major financial windfall, the regulators would make sure that prices would be lowered, especially when there is little competition to lower them. In fact, in New York, Verizon was granted major rate increases of basic phone service starting in 2005, in part because the company was reporting major losses.
But there are no plans to ‘lower rates’ here. The FCC, of course, doesn’t care to lower cable TV, broadband, internet, or phone prices on their friends, the phone and cable companies — commonly called “ISPS”.
Yet, based on the companies’ financials, the changes in the tax laws for just these 4 companies helped to deliver a mind-boggling tax benefit of $58.8 billion dollars. Maybe if this new found cash was to be used for something useful, like building out infrastructure or bringing in serious competition to lower prices, then these windfall profits could be justified.
But this is not the case. The money appears to be going mostly to shareholders with massive earnings per share benefits — i.e.; take the money and run. And wouldn’t you know it, those who benefit the most are the largest shareholders — the management of Verizon, AT&T, et al.
AT&T Claims 2017 has been a Remarkable Year because of the “Major Policy Achievements”.
America’s consumers and businesses are under attack, not only from outrageous tax breaks to already rich corporations, commonly known as the so-called ISPs, but they are being doubly assisted by the FCC.
And AT&T et al. are, of course, laughing all the way to the bank due to the current Trump and FCC tax and regulatory policies.
Randall Stephenson, AT&T’s CEO, told investors in the company’s 4th Quarter 2017 earnings presentation — it’s a remarkable year because of the “major policy achievements”.
“I just want to take a moment and reflect on 2017 because by any measure, 2017 was a remarkable year. It’s remarkable for our country, for our industry where we operate, and for AT&T. And it’s been a long time since we’ve seen so many, what I would call, major public policy achievements compressed into a single year like we saw last year. And we’re calling these achievements because the combined impact from these is going to be growth. It’s going to be growth in U. S. investment and jobs and in wages. And all of this began early in 2017, as regulations across all industries were being rationalized.”
“We need a long-term predictability on the rules of the Internet and on customer privacy. So, we’re calling for an Internet Bill of Rights and you can expect us to take a leadership role on this as the discussion progresses.”
As we pointed out, in a single year, the FCC decided to make massive changes, which are part of a wish list created by AT&T.
§ Get rid of Net Neutrality
§ Get rid of basic privacy laws
§ Help to kill off competition
§ Help to close down the existing copper infrastructure, even in areas where there are no substitutes.
§ Force-march customers onto wireless service
§ Privatize publicly funded infrastructure.
We call this litany of regulatory mayhem “The Wheel of Misfortune”. And the idea that AT&T wants an “Internet Bill of Rights” is ludicrous. One has to remember that the FCC named the removal of Net Neutrality the “Restoring Internet Freedom Order”.
In fact, Trump has decided to make the FCC a toxic waste dump by having telco and cable company consultants lead the transition team. Trump then appointed former Verizon attorney Ajit Pai to be chairman, and Brendan Carr was made a commissioner; he is a former lawyer at Wiley Rein, who worked for Verizon, AT&T, and the wireless association, CTIA and the phone association, USTA, for years.
Verizon Benefits from All of this are Also Worth Noting.
Talk about financial gifts, Verizon writes that it had a $16.8 billion dollar, one-time earnings increase — and instead of actually building out areas with fiber optics that were neglected, the company has decided to give the money to the shareholders, with an additional $4.10 per share.
“As Verizon noted in an 8-K filing on Jan. 17, the federal Tax Cuts and Jobs Act also resulted in a one-time, after-tax increase to earnings provisionally estimated to be approximately $16.8 billion, or $4.10 per share. This is primarily related to the re-measurement of the company’s net deferred tax liabilities at the new corporate income tax rate.
“The cumulative net impact from these items, after tax, was approximately $15.2 billion, or $3.71 per share, in fourth-quarter 2017.
I note that elsewhere, according to Verizon, this increase was $4.56 in earnings per share (EPS), compared with $1.10 in 4Q 2016–315% more.
Verizon is also adding $100 million to the Verizon Foundation, from the current $200 million to $300 million over the next two years — which, as we documented, has been used as a slush fund to give to politicians in their districts for pet projects.
But who is the largest beneficiary of this largesse? Well, Chairman Lowell McAdam who had 1.5 million shares of stock in 2016 (the last published accounting) so this tax benefit per share will make him an additional $6.1 million. Who knows what else is in the convoluted executive pay schemes which will be listed in the Verizon 2017 annual proxy statements.
The Net Neutrality Decision Claims that “Title II Harms Investment”. This Conclusion is Based on Manipulated Data
These year-end financial reports also highlight something else: The FCC has been manipulating the story that Title II harms investment.
This is Comcast’s capital expenditures for 2015–2017.
“Capital Expenditures
Our most significant recurring investing activity has been capital expenditures in our Cable Communications segment, and we expect that this will continue in the future. The table below summarizes the capital expenditures we incurred in our Cable Communications segment in 2017, 2016 and 2015.”
This shows that there were only increases in the total from 2015 through 2017, from $7 billion to $7.9 billion. Where’s the ‘impact’ of Title II?
And this is Verizon’s overall capital expenditures. The numbers are going up, not down as well.
These ‘overall’ numbers directly contradict the FCC’s claims. The FCC quotes multiple garbage-pail analyses, such as Hal Singer’s Broadband survey, which takes the entire holding companies’ capital expenditures of Verizon, AT&T and Comcast, then calls all of these “ISP” investments.
“91. Comparisons of ISP investment before and after the Title II Order suggest that reclassification has discouraged investment. Performing such a comparison, economist Hal Singer concluded that ISP investment by major ISPs fell by 5.6 percent between 2014 and 2016.
“Singer attempted to account for a few significant factors unrelated to Title II that might affect investment, by subtracting some investments that are clearly not affected by the regulatory change (such as the accounting treatment of Sprint’s telephone handsets, AT&T’s investments in Mexico, and DirecTV investments following its acquisition by AT&T in the middle of this period).”
The problem with this approach, as we mentioned elsewhere, is that these numbers are ‘loaded’ as they represent the entire Verizon holding company. Verizon had investments of 5% or more in 471 companies in 2016 and no break outs of the use in these garbage pail numbers that include ‘capitalized software’.
And Singer manipulates the details of AT&T’s numbers as well, which gooses the entire calculation to show a larger decline. As we just showed, Comcast had increases every year and Verizon’s overall capx also increased.
But, as we pointed out elsewhere, using the base holding companies’ capx total are useless — and there are better data, which we presented, based on state broadband expenditures that the FCC ignored.
We bring this up because what we have is an out of control FCC that is helping to feed the telco-cable gluttony by manipulating the basic data about construction expenditures to create harmful public policies, like getting rid of Net Neutrality.
Next Step: Lower Prices Immediately.
Then we have Charter, which includes Spectrum, formerly Time Warner Cable.
Let’s examine why America should be getting rate reductions immediately.
Charter had a $9.3 billion tax benefit gift, and its net income increased 2048% from $454 million to $9.6 billion and the earnings per share went up 2247%.
But this will have no impact on lowering rates.
Here’s what Charter writes about its taxes, fees and charges:
“A special note regarding phone taxes: Government agencies have found phone bills to be an effective way to assess and collect taxes because most people receive one. Those taxes may subsidize various services at the federal, state and local levels (e.g., emergency services, telecommunications services for schools, libraries, health care facilities, etc.). Charter and other companies offering phone service collect the required taxes as part of the total phone bill and send the appropriate amounts back to the taxing agency.
Unfortunately, most of this is deceptive. The charges below, like the “Broadcast TV Surcharge” or the “Business License Fee” are NOT government agency taxes, but made up fees or are charges on the company that they pass through.
Fees / Surcharges
Broadcast TV Surcharge “Federal law allows local U.S. broadcast television stations (i.e. affiliates of networks such as CBS, NBC, ABC, Fox, etc.) to negotiate with cable and satellite providers in order to obtain “consent” to carry their broadcast signals (Cable Television Consumer Protection and Competition Act of 1992).
Business License Fee “This is a fee or tax assessed on Charter for doing business in your state or locality”.
And some of these are downright despicable and should be removed immediately, regardless of anything else — Secure Connection Fee? Really?
“Secure Connection Fee
“Charter devotes considerable resources to the development and implementation of measures designed to ensure that the connection between a Spectrum receiver (or any other authorized device) and the Spectrum network is secure and that subscribers receive through the connection all of the services they are lawfully authorized to receive.”
REFUNDS AND LOWER PRICES DEMANDED — $20-$40 PER MONTH.
If Charter got an additional $9.3 billion in tax benefit, how come this nickel, dime and quartering of customers with questionable charges is not on the table to be removed, or have these tax benefits used to lower the overall costs to customers for all services?
Here’s What We Suggest:
Charter had about 25.6 million residential customers who get cable, internet, broadband or voice and some combination.
This comes to $363 dollars extra per customer in this benefit, with caveats.
Why shouldn’t we split the difference and get $181.50 back in lower rates — isn’t that reasonable? With an average of $107.00 per month (as different customers have different services and bundles), then there should be a $15.00 decrease, about 14% across the board.
But these per month revenues does not appear to include all of these extra charges, many bogus, and thus this average quoted in the 4th Quarter 2017 report has little reflection on the total bill.
“Monthly residential revenue per residential customer is calculated as total residential video, Internet and voice annual revenue divided by twelve divided by average residential customer relationships during the respective year.”
NOTE: Thus, there is an additional $10.00-$25.00 a month that may also need to be eliminated. Charter never discloses the total actual average charges on bills that a customer pays per month.
Thus, adding the made up fees and surcharges, of the $117-$132.00 a month, we should have a drop of $25-$40.00 a month — not counting the reduction in actual taxes being applied to all of these costs.
And this is just Charter. Comcast, Verizon and AT&T should also be lowering rates 15%-30% and getting rid of all of these made up fees.
Where’s the FCC’s analysis to lower rates? Where’s the FCC’s discussion of bringing in direct competition to lower rates?
Here’s a list of Charter Fees/Surcharges (if charged) — from their web site.
Comment 1: is 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 of the current proceeding and Verizon settlement, as published in tbe Huffington Post: Verizon NY in Multi-Billion Dollar Settlement Tangle, Underway in NY State.
Comment 3:: is a full analysis of the Verizon NY’s 2016 Annual Report Verizon NY 2016 Annual Report: Follow the Money: Financial Analysis and Implications
On May 24th, 2017, the IRREGULATORS filed comments with the FCC and the Federal State Joint Board on Jurisdictional Separations.
IRREGULATORS:
We recognize that the Commission has chosen to deregulate the so-called Price Cap Carriers such that to the limited extent that they are subject to rate regulation, it is via a price cap mechanism, not the traditional Uniform System of Accounts. Hence only the Rate of Return Carriers are directly subject to the separations mechanism for the computation of their interstate rates. However, even in the case of the Price Cap Carriers, Separations is a joint federal-state matter, and the freeze imposed by the Commission directly impacted state rates and, even more importantly, policies. Fictitious accounting leads to bad decision-making. Hence the costs of more accurate separations are not an undue burden. Rate of Return Carriers already are required to provide detailed regulatory accounting in order to determine their appropriate rate and subsidization levels. Price Cap Carriers, especially the Bells (including their successors-in-interest) are large companies with ample accounting resources. Thus, the issues we raise are not moot, even when dealing with the largest carriers.
The Federal State Joint Board has asked:
Re: Federal State Joint Board on Jurisdictional Separations Seeks to Refresh Record on Issues Related to Jurisdictional Separations, FCC 17J-1
Re: Federal State Joint Board on Separations Seeks Comment on Referral for Recommendations of Rule Changes to Part 36 as a Result of Commission Revisions to Part 32 Accounting Rules, FCC 17J-2
“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.)
Here’s What Actually Happened (For details, download the book.)
I believe that the potted plants, as shown in the picture above, are not a substitute for the two FCC commissioners that are missing from this picture and should be helping to add balance to the lopsided reign of terror currently underway. While three FCC commissioners legally constitutes a quorum, I’d trust the votes of the potted plants, (Dieffenbachia, I believe) over this group.
There are supposed to be 5, I repeat, 5 commissioners at the FCC. There are now only 3, with only 1 person, Chairman Ajit Pai, a former Verizon attorney, calling the shots. (More likely, there is undue influence from the Executive branch making decisions to remove basic privacy rights and coming up— to trash Net Neutrality.)
On April 20th, 2017 the FCC is going to have a meeting and it is going to be a consumer and competitor bloodbath. The FCC has already put forth their proposed rules in multiple areas, including the “IP Transition”, to the hotly contested “Broadband Data Services”. But, the overall plan is to remove all regulations and obligations on the incumbent phone utility companies: AT&T, Verizon and Centurylink. (You didn’t know that they are still ‘utilities’?)
In short, this is an all out assault on the public interest. And I’ll come back to what’s about to happen in a moment.
Just to recap, the new FCC Chairman, Ajit Pai, has taken control of the FCC with the help of his other Republican Commissioner, Michael O’Rielly. This has left a vacuum and a guarantee that there will be no serious discussion of any FCC decision because there is one Democrat, Mignon Clyburn, and she is not a lawyer. There was initially some lip service to have a former Dem Commissioner, Jessica Rosenworcel return, but that would have created, well, a stalemate with 2 Dems and 2 Republicans.
