Want to know why there is a Digital Divide or how to fund a fiber optic-to the-home future, even in rural areas, without government subsidies and handouts?
Verizon NY is NY State’s (which includes NY City) primary public telecommunications utility, just like other state-based utilities, such as water, gas or electric. We will be referencing the excerpt above, taken directly from page 25. (It has been simplified for this discussion, but nothing was changed.)
We estimate that Verizon NY Local Service was overcharged an estimated $1.1-$1.6 billion, in just 2019, for just three expense items; Construction & Maintenance, Corporate Operations expenses and Marketing. (This is the low number.) Nationwide, this equates to Local Service being overcharged in America an estimated $16-$23 billion in just 2019.
We will go through our calculations based on this Verizon NY 2019 Annual Report and the previous 5 years, as well as using this as a model for the rest of America.
Follow the Money: The Basics in the Era of the Pandemic
First, virtually no one knows that there are still state telecommunications utilities in every state and virtually no one has actually examined the financial books — the revenues and expenses. Yet, it is now more critical and relevant than ever because the pandemic has exposed that there are massive holes in broadband deployment, mostly impacting low income urban areas as well as rural areas.
Moreover, these networks are not just the legacy copper wires, but also include almost all of Verizon’s fiber optic wires, such as the Fiber to the Premises, FTTP, wires used for FiOS, as well as the fiber going to the cell sites or to the ATM machines.
But, also unknown is the fact that over the last decade, these public telecom utilities have been and are continuing to be dismantled — and it has been done through the manipulation of the FCC’s cost accounting rules. These federal accounting formulas have been applied to the state utility financials and were supposed to divide up the costs to the different lines of business fairly to protect the utility phone customers. Instead, they now make the entire wired infrastructure of America appear unprofitable by diverting the majority of expenses into one category—basic wired local service.
More surprising, New York appears to be the only state that still requires and makes public the state-based incumbent telecommunications utility financials. The last available data from the FCC for America was for the year 2007.
Putting this Report and Next Steps in Context
Unfortunately, Verizon has been slowly removing (“redacting”) information from these financial reports. The IRREGULATORS and New Networks Institute filed to block this removal of basic information and we are now calling for investigations.
- On March 13th, 2020, IRREGULATORS v FCC, was a win for the American public. The IRREGULATORS had filed since 2015 to have the FCC fix their accounting or acknowledge, in writing, that they do not apply – or that there were no other ‘strings attached’. The DC Court of Appeals made it clear that the states are now independent to devise a new set of accounting requirements and not use the FCC’s formulas.
- On June 8th, 2020, Verizon also filed a Motion with the NY Public Service Commission to hide, (they call it ‘redact’), basic financial and business data.
- On June 30th, 2020, the IRREGULATORS filed comments to block Verizon NY’s Motion and are now calling for investigations.
We summarized our filing and detailed what was redacted and why it matters:
- Why are the IRREGULATORS Calling for Investigations? Halting cross-subsidies can supply the billions of dollars to close the Digital Divide.
- What Is Verizon Afraid of? REDACTED XXX Opens Pandora’s Box. What was ‘redacted’ — and what we are asking for.
The 5G Wireless & WiFi Knee-Jerk Reaction: The immediacy of solving the newly-exposed Digital Divide — and the uncertain future of families being stuck at home — has now generated knee-jerk reactions to roll out wireless and WiFi even though these statements never mention or examine that wireless requires fiber optic wires and it is not profitable once the costs of the fiber optic wires required for these services are incorporated; it is like giving a heart attack patient some aspirin and a band-aid, vs fixing the underlying problems. But the subplot has been that Verizon et al. have been force-feeding wireless because it makes them more money, not because it is better for the communities they serve.
READ THE REST ONLINE
1) Summary: The State Telecommunications Utility Financial Reports