The following is by Bruce Kushnick; 12/13/2017 04:54 am ET; Original article here.
On December 14th, 2017, the FCC will vote to shut down Net Neutrality. The decision has already been made; the vote will just be a formality. The Republican ‘FCC Gang of 3’ (Pai/O’Rielly/Carr) is now a voting block, which AT&T, Verizon, ALEC et al. put into place to remove nearly all federal regulation and obligations on the Telecommunications companies (phone, broadband, Internet, cable, wireless, etc.) companies and is preempting state laws to get this done.
Unfortunately, the FCC’s decision on Net Neutrality is only one of 15-20 different current FCC proceedings that are designed to all work together, which we dubbed the “Wheel of Mis-Fortune”. While Net Neutrality is a catchy phrase, it is more of a distraction; the real problems are much deeper and they have gotten far too little attention.
Sue the FCC; Break Up Verizon & AT&T
(Note: I will address the cable companies’ role in all of this in a future story.)
Our position is simple. We need to have a collective ‘Ah-Ha’ moment. America needs to need
- Restore properly functioning competitive markets
- Light up the fiber-optic networks for which we already paid
- Enforce the fiber optic installation contracts that the Telecomm firms and the FCC have conveniently ignored.
- Stop AT&T and Verizon Cross-Subsidies: these Telecom firms have been looting their Wireline Utility Networks to Cross-Subsidize construction and operations of their other subsidiaries, including Verizon Wireless and AT&T Mobility.
- Take back our rights as the public
Most people do not realize that there are separate State Telecommunications Utility entities, like Verizon-New York or AT&T-California, that have built both copper and fiber optic Wireline networks that cover most of each state. These Wireline networks — already in the ground and on the poles — are regulated by Title II of the Communications Act of 1934, which set up Telecom firms as Common Carriers, or in modern parlance: Incumbent Local Exchange Carriers (ILECs). ILECs are responsible for providing local telephone exchange services in specified geographic areas. ILECs hold regional monopolies on landline service and are joined in some markets by Competitive Local Exchange Carriers (CLECs).
Fast forward to today and you see that Verizon’s and AT&T’s respective corporate holding companies own and run many different business entities: some are Title II-regulated entities (the State ILECS) and others are not Title II-regulated: Wireless entities, Internet Service Provider (ISP) entities, and even content creation/distribution entities — all separate businesses that have been maneuvered into place to create market-choking monopoly power, resulting in poor service for many and high prices for all.
Here’s the problem: all of these entities not regulated by Title II have been using the Title II-regulated copper and fiber Wireline networks as a cash cow for these other separate companies and they have gamed the system to “encourage” the FCC and our elected officials to look the other way while they looted the State ILECs.
With the FCC’s assistance, Verizon and AT&T have contorted their accounting to force Title II-regulated Wireline customers to fund Verizon and AT&T other subsidiaries:
- ISP companies, such as Verizon Online
- Wireless companies, including Verizon Wireless and AT&T Mobility
- Verizon’s and AT&T’s cable TV business
- Verizon’s and AT&T’s ‘Business Data Services’
- Many other Verizon and AT&T lines of business
This is fraud. We need to stop all of this unfair vertical integration and concentration of monopoly power and break up both Verizon and AT&T into their wholly-separate constituent parts, each part with wholly-separate stocks and boards of directors. The new order would be:
- Verizon Wireline Utility Companies (the State ILECS)
- Verizon Wireless *
- Verizon Online (ISP Service) *
- Verizon Entertainment (video and Internet content) *
- AT&T Wireline Utility Companies (the State ILECs)
- AT&T Mobility *
- AT&T Online (ISP Service) *
- AT&T Entertainment (video and Internet content) *
* Unlike today, in the new order, each of these separate companies would compete with others and pay the Wireline Utilities fair, negotiated rates for the use the Wireline network.
Big Telecom’s Plans to Cross-Subsidize
Has Been In Place For Decades
Has Been In Place For Decades
Fran Shammo, Verizon’s former Executive Vice President and Chief Financial Officer stated at the Goldman Sachs Communacopia Conference on Sept. 20, 2012, that Verizon’s Wireline construction budgets have been charged for the construction of Verizon’s Wireless network.
“The fact of the matter is Wireline capital — and I won’t get the number but it’s pretty substantial — is being spent on the Wireline side of the house to support the Wireless growth. So the IP backbone, the data transmission, fiber to the cell, that is all on the Wireline books but it’s all being built for the Wireless Company.”
We Need to Separate the ISP Service from the Wireline Utility Network.
What’s Up With Your ISP?
Internet Service Providers or ISPs are not phone or cable companies. The ISP is a separate subsidiary that provides a connection to the Internet/World Wide Web and the service used to be offered by many separate competing companies.
In 2001, there were 9,335 ISPs in America handling the majority of the Internet traffic. The previous Republican FCC administrations helped to kill off these small, entrepreneurial companies and helped the phone and cable companies take over the business and subsume these displaced customers.
By 2007, about 7,000 wireline ISP companies had been put out of business, not by competition but by the government with the help of what are now Verizon and AT&T. In more rural areas, there has been a growth of wireless ISPs, WISPs, to bring broadband to customers where the ILECs failed to show up and ‘invest’.
Thus, this is not just simply about the flows of money but about the Telecom companies vertically integrating their businesses, combining the Title II-regulated copper and fiber Wireline networks they control with the separate services that depend on these Wireline networks — and they have gamed the FCC into doing the dirty work them.
If, however, the companies that control the wires or airwaves are separated from the ISP service, then and customers would have choices and the markets could function properly, again. Then, unlike today, if an ISP harms a customer, that customer could leave and go to another ISP.
The FCC Must Investigate:
Customers Paid Billions Per State for Upgrades
Via State-Price Caps and Other ‘Investment’ Incentives.
Customers Paid Billions Per State for Upgrades
Via State-Price Caps and Other ‘Investment’ Incentives.
The FCC, in every proceeding, including Net Neutrality, never discusses that the Wireline networks of the original State Public Utilities are important. In fact, the FCC has failed to discuss the fact that there were broadband plans in every state since the 1990’s.
- “The Book of Broken Promises: $400 Billion Broadband Scandal & Free the Net” documents, in detail, the plans of the utilities to be upgraded (as well as Net Neutrality, since its inception).
- By 2000, now-AT&T California was supposed to have 5.5 million homes and spend $16 billion on the build out. This never happened.
- By 2000, Verizon Massachusetts was to have 330,000 households completed. This never happened.
In each case, the State Commissions agreed to give the companies billions per state to do the work—in the form of rate increases and tax perks. The FCC must investigate, instead of aid and abet these crimes.
Title II Did Not Harm Investment. Period.
While the FCC quotes bogus pundit analyses that do not bother with actual facts from the Telecom companies and the State Utility Commissions, every comment made that Title II harms investments neglects the fact that Verizon, in every state, got the regulators to allow the company to declare the fiber as ‘Title II’.
Doing so allowed Verizon’s expenses to be dumped into each ‘State utility’ — enabling mass cross-subsidizing for nearly all of the buildout of FiOS and Verizon Wireless — by raising local phone rates.
We wrote a summary and filed a Petition with the FCC explaining how Title II is the investment machine on the state level and how the FCC has ignored basic facts about Title II.
In fact, in 2004-2006, Verizon went state-to-state and got the states to allow Verizon to claim that the fiber optic wires being put in for FiOS were part of the State Utility and that the construction budgets and staff of the state utilities would be building out the networks.
New York State allowed Verizon to charge local phone customers multiple rate increases for these build outs. The following is an excerpt from a Verizon NY cable franchise filing proving that Title II was the investment mechanism used for Fiber to the Premises (FTTP). This represents billions of dollars that customers paid via rate increases.
What this says is that in 2005, the NY State Utility Commission claimed that the fiber to the home, “FTTP”, was Title II, Common Carrier and was part of the existing networks — meaning that FiOS expenses for the fiber would be paid for via the state utility construction budgets.
Thousands of state documents for the other states all have similar language that directly contradict every statement made by co-opted consumer groups, astroturf and telco-shill, paid-off pundits, corporate-funded ‘think tanks’ or campaign-financed politicians, not to mention the American Legislative Exchange Council (ALEC) — which all claim that Title II harms investment. They are all wrong.
Verizon and AT&G have used “Title II” as the tool to do the following:
- Overcharge low income families, seniors, rural areas, small businesses, cities and schools for fiber optic upgrades that most will never get,
- Perpetrate illegal cross-subsidies from the Wireline division to construct the Wireless cell sites.
Keeping Title II in place and fixing the mess is the goal. The Telecom companies played the state commissions against the federal regulators, telling them different ‘facts’; this practice has been dubbed “Title Shopping” — i.e. get the best deal and hope no one notices that they gamed the regulatory system.
1. WE NEED TO GET THE MONEY BACK
We need to upgrade the State Utility Networks with fiber and reclaim the illegally spent Cross-Subsidy money to fund the Union-labor construction of the FTTP network (to each home and business).
The legacy copper wireline networks were never properly upgraded to fiber optics over the last two decades. Instead, the FCC majority (Pai/O’Rielly/Carr) plans to shut off the existing legacy copper wires and replace them with inferior wireless service with data speeds of only 10 Mbps down and 1 Mbps up — which is far slower than the FCC’s current definition of broadband: 25 Mbps down and 3 Mbps up. This is crazy, according to FCC Commissioners Mingon Clyburn and Jessica Rosenworcel (from 2:40:38 to 2:42:00 in this video), both who comprise the FCC minority.
Here is the catch: the FCC is only shutting off certain wires and hiding the fact that the majority of the wires, paid for via the State Public Utility customer rate increases, will be dedicated to Wireless, which will not have to consider public interests and benefits.
2. WE NEED TO TAKE THE FCC TO COURT
The FCC hasn’t audited its own cost accounting rules for 17 years and is now attempting to erase these rules — as a cover up.
At the core of the Telecomm cross-subsidy scheme is this:
- The FCC’s cost accounting rules set how costs are allocated— i.e. how much of the expenses are paid by which lines of business.
- The FCC set the rules to reflect the year 2000 in 2001 and has never audited it own rules since then.
- The accounting rules have become a shell game, making the State Utility networks pay 60% of almost all expenses, including Corporate Operations expenses, such as the lawyers, lobbyists and even the executive pay, while these other lines of business pay a fraction or nothing for most expenses, including construction.
- In 2017, the FCC voted, (even though the IRREGULATORS filed and objected), to extend the ‘freeze’ to keep the accounting rules to be based on the year 2000, and will revisit them in 2018.
If you hear about Chairman Pai weed-whacking the regulations, he is actually erasing all of the financials, known as the “Uniform System of Accounting” rules, the “USOA” – to cover up the cross-subsidies.
The State Utility Wireline networks have become cash cows for Verizon’s and AT&T’s other lines of business. Net Neutrality is just one of the many negative results from this.
If the Telecom companies can control the Wires and the services over these Wires and are looting the State Utilities to perpetuate a massive financial shell game, then we need to go after the money and the government agencies that are failing the public.
The IRREGULATORS and New Networks Institute documented these cross-subsidies in New York. Verizon NY is in the midst of a major settlement — based, in part, on our research and findings. Verizon is settling to stop the ongoing investigation of the poor condition of their copper networks and the massive cross-subsidies that unfairly benefit Verizon Wireless and Verizon’s other subsidiaries.
This, however, is only a small part of fixing this mess. Net Neutrality is important but is only a part of this picture of the corporate takeover of the FCC and our public policies.
It is now time to do the following fix this mess:
- Take on the FCC to get the urban, suburban and rural areas upgraded to fiber optic broadband, using the moneys already collected by Verizon and AT&T. No more government assistance for Verizon and AT&T are needed, just penalties — and payback — for systematically looting the State Utilities for decades.
- Open these Wireline networks to direct competition, and reclaim the monies that have been used to cross-subsidize the companies’ other lines of business — money that public paid over and over for a fiber optic future that we never got.
- Break up Verizon and AT&T to solve the Net Neutrality and Consumer Privacy problems, to reclaim the funds that will pay for the Title-II fiber upgrades, and to bring back competition, which will deliver lower rates.
Going forward with the FCC’s current plan condemns a large part of America to only a smart phone with 10Mbps down 1Mbps up and allows the Telecom and cable companies to track you, sell information about you, and charge you too much because there is no competition.
We broke up the original AT&T because it had monopoly power over America’s communications. Now we have a tight gang of companies that have taken over America’s communications and are wielding monopoly power, again. Repeat after me. It is time to: