You might want to read one of the trilogy of books we wrote on the subject, the first published in 1998, the latest published in 2015, or the collection of research reports we published as New Networks and now the IRREGULATORS, our consortium of lawyers, forensic auditors and other analysts,
the last book,
http://irregulators.org/wp-content/uploads/2017/05/BookofBro...
and our library of research
http://irregulators.org/our-work-reports-filings/
Moreover, the books and research not only use the expertise of our gang (or which some of us have been working together for a few decades) but, we quote primary research, such as annual reports, state and federal filings by AT&T et al, etc, much of which are hidden in plain sight, such as the Verizon NY 2019 Annual Report, which is the financial report of the primary telecommunications state-based public utility-- and ironically most reading this don't even know that there are still state public utilities left.
http://irregulators.org/wp-content/uploads/2020/06/Verizonny...
The $200 billion broadband scandal was published in 2005 and that was based on examining the state-based commitments for fiber upgrades and the changes in state laws that gave the companies billions per state to do the upgraded-- i.e., rate increases and tax breaks.
The most recent work uncovered that the accounting has been manipulated in the utilities and caused the networks to appear unprofitable --- and we're preparing to take legal actions in multiple states-- it's about $20 billion annually in the US. https://bit.ly/3mQUWgf
As a former senior telecom analyst to the telcos 1982-1994--we knew were the skeletons were buried...so, we didn't just 'wing it', and the books detail our claims. So while others may follow in our footsteps... we've been at this for decades with actual documentation to substantiate our work. to see the latest, I post at medium.
See Rayiner's link upthread, to a thread several years ago that quotes your analysis directly and, to my mind, pretty convincingly refutes it.
My point on this thread is simply to remind people that we already knew going into the discussion that you believe there was a $200 billion broadband scandal. Since the point of the thread itself is to debate whether that's true, simply restating your premise doesn't move the discussion forward.
What would be neat is if you could click through Rayiner's thread, read it, and then rebut that.
>The ISP's never got "$200 billion" in the 1990's. That's a total made up number, based on taking what ISP profits would >have been had they been regulated as a utility, and calling everything over that "money given to ISPs."
>The premise of deregulation was that it would lead to increased infrastructure spending. And it has: the late 1990's and >the 2000's saw massive investment into cable and wireless. People assumed at the time the money would go into fiber, but >demand exploded in wireless so investment went there instead.
let's start with this-- The reference to ISPs. In the 1990's, the largest group of Internet service providers was not the incumbent phone companies, but entrepreneurs-- by 2001 there were 9335 independent ISPs and they handled the majority of the traffic-- it was only after 2004-2005, when the FCC killed the right of competitors to use the copper wires for line sharing did this definition change-- and what is now AT&T (then SBC) stole the business from the ISP.
Second, I never said anything about ISPs -- as, well, I was a research analyst for the competitors-- the ISP associations, like the Texas ISP association, TISPA, or CISPA, or the Competitor associations like ALTS or Comptel. And we filed to protect the ISPs from the harms caused by those who controlled the wires. We filed at the FCC, we were working with Congressmen Nadler to create the "Broadband Bill of Rights" and created a small ISP summit with the Small Business Administration -- Read our impact study.
Let me address this quote--its hard to know where to start. In 1991, when the info highway was proposed by the Clinton-Gore ticket, the telephone companies were still state utilities, controlled by holding companies. They were regulated, and the profits were regulated. They received alternative regulations in almost every state from 1992-1995. -- i.e., PA, CA, IA, OH, NY, NJ, KY, TN-- all had primary state-based public utilities and all had state laws changed.
And the investments were supposed to replace the existing copper wire with fiber. And laws were changed to pay for these fiber build outs. And phone rates went up, and profits went up, but virtually nothing was built; and there were others besides us tracking the amount of money collected for these utility networks. They were NOT free market companies but utilities, like water, gas, electric or roads---
So, Pacific bell (CA) claimed it would spend $16 billion and have 5.5 million households done by 2000
All of Verizon NJ. 100% was to be done by 2010-- with fiber capable of 45 mbps in both directions, starting in 1996,
All of CT was to be done by SNET, and spend 4.4 billion -- completed by 2007.
And cable? Wireless? They were and separate subsidiaries and it is illegal to subsidize these other lines of business out of the state utility budgets--it is known as 'cross-subsidies'.
Since I was actually a consultant to the companies when all of this was going down... I had a front row seat.
Think of this as a highway plan-- you pay a contractor to build a highway and they charge the state billions, which in turn turns into additional taxes... here, the local rates and other charges were applied to customer bills as prices should have went down when there were staff cuts.
Where did the money go? As documented, they lost over $16 billion as a group overseas, and they wanted to go into the long distance market-- which was separate, but was very profitable
So, according to this, the companies were ISPS and not utilities, wrong. They were allowed to cross-subsidize all lines of business-- wrong, and there were no commitments to build out the fiber as part of these utilities-- wrong.
And might as well finish this:
1) That the internet and mobile booms are unrelated to deregulation and should not be factored into the analysis. Of course, that's ludicrous.
2) providers of the infrastructure underlying those boom industries to depreciate infrastructure and invest in new infrastructure faster than before?
The book is about the wired infrastructure of the state utilities -- a fact that the commentor appears to not understand, and the 'deregulation' that was granted was based on the utilities who control the wired infrastucture to not lie to the public and not charge them for other lines of business that are supposed to be paid for by INVESTORS, not the utility customers.
Ironically, most of the wireless networks were subsidized, which shouldn't have occurred because, well, starting in 2010, the telcos started to divert the funding to wireless -- not legal in most states, to fund wireless, instead of upgrading the cities and rural areas. -- See, utilities are based on serving the territory they cover... So, Verizon and AT&T took billions and moved them to these other lines of business but then left the copper to deteriorate and not upgraded to fiber..
And that is 'ludicrous that the critic doesn't understand telecommunications laws, or even examined the details of the financials for the state utilities -- or the consequences that occurred.
The internet occurred because we, and others, spent years get the Telecom Act passed so that the small ISPs could do what they did.
2) That 1970's-style rate-regulation doesn't have an adverse impact on capital investment.
More crap. the investment under this "1970's" regulation, not referred to as "Title II", and the manipulation of the accounting was used to allow the companies' other lines of business to cross-subsidize and not build out the states with fiber and not even maintain the networks, especially in rural areas.
We wrote an entire report on the current Verizon NY 2019 Annual Report financials and cross-subsidies
I'll be glad to answer questions-- but it's not 200 billion... counting the cross-subsidies we uncovered over the last decade, it's over 1.1 trillion; The overcharging from changes in state laws which were based on commitmenets not met since 1993 is eclipsed by the massive cross-subsidy scheme underway playing out, today in the state utilities -- and yes, PA, CO, CA, NY, MA, all have primary state public utilities... like AT&T California or Verizon MA
Thank you for this comment. You haven't sold me, but I'm sure you've sold other people reading this thread. I read your two cites as well. I have two small points in response.
First: I ran tech operations (as employee #2) at what became Chicago's most popular independent ISP, in the mid-to-late 1990s, and had a similar "front row seat" to that sector. And I'll say right now that the claim that "deregulation killed the independent ISP" does not at all ring true. Economies of scale is part of it, but so was consolidated billing, coax Internet, "triple play" packages, and wireless. Also, the market just consolidated; even among the indie ISPs, by the end of the 90s, everyone was doing roll-ups.
Further, while I loved my time in independent ISPs, I'm confident that as a consumer, I'm far better served by AT&T than I was by any independent ISP I've used. My service is faster, more reliable, less expensive, and simpler than it was in the '90s in Chicago and San Francisco, or the early 2000s in Ann Arbor. Honestly: even Comcast did a better job than most of the indie ISPs I used.
Second, while the additional detail you've provided here is interesting, you really haven't engaged Rayiner's central argument, which is that however many billions of dollars you're saying telcos were "given" to build fiber, you're just counting dollars in their prices that you think are unreasonable. Which is not what people people on HN typically mean when they cite this "200 billion dollar scandal".
> >"deregulation killed the independent ISP" does not at all ring true. Economies of scale is part of it, but so >was consolidated billing, coax Internet, "triple play" packages, and wireless. Also, the market just >consolidated; even among the indie ISPs, by the end of the 90s, everyone was doing roll-ups.
We were the survey firm and did the analysis for multiple ISP associations, and we worked with the indie ISPs and CLECs, as well as with Small Business Administration's Office of Adovcacy. In the 1990's, at least, there was no triple play. the cable companies had not offered voice, or even broadband with any seriousness. AT&T was an indie and started bundling local and long distance, and wireless wasn't even on the radar as a broadband service.
And we filed complaints with the FCC, AG and state commissions because about 40% of the orders placed by an independent didn't go through -- harming the ISP but also pissing off their customers
https://newnetworks.com/baadslscrewisp.htm
And in 2001, we wrote an impact study, quoted by SBA about the lack of FCC enforcement, and the fact that the wired companies were stealing the ISP customers, that the orders weren't going through, that it took weeks to get orders, that there was preferential (illegal) treatment of the companies' own ISP,
(these links still work....) And how bad was it for those seeking justice from the regulators? Dave Robertson, the head of the Texas ISP Association, recounted his recent meeting with Chairman Powell and senior staffers at the FCC Enforcement Bureau.
"The meeting was Tuesday May 8th. In a nutshell, all the "bad acts" submitted to them to date have resulted in exactly "ZERO" dollars in fines, and little delay in their 271 approvals for the Bells to jump into the long distance market. We asked for something blatant as handwriting on a wall as to the future of the complaint process as we are approaching it. We got it. WE SHOULD EXPECT NOTHING FROM THE INFORMAL COMPLAINT PROCESS. We should expect nothing from any complaints we have submitted to date.
"A couple of weeks ago we met with a senior person in the ENFORCEMENT BUREAU. After a one-hour meeting and receiving some heartfelt empathy for the plight of ISPs and the consumers who are being victimized by the illegal, anti-competitive behavior, I suggested that our best move might be to just jump out a window. He suggested we might want to consider throwing a chair out of the window first, so we wouldn't get cut on the glass as we jumped."
So, yeah, wireless and the triple play? -- had the networks been open, would the independent ISPs used the networks to offer these other services? AT&T and MCI at the time were large enough, as was AOL and other ISPs like Earthlink could have, probably would have.
I agree there was consolidation -- but, when the FCC got rid of line sharing and refused to address the litany of charges against the telcos who controlled the wires, -- but worse, the companies lied about deployments and took the money --didn't upgrade their networks to fiber as paid for by local phone customers --- we were put on a path where those who control the wires killed off most of the competition.
>Second, while the additional detail you've provided here is interesting, you really haven't engaged Rayiner's >central argument, which is that however many billions of dollars you're saying telcos were "given" to build >fiber, you're just counting dollars in their prices that you think are unreasonable. Which is not what people >people on HN typically mean when they cite this "200 billion dollar scandal".
Arrgh. While we did track price increases, which shouldn’t have happened as they were based on supposedly using the extra cash to upgrade their aging copper infrastructure --- we didn’t use price increases for our overall calculations
We examined multiple states' plans as well as the data that the FCC collected, as well as other groups that since stopped including NARUC, BEllCORE, and state and federal filings by the companies.
but-- I'll play... The incumbent utilities are regulated, because they control critical infrastructure, get use of the rights of way, and had requirements to deploy fiber--based on their own filings and commitments made.
READ THESE: we quoted other analysts Here’s testimony by ETI about Verizon PA fiber plans and monies collected – (ironically funded by AT&T against Verizon,-- before the networks were closed and AT&T and MCI were put up for sale and AT&T was taken over by SBC http://www.teletruth.org/docs/LLS%20PA%20Senate%20Testimony%...
This is a scathing review of the first 5 years of the Verizon NJ ( Bell Atlantic – 1997) by the New Jersey consumer advocate.
https://web.archive.org/web/20160429003841/http://www.rpa.st...
It’s clear no one has read the original source materials – We covered a) depreciation, b) return on equity, c) dividends paid d) extraneus deductions charged to the state, e) growth in lines, minutes, revenues, expenses, corporate operations expenses, marketing, employees, etc –
So, as a group the telcos took $25 billion in tax deductions when they claimed that they were replacing the copper… didn’t do it. The state freed their profits so nationwide it went from 12-14% Return on Equity to 29% on average—but they were still monopolies and no direct wireline or wireless competition. And again, this was supposed to be used for fiber.
The overcharging, then was comparing the commitments against the excess billions the companies-state utilities- got from the changes in state laws was supposed to be used for construction, not buying companies overseas.
And when $200 billion was written, no telco had done the work but all got billions. FiOS and U-Verse were announced in 2004 specifically to close the networks—claiming it was harming investments – when, we, the people, were the investors, which the FCC, etc never recognized.
---In 2001, there were 9300 ISPs in America, handling the majority of US internet subscribers.
----By 2010, most of America was supposed to have a fiber optic service to the home as every state cut a deal to have the state utilities upgraded to fiber and to charge local phone customers.
---And every merger made the situation worse.
Unfortunately, the companies essentially lied about the deployments while competition was shut down, not through market forces but through a takeover of the FCC.
The FCC, in 2005, removed the right of small ISPs to use line sharing to offering service, and the competitors were removed by getting rid of the wholesale arrangements, both of which started when the Telecom Act of 1996 opened the networks to competition.
By combining the 'Broadband' service, which is Title II, with the Internet Service, an “information” service -- when the FCC mushed these 2 services together, they became, together, an information service, which stopped the obligation to rent the utility networks
– This caused Net Neutrality.
---7000 small ISPs were put out of business and then AT&T and MCI were put up for sale-- and merged.
Documented in: ‘The Book of Broken Promises: $400 Billion Broadband Scandal”-- a free download. https://bit.ly/2M7KzTE
The FCC is currently erasing all the remaining laws and regulations on the telcos, claiming 5G will fix everything. With a range a few blocks and requiring a fiber optic wire -- what this is really about is that we'll have a few companies in control with no more regulations or obligations -- and whatever they give us-- we will have to be thankful for.
My take -- this has gone too far and we need to start to break up AT&T again.... and separate the companies from the wires.
And, we also need to go after the billions in cross-subsidies where the companies have been able, with the help of the FCC, to manipulate the accounting to dump most of the expenses into the state utility to make their other services 'profitable'.
These 2 recent articles supply a short history of the mergers and the commitments that were never completed for broadband and competition; the second is the Verizon New York 2017 financial report -- published MAY 31, 2018
---“The Mergers that Created ATT & Verizon Were Failures. Time to Break Up AT&T…Again.” https://bit.ly/2JM5zRB
and
---“How Did Verizon NY, the State Utility, Lose $2.6 Billion in Just 2017? The FCC’s “Zombie” Rules.” https://bit.ly/2sLj2i0
I summarized the findings. So far, NO regulator has bothered to examine this new financial report and no reporter has bothered to dig into it.
We've all been played. Most people don't understand how we got here or that the FCC and telcos have actually rewritten the history-- it is said that the winners write the history.--We can't let this stand.
Netflix et al doesn't have to be ISPs... We need to reopen the networks for competition—wireline and wireless and let the customer choose which ISP to use over the networks customers paid multiple times to have upgraded.
And AT&T and Verizon should be separated from these utility networks—ie, all of the wires which would include all the fiber that was built for wireless, FiOS, etc).
No more tracking, blocking, prioritizing of their own affiliate companies, overcharging, and letting the networks deteriorate.
No. What I call 'tax' perk has multiple layers. First, around the original fiber optic deployment time, Verizon et al took one-time tax deductions under something called FASB71 -- of-$25 billion dollars, which was 2-3 billion per bell company (like Bell Atlantic or Ameritech)
Second, they were able to 'accelerate' depreciation, meaning write off the networks faster, regardless of the life of the network product, such as the copper or fiber wires.
Depreciation, in this case, lowers the taxes paid as it is an expense, but in the old days, it was part of the calculations of the costs to offer service, so more expenses would mean -- oh, we're losing money, give us more rate increases.
I don't have problems with accelerated depreciation -- if they actually were doing what they said which was replacing the aging copper utility wires with fiber optics -- but in most of these cases, they didn't replace it but took the deductions and got the benefits.
Go into an audit with the IRS and tell them you wrote off equipment that you didn't buy or that you didn't replace-- see how that works for you.
You again. Maybe you should actually read the article instead of your usual knee jerk reaction, which is always wrong.
The article is about Verizon making false and misleading statements to the FCC about its use of “Title II”, where it has told the FCC, the courts and the public that if the companies are ‘reclassified’ as title II in the net neutrality proceeding it would harm investment. And we nailed them, showing that their entire fiber to the premises networks are already Title II, and we are using Verizon’s own documents, which directly contradict what they told the FCC. -- And it's not legal to lie to the FCC.
Then you rant about something-- “any price increase beyond that rate is a "subsidy" from the public to the carrier.”
One day you should actually read what I wrote. Starting in the 1990’s, Verizon got regulators to change the laws to charge customers to fund fiber optic deployments – and instead now-Verizon pocketed the money and didn’t build the networks. But you don’t mind being ripped off or that from 1993-2005 there were no build outs of networks which we paid for. And this continued with FiOS.
Going back to the article, not only are Verizon’s networks Title II but they did this to charge customers for these networks-- as Verizon claimed it was building out FiOS as part of the state utility telecommunications networks. As we showed, using Title II, Verizon got the State to charge regular phone customers rate increases – well, it ain’t legal to charge phone customers for say, the roll out of a cable service. Worse, Verizon stopped the FiOS deployments so in NY state, 80% of the state municipalities, and their customers, paid for network upgrades that they’ll never get – including low income families, seniors—people who weren’t supposed to be charged.
Then you claim that somehow we should investigate Apple "if they subsidized iPhone development by increasing Mac prices?"
Wha? Verizon controls essentially facilities and is still a utility network and gets the ‘rights of way’ based on a franchise. Apple is a free market company that doesn’t control any wired or wireless facilities and I can go and get any phone I want.
But you can’t tell the difference nor did you even bother to read the story.
I read your petition. I don't think there's anything perjurious about taking advantage of the regulatory framework you're stuck with while arguing that it's a bad regulatory framework and shouldn't be expanded.
> One day you should actually read what I wrote. Starting in the 1990’s, Verizon got regulators to change the laws to charge customers to fund fiber optic deployments – and instead now-Verizon pocketed the money and didn’t build the networks.
I've almost certainly read more of your organization's publications than 99% of the people on HN reflexively upvoting this story because it fits with their biases and worldview.
I'll concede that you may be right about some of the stuff you bury "below the fold" (e.g. accelerated depreciation), only because I don't have the energy to really dig into those numbers. But the headline numbers, based on the premise that regulators should be setting rates in the first place, that's nonsense. The government shouldn't be in the business telling private companies what prices they can charge.
There's a problem with all of this-- Verizon's entire Fiber-to-the-home networks are classified as Title II, Common Carriage, telecommunications service. -- Already.
Verizon did this to get the state-based utility rights of way as well as charge the construction budgets to phone customers -- especially those using the copper wires and who may never get upgraded.
Shame they never told the FCC or the courts or the public this fact-- and continues to claim Title II harms investment when it's a cash machine for Verizon today-- at the customers' expense.
From the Verizon New Jersey's FiOS cable TV franchise agreement, renewed this year, 2014. -- All of the hundreds of franchises uses similar if not identical language.
"Verizon NJ has been upgrading its telecommunications facilities in large portions of its telecommunications service territory so that cable television services may be provided over these facilities. This upgrade consists of deploying fiber optic facilities directly to the subscriber premises. The construction of Verizon NJ's fiber-to-the-premises FTTP network (the FTTP network) is being performed under the authority of Title II of the Communications Act of 1934 and under the appropriate state telecommunications authority granted to Verizon NJ by the Board and under chapters 3 and 17 of the Department of Public Utilities Act of 1948. The FTTP network uses fiber optic cable and optical electronics to directly link homes to the Verizon NJ networks.
"Pursuant to the NJSA 45:5A-15, telecommunication service providers currently authorized to provide service in New Jersey do not require approval to upgrade their facilities for the provision of cable television service.
"As such any construction being performed in the public rights of way is being undertaken pursuant to Verizon NJ authority as a telecommunication service provider."
Let me add some current history. Verizon's entire FiOS network is based on a Title II, common carriage, telecommunications classification-- that's right, for those following Net Neutrality, while Verizon et al screams about Title II, their networks are ALL Title II.. why?
The scam is simple -- by using title II, they get to charge local phone customers rate increases to pay for the fiber optics. Verizon also dumps the construction budgets into the utility networks for its wires to the cell towers and even the 'special access wires' -- which are also classified as Title II. – Title II, then is a cash machine.
And Verizon never told the FCC, the courts, or the public about this.
But the revenues don’t go back to the utility—they appear to go into a “black hole” accounting…
In tracking Verizon New York, we found that there were actually statements made about raising rates for the ‘massive deployment of fiber optics’ in 2009, which was the third increase since 2006.
The increases, including the additional taxes, fees and surcharges (many of which are also either revenues to Verizon or ‘pass-through’ taxes that are on Verizon but charge customers), and the increases to all calling features, etc – came to about $4.5 billion extra since 2006.
However, the data – Verizon stopped publishing its SEC-based state reports in 2010, the FCC stopped publishing the data in 2007, but NY State required an annual report – but it only shows the revenues and expenses for the utility.
The ‘black hole’ funds were uncovered when comparing the state-based SEC reports with the State-filed annual reports; in just New York, in just 2009, there was an additional $2.7 billion in revenues – but no extra construction costs to this ‘black hole revenue.
Verizon then, shows losses in the utility, claiming the networks are uneconomical to upgrade. But the losses are created based on this flow money—the ‘affiliate’ companies, like Verizon Wireless or Verizon Online or Verizon Business, pay less than market prices and have the construction budgets dumped on the regulated side—lowering revenues and adding expenses and creating manipulated losses.
Verizon NY alone showed about $11 billion in losses, about 2 billion a year from 2008…about $5 billion in tax savings… Ie, Verizon New York paid no income taxes since 2008 or earlier.
This is happening in every Verizon state, and we assume AT&T as well but they aren’t required to supply basic data anymore. AT&T stopped publishing its SEC reports a decade ago or more, and most, if not all states, don’t require the level of financials needed to examine this flow of money.
This new financial shell game started to pick up speed after the networks were closed to competition around 2005.
So, on top of the original ‘commitments’ and the extra money that’s been collected since the 1990’s, as no state ever went back and got the money or refunds to even stopped the excess profits, this new financial-game puts the original overcharging customers as a very low number as it doesn’t account for the steriod-based, Title II, cash machine.
First, I have a new book which details the state materials. “The Book of Broken Promises” and goes through 2014, and covers most of the state commitments to deploy fiber optic broadband, monies collected and the failure to deliver and goes through 2014.
http://newnetworks.com/bookofbrokenpromises.htm
This PA, stuff is from 2003, and you got most of this discussion wrong. – Guess you work for the phone company…
>The $2.1 billion is Kushnick's usual fabrication: pick a "rate of return" typical for <regulated monopolies, and call all profits above that number post-deregulation as <"money given to the telephone company."
I didn’t pick the rate of return. Duh- It was based on the current returns that were allowable under state law, and I used the PA numbers—as told by the state-based Bell of PA (now Verizon PA) SEC filings.
The changes in state law happened in every state (though with varying commitments) – such as Verizon states -- PA, NJ, MA, and other states, IL, OH, etc. -- and they were ALL based on direct commitments to rewire parts, if not the entire states as well as schools, depending on the state.
In PA, the original commitment were 100% completed by 2015, (though the commitments were changed over time.) in NJ it is 100% completed by 2010—with fiber 45 Mbps in both directions.
In PA we filed a complaint which said – state laws were changed specifically based on the commitments to upgrade the state utility plant, which was copper, with fiber. It removed the old ‘rate of return’ for new ‘alternative regulation’, that speeded up the write offs of the networks, and no longer examined the profits of a state utility – which had a monopoly on that wire—with the goal to use this extra money for the deployment plan called Opportunity PA.
The profits overall, went from 12%-14%, which was standard in almost every Bell state to about 30% after the new law took effect. In PA it went from 13% then jumped to 30% by 1998. -- But they didn’t deploy the fiber – nor replace the wire. And these numbers were in the SEC-annual reports.
You didn’t bother noting the chart on page 23 outlining the extra profits—directly tied to deploy fiber optics.
And PA and NJ had a timeline of deployment to upgrade to fiber and 45 Mbps—and it didn’t happen. An analyst we quote said:
“As we approach the end of 1998 a point by which BA-PA is supposed to have broadband available throughout 20% of its rural, urban and suburban areas there is no sign of any broadband service being offered to Pennsylvania's residential customers."
And the PA state commission wrote:
“When the Commission accepted Bell's proposal, that proposal became binding on the Company. Any modifications or deviations from a 45 Mbps two way interactive network must be approved by this agency, since such would constitute a modification to the June 28, 1994 Opinion and Order which ruled on the Company's original Petition and Plan.”
You write:
>In other words, the accelerated depreciation was to compensate for the fact that once >regulated prices were gone, the telephone plant would become less valuable. It was not >predicated on replacing that plant with fiber.
Wrong… it was to replace the copper wires in the state utility. You obviously didn’t read the documents. This is the language in the New Jersey Bell (Verizon NJ) annual report, 1994, for a $1.013 billion deduction – for the “company’s technology deployment plan” — It was a one-time deduction which every phone company took, called FAS 71, and it says:
"The Company's determination that it was no longer eligible for continued application of the accounting required by Statement No. 71. It was based on the belief that the convergence of competition, technological change (including the Company's technology deployment plans).
And the result is a tax savings of about ½ billion dollars in NJ —from this one change.
And this is on top of ‘accelerated’ depreciation, which was also set by the state commissions to help speed up the deployment to fiber optics—which didn’t show from 1993-2005. – i.e., the company gets more tax deductions per year and didn’t replace the copper.
We documented this in our first book, 1999, Foreword by Dr. Bob Metcalfe, (co-inventor of Ethernet) who went through all the stats. And it was ALL for the commitment to replace the copper wires with fiber.
By around 2009- in NJ we calculated that Verizon NJ collected about 15 billion.
And you’re apologist for the companies deceiving the public and the state commissions and getting billions extra in tax perks and excess profits – which are monies that directly impact customers’ bottom line.
Law changed – extra money garnered – nothing built, (1993-2005) but to you that’s just fine.
And this PA stuff is from 2002-2003, before we uncovered the entire story about Verizon and AT&T financial manipulations—and it was low number.
Anyone interested in knowing the real history about broadband and fiber should do the fact checking themselves – the new book has detailed footnotes and links.
thanks. AT&T was broken up in 1984 and the company became a 'long distance company', while the local phone companies were spun off to create seven baby bells --
there was no internet then, and 'long distance' was a monopoly. In 1984 MCI wanted in, so that's one of the major reasons AT&T was broken up.
The court realized that they companies should be restricted from these other markets, like long distance because they could vertically integrate-- ie, combine local, long distance, broadband, and control the wire.
Long distance -- while that market has been diminishing year by year, in 1996, the incumbents wanted to get into this market, so they created the "Telecom Act of 1996" to trade off-- opening the networks in exchange for entering long distance.
If you look at any triple play they still have a long distance component-- about $12 bucks.. not counting taxes and while many might go voip - the average customer just wants the thing to work.
if you want the full history search for the "Unauthorized Bio of the Baby Bells" -- also a free download, with Foreword by Dr. Robert Metcalfe. (1998) The opening in $300 billion was taken from this first book.
The Urban legend speaks – I wrote 3 books on this topic, which outline, in detail how New Networks generated the numbers.
In the 1990s, all of the phone companies in the US applied for and received alternative regulations which was based on their commitment to replace the copper utility wire, known as the PSTN, Public Switched Telephone Networks, with a fiber optic wire. This was based on then Al Gore’s call for America to be completely upgraded by 2010, called the information superhighway.
And the state laws were changed to give the companies billions of dollars per state and this was done by multiple financial incentives—where the phone companies’ services were no longer examined for profits, even though there was no competition at the time – so ‘call waiting’ cost less than a penny, and the companies charged $4.00 – and this included almost all services, such as non-published numbers. Their profift jumped from 12-14% to 35-40%; they had major increases in dividends, they took massive tax write-offs for the networks, among other things.
And the companies lied about their deployments but continued to keep the excess profits. – So, all rate increases were tied to these financial perks, where the state never went back and changed the laws or got refunds when the companies failed to deploy.
While states, like New Jersey, where they collected about $15 billion, were supposed to be upgraded by 2010 with a fiber optic service capable of 45 Mbps in both directions.
http://newnetworks.com/verizonnjbroadbandresources/
And it continues today with more rate increases. Our new report shows that regular POTS, plain old telephone service, customers were charged about $4 billion in New York State for ‘massive deployment of fiber optics’, even though the majority will never get any upgraded service.
I wrote 3 books on this. The first is about 1980-1998, with Foreword by Dr. Bob Metcalfe, second was in 2005 and the third book is coming out next month.
Book 2: http://www.newnetworks.com/broadbandscandals.htm
And we filed in multiples states over this since 1999, we have separate reports about the revenues and profits that’s been published.
If you got specific questions after you read the books, -contact me. I’ve been a telecom analyst for 32 years—and used to work for those who are now called Verizon, AT&T and Centurylink as a senior analyst at multiple telecom consulting firms. bruce@newnetworks.com
Do you know of a convenient table showing the numbers you use to get those profit figures? I'm mostly interested in a clear understanding of what you are saying, and it is easy to end up talking about different things when discussing corporate earnings.
The profit margin for Verizon today is less than 12%:
short answer..one table, only giving the 'corporate earnings' doesn't tell the story-- but I'll think about a few to post.. highlights.
First, the link is to 2014 financials; the tracking to charge for broadband by changing state laws started in 1993. Also, the numbers in Verizon's overall business reports are a garbage pail of revenues, etc. as the company has over 365 different investments and companies in over 150 countries.
On the earnings, my books use a standard EBITDA, earnings before income tax and depreciation and amoritization, and Return on Equity, among other indicators.
And we used the SEC-filed state-based annual reports, like a report for Verizon New York, but that data stopped in 2010; the FCC data stopped in 2007.
Worse, if you read our new report about Verizon New York you'll see that the numbers can't be ascertained easily anymore because of all of the cross-subsidies for all of the other businesses.
In fact, a previous report we wrote last year about Verizon NY is now part of FOIA challenge in court. It was used by Common Cause, Consumer Union, CWA in a proceeding calling for audits.
The overcharging is also different than just the 'corporate earnings'-- for example, In new york, Verizon got multiple rate increases on regular phone customers for 'massive deployment of fiber optics'; the additions come to about $4. billion from 2006-2013.
It's not legal to charge regular copper-based phone customers for a cable service, for example, or have expenses for the construction of the wireless cell tower wires.
However, at the same time, the company claims to have lost $11 billion in just New York for the last 5 years... the losses caused by the various affiliates (like Verizon Wireless is an affiliate of Verizon NY).. adding expenses.
Moreover, the books and research not only use the expertise of our gang (or which some of us have been working together for a few decades) but, we quote primary research, such as annual reports, state and federal filings by AT&T et al, etc, much of which are hidden in plain sight, such as the Verizon NY 2019 Annual Report, which is the financial report of the primary telecommunications state-based public utility-- and ironically most reading this don't even know that there are still state public utilities left. http://irregulators.org/wp-content/uploads/2020/06/Verizonny...
The $200 billion broadband scandal was published in 2005 and that was based on examining the state-based commitments for fiber upgrades and the changes in state laws that gave the companies billions per state to do the upgraded-- i.e., rate increases and tax breaks.
The most recent work uncovered that the accounting has been manipulated in the utilities and caused the networks to appear unprofitable --- and we're preparing to take legal actions in multiple states-- it's about $20 billion annually in the US. https://bit.ly/3mQUWgf
As a former senior telecom analyst to the telcos 1982-1994--we knew were the skeletons were buried...so, we didn't just 'wing it', and the books detail our claims. So while others may follow in our footsteps... we've been at this for decades with actual documentation to substantiate our work. to see the latest, I post at medium.
https://kushnickbruce.medium.com/