AT&T CEO: Government Should Pay $60–80 Billion for Broadband; IRREGULATORS: Government Must Halt the $80 Billion a Year in Overcharging by AT&T-Big Telecom.

Audit the books, stop the overcharging and fix the Digital Divide without government subsidies.

According to Broadband Breakfast, June 10, 2021, AT&T wants government handouts for broadband in territories it failed to upgrade.

“AT&T CEO John Stankey said…that the federal government can get away with shelling out between $60 to $80 billion in infrastructure dollars to connect rural and remote America…”

Over the last year, with everyone forced to stay at home, the pandemic has brought into harsh focus that America was never properly upgraded with high-speed broadband, especially in rural and low income areas, and that prices are out of control, making it hard, if not impossible for low income families to get broadband at ‘reasonable rates’.

And the government has already started to throw money at this. We’ve written a series of articles about the Emergency Broadband Benefit, (“EBB”), a $3.2 billion dollar fund where low income families can get up to $50 a month discount on the broadband internet service, (tribal households can get more money).

While helpful, AT&T et al. are getting reimbursed for this $50 and worse, the companies can charge made-up fees, as well as for an internet modem, inflating the costs to customers as none of these added charges are part of the advertised price or even mandated by the government.

But in AT&T’s case — and hidden in plain sight, the entities offering these services are the state-based public telecommunications utilities; AT&T controls 21 states’ primary infrastructure, such as AT&T California or AT&T Michigan, but AT&T never mentions that there are state-based public telecom utilities in America or that AT&T controls the majority of the US (by population) or that AT&T let most of the rural areas deteriorate over the last 30 years.

IMPORTANT: These are NOT just the copper based phone lines, but also DSL and U-Verse and even the fiber optic connections to the node, including the fiber optic wires to the wireless cell sites.

This, then, is the partial 4th article in the EBB, Emergency Broadband Bamboozle series.

But, $3.2 billion is just chump change compared to the national planned give-aways being discussed. As the opening chart shows:

§ President Biden announced a Democrat offering; a $100 billion dollar government subsidized plan which is supposed to be spent to have 100% of America with broadband by 2030. This plan has been focused more on giving the money to the municipalities and not AT&T and the incumbent phone and cable companies.

§ NOTE: Since the announcement the total has been reduced to $65 billion.

§ The Republicans want $65 billion but they want these taxpayer dollars to be given to AT&T, the other Big Telecom companies and Big Cable.

Moreover, the Democratic plan is being trashed by Big Telecom and Cable.

USA Today (via Reuters) quotes the cable association, NCTA and the USTelecom, the association for the wired companies like AT&T, both slamming the plans for municipality build outs.

“The cable lobbying group NCTA said the White House ‘risks taking a serious wrong turn … by suggesting that the government is better suited than private-sector technologists to build and operate the internet.’ The NCTA also said it was worried about price regulation. The Biden document does not mention price controls.”

“Jonathan Spalter, CEO of the lobbying group USTelecom, said that prioritizing investments in government-owned broadband is ‘exactly the wrong approach’ since taxpayers will get the bill if such networks fail. He also claimed that broadband prices are already falling”.

The IRREGULATORS Position: Halt the Subsidies; Get the Money Back to Fix the Digital Divide.

The answer begs the question: Why is America giving AT&T et al. government subsidies to ‘fix’ the Digital Divide when these companies were responsible for creating it? As the data indicates, these few companies took actions over the last 3 decades to create the Digital Divide, not to mention leading the fight to disregard Net Neutrality, and a host of other issues that harmed our Digital Future.

The overcharging continues and has increased over the last few decades, with an estimated overcharging now at $60-$80+ billion annually. And depending on which services are being used, who is the telco or cable company, the state, and the state and federal laws that helped to overcharge you, overall, each household is paying about $450-$625 a year, extra. But, since 1991, over time, the average household was overcharged $8,000 to $10,000, though there are many caveats and details (and these are the low numbers).

While too complicated to explain here, we have put together a library of reading for most of these topics. What follows is from a separate report. Note that this overcharging is not ‘additive’, and each examination is designed to shed light on a specific dark areas.

First, Let’s Start with the Large Cumulative Overcharging Areas;

  • Accounting Manipulation: The companies were able to manipulate the FCC cost accounting formulas to make the state utility into a cash machine to illegally fund all of the other lines of business, which started in 2001.
  • Wireless Bait & Switch: Using accounting formulas that have become corrupted, the wireless business was able to divert the state wired constriction budgets for wireless instead of maintaining and upgrading rural areas and inner cities.
  • Failed Broadband Commitments: Starting in 1992, the companies made commitments replace the existing copper wires of the state utility with fiber optics; state laws were changed to give AT&T et al. billions to do upgrades, which never happened. However, this pattern happened multiple times.
  • Harvesting Local Customers: The companies’ manipulation of the accounting rules and a failure of state and federal regulators to conduct any audits their financial documents have allowed basic phone customers to be hit with 150% rate increases, and add-on increases of 50–525% — Prices have increased continuously for the last 15 years.
  • Added Made Up Fees: Broadcast TV and Sports Fee and Cost Recovery fees are not government mandated, are not audited or even reviewed, and without competition, continually rise.
  • America’s Prices for Triple Play and Wireless with Overseas are 5–20 times more expensive. We compare the pricing of the European Union and the US, showing how much we are overcharged.
  • Business Data Services Overcharging. The guts of the networks, the wired used for wireless cell sites or competitors have been kept extremely profitable due to price inflation, thus making all US services be overcharged.

There have been no audits of any telecommunications state utility that we are aware of, by either the state commissions and government entities or at the FCC — none.

And, to summarize, AT&T, who wants the government to put up $60–80 billion for Big Telecom, caused the Digital Divide in the first place by its failure to properly upgrade the state, then through a massive bait and switch it let the state utilities deteriorate and not bring high speed services to the rural areas — nor did AT&T et al. even bring serious competition in the urban areas.

What is now AT&T, Verizon and Centurylink (Lumen) have been dismantling the entire telecommunications infrastructure, letting whole sections of these utilities to deteriorate, but at the same time, using the construction budgets for wireless — instead of wiring cities, especially in rural America.

Here’s Just a Few of the Areas of Overcharging.

Accounting Manipulation.

§ $79 billion in annual overcharging, documented NNI-IRREGULATORS based on updating document in 2021 and new areas of coverage.

Compared: America’s Cable Triple Play; Big Telecom’s Wireless Services, Prices offered by European Union Countries

To give the reader a perspective of the excessive charges America is paying, we used multiple independent research sources from the European Union, and Rewheel research, as well as Consumer Reports, actual bills, and web information supplied by the companies. This is just one demonstration of how much Big Telecom and Cable have taken control over our infrastructure and how it has cost America. This summary is discussed in more detail in the report.

§ $73 billion in annual overcharging-the difference in price from the European Union to AT&T and Verizon’s prices for Wireless and the Triple Play of Big Telecom and Cable

§ $150 a month in overcharging on the Triple Play; the US average is $217.00; EU countries are offering a triple play for $25–50 — That is $1,800 a year in overcharging

§ $30+ a month in overcharging for wireless; According to Rewheel the EU has ‘truly unlimited’ data;1000GB or more; the US is $90 for 50GB;

§ $15 a GB vs $.07 cents: Spectrum wireless service highlights how Low volume users are particularly harmed by US prices, as EU prices are about seven cents.

Of course, there are ‘deals’, package prices, promotional prices, discounts, but, as we are about to discuss, most of these leave out the made up fees and additions that add 20–40% more a month than the advertised price.

Part of this is because there is no competition and the incumbent companies control the critical network infrastructure.

Made Up Fees. Because there is no government oversight and no competition, companies can and do take advantage. For example, the addition of the Broadcast TV and Sports Fee, or the Cost Recovery fees are not mandated by the government, are not audited, and are not included in the advertised price.

We estimate that:

  • $22.7 billion dollars in overcharging from add-on “Cost Recovery Fees” and the cable “Broadcast TV & Sports Fees”, now at $10-$30 a month.
  • 300 million wireless subscriptions pay an extra $30- $42.00 a year.

Harvesting: Continually Raising Rates; Local service customers have been not only left stranded without being upgraded, but also hit with continuous increases — to force-march them to wireless.

  • $11.8 billion dollars annually we attribute to the harms of harvesting basic phone landline customers with continuous rate increases for 15 years.
  • 35 million customers may be overcharged $25–30 a month, $300–360 a year, but it could be as much as 100 million total customers.
  • $2,700-$3,200 per line, we estimate has been overcharged since 2006.

Business Data Service Overcharging and Cross-Subsidies “Backhaul” also known as “Special Access” or “BDS”, “Business Data Services”, are the guts of the networks’ they are the basic copper and fiber wires used for data lines to cell sites and to competitors and AT&T et al., control the prices of wireline and wireless, manipulated to keep prices inflated for both end users and competitors

  • $31,000,000,000 in Annual Overcharging
  • Verizon NY’s 2019 Annual Report showed that BDS, which uses the state utility infrastructure, had a profit margin of 55%.
  • $80–100 billion in revenue is hiding in plain sight. There are no FCC or state reports that detail the size, scope and cross-subsidies that are evident.
  • Hundreds of millions of access lines are also hiding. In 2007, the FCC stopped publishing the number of copper and fiber optic ‘special access’ lines in service — -that resulted in $80 billion dollars in revenues with zero published lines in service — and the FCC’s last data showed that ½ were copper-basic phone lines that were reclassified to NOT be counted as an access or phone line.
  • $53 Billion in Annual Overcharging. BDS overcharging combined with all of the other cross-subsidies of AT&T et al., totaled $53 billion a year in 2017, in large part because the companies still use the distorted frozen allocations, and Verizon NY is required to publish an annual report. Because the companies still use the same accounting, we assume that the overcharging in NY matches the other states, with caveats. (This did not include specific overcharging pertaining to the cable TV companies.

Previous Failed Broadband Commitments

§ $500 billion in overcharging based on the state fiber optic commitments. New Networks Institute tracked the original commitments which were to replace the existing copper with fiber optics since 1992 in a trilogy of books and over 60 reports, state and federal filings, which started in 1993.

§ $400 Billion Broadband Scandal was published 2015, and an

§ Estimate $25 billion a year was for changes in state laws for broadband commitments that were never deployed.

Historical:

§ $60 billion of annual overcharging was in 2017 and documented by Consumer Federation of America; about $250 billion over 5 years, which was based on AT&T, Verizon, Comcast and Charter, 2017

§ Consumer Cost: $540 a year, $45 a month.

§ $53 Billion of annual overcharging was documented by New Networks Institute and the IRREGULATORS, 2017, which covered Big Telecom.

§ $633 billion from 2006–2017. 2006 was the start of a massive wave of deregulation.

Conclusion

We just laid out different areas of overcharging that were uncovered over the last decade to stress one major point — Most of this overcharging continues today unabated and it is massive amounts that should have been used to upgrade America, state by state.

AT&T, Verizon, CenturyLink and the cable companies need to be investigated and the billions per state in cross subsidies halted; the money used to properly upgrade the state utilities.

While we applaud President Biden on having a plan which calls for affordable prices and that billions could go to municipalities and others that could offer high speed broadband and competition to AT&T et al. — it never calls for audits, etc. and fails to address the cross-subsidies of wireless and the other businesses in place today.

The Republican plan is more a package of helping the large corporations keep their inflated rates and does as little as possible to fix the Digital Divide. It, too, never calls for audits, etc. and fails to address the cross-subsidies of wireless and the other businesses in place today.

AT&T is just self serving and couldn’t care less about the state utilitiesSeeking Alpha posted the transcript of “AT&T Inc.’s CEO John Stankey Presents at JPMorgan 49th Annual Global Technology, Media and Communications Brokers Conference (Transcript) May 24, 2021”

“fixed broadband can do in urban and highly attractive suburban areas, but what we do believe is that fixed wireless plays a role in other parts of our footprint, and there’s no question where we’ve had lower speed, you know, DSL offers in the market, that a fixed wireless solution in that outer reaches that what IT used to be the ILEC footprint, could be a good solution for us, and for those customers.”

“And more importantly, it allows us to, you know, shut down some infrastructure. Over time, we have a voice replacement service now that can be in there. And so that allows us to look at our options around footprint that used to be in place and fixed costs that used to be there, begin the work of starting to shed some of that footprint and reduce the number of square miles that have that fixed infrastructure in place that really, you’re never going to have an incentive to ultimately upgrade to fiber.”

Note: the ‘footprint’ are the utilities in the 21 states.

There is no acknowledgement that the company got paid to do fiber in rural areas in multiple states multiple times. AT&T never mentions that there are state public telecommunications utilities nor that the plans are for trashing the infrastructure and use the budgets for ‘wireless’; Nor does AT&T mention that the price of all services have been inflated to make prices unaffordable, because it controls the wires that are hidden in plain sight.

I repeat the headline:

IRREGULATORS: Government Must Halt the $80 Billion a Year in Overcharging by AT&T-Big Telecom.

Audit the books & stop the overcharging before any more government funding.

New Networks Institute,Executive Director, & Founding Member, IRREGULATORS; Telecom analyst for 38 years, and I have been playing the piano for 63 years.