Break Up Big Telecom: $1+ Trillion in Overcharging … And Counting.

READ: FULL REPORT 3
READ: ALL Reports of the Break Up Big Telecom & Cable

This article is only about examining one basic question, besides the mind-boggling totals:

How much money have you, your family, friends, business, the city you live in, your neighbors, the State and even America been overcharged by Big Telecom & Big Cable over the last 3 decades?

But let’s get personal. 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 (and these are the low numbers.) $8,000 to $10,000, though there are many caveats and details.

This answer begs the question — Why is America giving AT&T et al. a free pass — as well as a continuous stream of government subsidies to ‘fix’ the Digital Divide when these companies were responsible? 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.

On top of this are the ‘opportunity’ costs — such as the economic harms to your town because Big Telecom never upgraded their networks for high speed broadband connections, even when everyone paid extra for it, and there was no serious competition to lower prices. Moreover, throughout the US there is a pattern where those areas that did get upgrades were the wealthier neighborhoods, leaving the low income areas a Digital Desert, known as ‘redlining’.

New Networks Institute (NNI) and the IRREGULATORS are joined by other analysts who independently found massive overcharging and cross-subsidies. Consumer Federation of America’s examination of the Big Telecom & Cable companies, Overcharged and Underserved”, found that this cartel has worked together to overcharge America an estimated $60 billion annually, $250 billion in a 5-year period, 2012–2016, in a myriad of ways. This overcharging came to approximately $540 a year per household.

Thus, to solve the Digital Divide, as discussed in the other reports, America should not being giving out more government subsidies to Big Telecom & Cable. We need to halt the massive cross-subsidies and financial manipulations between the state based wired telecommunications public utilities that still exist and are hiding in plain sight, and the rest of the Big Telecom subsidiaries, like wireless. There is plenty of funding to upgrade America to fiber optics and to lower rates. And it is time to reopen these networks to all forms of competition. AT&T et al. created the Digital Divide to make more profits, not to better serve America or your town, your state or your family.

Let’s Follow the Money: Overcharging Details

In order to understand the power of these corporate monopolies to overcharge us, we identified 10 areas of market power impacts and what needs to be addressed.

1) Market Power: Added charges on telephone, cable, internet, broadband and wireless services — because they can.

2) Market Power: ‘Truth in Billing’, ‘Truth in Advertising’ Violations to Cover Over Charges. True market power is having bills no one can understand, examine and be able to explain basic charges on the bills.

3) Market Power: ‘Harvesting’ the entire US wired customer base, with over 100 million lines and make sure no regulator or politician examines the rate increases of 150%.

4) Market Power: America’s prices are 5–20 times more than overseas, Why? Overseas pricing vs US shows Monopoly controls over the wires.

5) Market Power: Wireless Underpayments $23 billion estimated annually has been diverted to fund the wireless subsidiaries instead up upgrading cities and towns throughout America and this includes over $6.2 billion in access fees to use the networks.

6) Market Power: “Backhaul”, the core infrastructure, also known as “Special Access” or “BDS”, “Business Data Services” which control the prices of wireline and wireless, have been manipulated to keep prices inflated for both end users and competitors.

7) Market Power: Massive deception about the actual number of lines in America. Hundreds of millions of access lines are also hiding.

8) Market Power: Other Voices: Consumer Federation of America’s examination of the Big Telecom and Big Cable companies, working together to overcharge in a myriad of ways — estimated at $60 billion annually, in 2016.

9) Market Power: Broadband Scandal: From 1992–2018 an estimated $500 billion was charged to local phone customers for upgrade of the states with fiber optics — but charge local phone customers, over and over.

10) Market Power Accounting Scandal: The ability to manipulate the FCC’s cost accounting rules, known as ARMIS, made the entire US infrastructure appear unprofitable, and the utilities became a cash machine for the other subsidiaries, which started in 2001 and continues today.

NOTE: FULL DOCUMENTATION: We put together separate reports on the wireless-wireline cross-subsidies, Harvesting, the price comparisons of the US and the EU, full reports and books on broadband scandal and the accounting scandal.

How This Works: Each service a customer has can have different ways of overcharging them. Some of these, like the Broadcast TV fee, are just tacked on to the bill. Other ways are harder to understand. For example, ‘harvesting’ is when the company decides they can continually raise rates on basic wireline phone customers, with the goal to move them to wireless or be gouged. The regulations that were ‘deregulated’ or the lack of oversight by the government can be tracked, as well as the price of service. Our analysis is based on our tracking of multiple states and finding that in 2005, AT&T and Verizon had laws changed that allowed for continuous increases. That should never have happened and we consider the increases overcharging, especially when prices should have been going down. The accompanying report details what happened and how we determined how much was overcharged. Other reports discuss why legal actions may be required to fix these long-time problems.

Thus, the overall average we present is a starting point, using three decades of analysis and Big Telecom’s financials, actual communications bills, etc. While all of us are impacted by the large corporate financial manipulations, what services you have, the state deregulations, and which company provides the service (or didn’t show up), will determine how much you and your family were overcharged.

Finally, we also created a model of how much extra America is paying for wireless and the cable triple play as compared to the European Union and overseas, as a benchmark of how much we are being gouged.

Let’s start small, with basic made up fees and customer harvesting.

1) Market Power: Added charges on telephone, cable, internet, broadband and wireless services — because they can.

‘Made Up’ Fees. Because there is no government oversight and no competition, companies can and do take advantage.

Our Position: None of these fees are justified as most are the cost of doing business and are not government mandated, or audited, and they are not even included in the advertised price — in fact, they are added to hide the total cost of service. More importantly, they are being offered by franchised communications companies with a captured monopoly client-base. None of these additions are valid as there is no competition to get rid of them, and they are now ‘cartel-like’ — industry standards, that should never have been allowed. The solution, regardless of anything else — audit the books for actual costs, then have the companies remove the charges and either add them to overall price or remove them completely.

We estimate that:

A) The Broadcast TV & Sports Fee are two made up fees (sometimes combined) and they have gone up dramatically, 751% since 2014, to over $19.00 per month on a March Spectrum NY bill 2021. Comcast Xfinity increased their fees, totaling $30.20 a month in 2021.

There are 75 million or so cable subscribers which include the “Big Telecom & Big Cable” group having 47 million, (not counting satellite).

Using the average estimated based on the charges of the Big Telecom & Cable, we have

  • $225 extra a year estimated (range $120-$300 a year) just for these made up fees, with revenues to the company from this 47 million or $10.7 billion additional revenues.

Including satellite and other providers: With 75 million estimated cable subscribers:

  • $120–300 a year in overcharging.
  • $750 million to $1.5 billion estimated a month to the companies;
  • $9 to $18 billion annually to the companies.

B) Wireless ‘Cost Recovery’: AT&T and Verizon have over 300 million wireless subscriptions alone, and the Cost Recovery and Admin fees are bringing in an extra $30-$42 a month to these companies — that’s $9 billion- $12 billion.

Combining just a few of the made up fees:

  • $22.7 billion estimated combined average in overcharging from just the add-on “Cost Recovery Fees” and the cable “Broadcast TV & Sports Fees”,

NOTE: This focuses on the specific wireless charges of AT&T and Verizon for cost recovery and the Big Telecom and Cable additional fees to their cable service for ‘Broadcast and Sports’ fees. However, virtually all of the other communications companies now put ‘cost recovery’ charges on whatever they think they can get away with.

C) Universal Service Fund Tax on ‘Interstate’ services is now at an all time high of 33.4%, collecting over $10 billion and this charge is also a pass-through as it is applied to the communications service.

  • This is up from 17.9% in the 2nd quarter, 2016 — just 5 years ago — almost double.
  • On basic phone bills and wireless, it can be $2-$5.00 extra a month, for a plan with a few phones, $24-$60… per service annually. USF is on wireless, wireline interstate services.

While it is important to have ‘fair and reasonable’ priced phone service, much of this charge ends up back in the coffers of AT&T and the other companies.

And we all know that these are just a few of the ridiculous charges that have been added to bills and we are expected to pay..

2) Market Power: ‘Truth in Billing’, ‘Truth in Advertising’ Violations to Cover Over Charges. True market power is having bills no one can understand, examine and be able to explain basic charges on the bills.

If you want true market power, having bills no one can understand, examine or are able to explain basic charges on the bills — has been an issue for decades. The information on the web site can be wrong, or missing, the advertising is deceptive, especially about promotional pricing vs the final retail price, and the advertising is missing 20–50% of the total charges a customer must pay.

Market power is to keep the entire communications landscape in confusion and covering any details. New Networks Institute filed a complaint in 1993 and multiple times over the next 3 decades to fix these issues. Unless serious actions are taken, there is no truth in truth in billing, and with more services added to the bills, it just gets worse.

The simplest example: No one can properly calculate the taxes, fees and surcharges that appear on a basic triple play bill, with multiple services. There is no Rosetta Stone that explains which taxes are applied and the percent being added. Worse, 90% of the taxes have mistakes, with calculations that can be off by an added penny or nickel. But the true sin is that there is no cross-checking to add up all of the charges to see if they are ‘fair and reasonable’.

3) Market Power: Harvesting the entire US wired customer base, with over 100 million estimated lines and make sure no regulator or politician examines the rate increases.

Basic Local Service customers who have the basic, copper-based phone line, have not only been left stranded without being upgraded, but also got hit with continuous increases — to force-march them to wireless. Since 2005, Local Service prices in AT&T California went up 150%, with the specific add-ons going up 94% to over 525%. And, in NY, Verizon has also been harvesting the customers in an almost identical manner.

  • $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.

This represents just basic phone service and add-ons; not wireless or cable or broadband services or additional fees, etc.

Full Report and Summary Harvested and Stranded: $10–14 Billion Annually

4) Market Power: America’s prices are 5–20 times more than overseas, Why? Overseas pricing vs US shows monopoly controls over the wires.

This is another way of examining just how much we’re being overcharged. As we point out, the pricing of America’s the triple play or wireless service compared to the European Union, is outrageous. The addition of all of these made up fees, and the ability to continually raise rates has cost America’s communications users big time compared to overseas.

§ $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.

Triple Play: (European Union Commission Reports are used as Source Material)

§ $150 a month in overcharging on the Triple Play;

§ $217.00 is the US average.

§ $25-$50, EU countries are offering a triple play.

§ $1,800 a year in US overcharging.

Wireless ‘Truly’ Unlimited: EU compared to US using Rewheel Research.

§ $30+ a month in overcharging for wireless;

§ 1000GB or more according to Rewheel is the EU ‘truly unlimited’;

§ $90 for 50 GB is the US fake unlimited.

§ $15 a GB vs $.07 cents: Spectrum wireless service advertises a $15.00 per GB service and this 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 discussed, most of these leave out the made up fees and additions that add 20–40% more a month than the advertised price.

5) Market Power: Wireless Underpayments for Construction and Access Fees.

Big Telecom includes Verizon Wireless and AT&T Wireless and they are separate subsidiaries and they are supposed to pay the state public utilities for any construction that is done for the wires to the cell sites, as well as fees to use those wires.

As we point out, there appears to be a fraction of the expenses paid by Verizon Wireless to Verizon New York and this is happening throughout the US. We estimate that:

  • $23 billion annually has been diverted to fund the wireless subsidiaries instead up upgrading cities and towns throughout America and this includes over $6.2 billion in access fees to use the networks.
  • $216 billion was charged to the state telecommunications public utilities over the last decade for wireless construction.

New York

  • $1.4 billion was charged to Verizon NY annually in construction costs that were not used for local service, which includes $237 million in access fees.
  • $15.2 billion over a 10-year period was overcharged in just New York for construction that was diverted to wireless.

It gets even more screwball when we find that these expenses a) diverted monies to fund the wireless build out and b) left the rural and low income areas to deteriorate. Moreover, c) the under payments created losses, which were d) used as an excuse to not upgrade the rural areas, e) cut staff and f) even to complete the cycle by getting rate increases on basic service customers.

6) Market Power: “Backhaul”, the core infrastructure, also known as “Special Access” or “BDS”, “Business Data Services” control the end user prices of wireline and wireless and they have been manipulated to keep prices inflated for both end users and competitors.

Backhaul are the guts of the networks, but they are just regular basic copper and fiber wires used for data lines to cell sites and to competitors and AT&T et al. And because AT&T and Verizon control not only the wired services but also the wires that are used for wireless, they can, in the end, control the retail communication prices in the US. And it is clear there is no competition to these primary wires.

Ironically, AT&T, before it was bought by SBC, one of the Bell companies, started a call for an investigation of “grossly excessive” special access rates — and this was in 2002.

Based on Verizon NY Annual Reports we found:

  • $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%; previous years could be over 65%.
  • $80–100 billion in revenue is hiding. There is no FCC or state reports that detail the size, scope and cross-subsidies that are evident

7) Market Power: Massive deception about the actual number of lines in America. Hundreds of millions of access lines are also hiding.

No one is using the copper and wired networks anymore? Wrong.

  • 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. By 2020, that means that there was approximately $80 billion dollars in revenues with zero published lines in service– and the FCC’s last data, which was part of an investigation using 2013 data, showed that ½ were copper-basic phone lines that were reclassified were NOT be counted as an access line.
  • 108 million wired lines were listed in the FCC’s Marketplace report as being used for voice calling in 2020, while at almost 40 million were the copper based phone line.

The 2 Primary Market Forces Driving the Overcharging: Broadband Scandal & Accounting Scandal.

8) Market Power: Broadband Scandal: From 1992–2018 an estimated $500 billion was charged to local phone customers for upgrades of the states fiber optics, over and over. This included not only rate increases but also state and federal tax breaks, and free use of the rights-of-way.

Previous Failed Broadband Commitments, 1992–2018

§ $500 billion in overcharging; (this is the low number.)

New Jersey, Verizon, a classic example.

§ $15 billion overcharging, Verizon New Jersey’s plan for 100% with fiber completed by 2010; Customers paid $5,000-$7,000, based on changes in state laws, per household, by 2015.

§ UPDATE: We estimate that $16.5-$18 billion by 2020 was charged to wired customers for networks at least ½ will never get. That comes to; $6,500-$8,500 per household by 2020. The State allowed for wireless as a substitution at DSL speeds.

§ Background: New Networks Institute tracked the original commitments, which were to replace the existing copper with fiber optics, since 1991, and encapsulated what happened in a trilogy of books, over 60 reports, and state and federal filings, that resulted in an estimated overcharge of $25 billion annually, nationwide.

See: New Networks Institute Reading Library

9) Market Power Accounting Scandal: The ability to manipulate the FCC’s cost accounting rules, known as ARMIS, made the entire US infrastructure appear unprofitable, and the utilities became a cash machine for the other subsidiaries, especially wireless.

Big Telecom Accounting Manipulation, 2006–2020

§ $818 billion in overcharging from 2001–2020

§ $79 billion in annual overcharging, 2021 estimated from rate increases.

Verizon NY Model

§ $3.7 billion, Verizon New York 2017; each state is different; Verizon NY published annual report showed billions in cross-subsidies, tax benefits.

§ $21–23 billion overcharged through cross-subsidies of Corporate Operations dumped into the utility, and the construction budgets diverted to wireless, 2019.

Background: Starting in 2001, the FCC, with the help of Big Telecom, were able to manipulate the FCC cost accounting rules that allocate the expenses to different services that use the state public utilities, with the impact — it made the majority of all expenses be put into local wired service, and charged to local phone customers. At the same time, AT&T et al. other lines of business that use the same wires did not pay market prices, and it allowed the wireless business to divert the state wired construction budgets to fund wireless instead of upgrading rural areas and inner cities. The utility also became a dumping ground and forced to pay the majority of Corporate Operations expenses, which includes executive pay to lawyers and lobbyists. This shell game made the entire US infrastructure appear unprofitable, which was used to manipulate public policies.

NOTE: We merged the accounting in these models post-2018. The total was a great deal more that we report here; this was the medium-low scenario. Also, due to the Pandemic, and new government subsidies, the accounting for broadband overcharging will also be impacted.

PUNCHLINE: How Much Are You Owed?

This calculation asks — -how much did each household get charged, on average, for 2020?

  • $8,000-$10,000 per household extra, 1991–2020
  • $450-$625 annually in overcharging

However, as we demonstrated, different users have been harmed in different ways. — Those who have a basic phone line have been harvested — and that is a specific version of overcharging, tied to a specific product.

There are many details that would change this model. For example, should the state reimburse those who have been illegally funding the wireless networks via local rates?

Without full audits, by state, the total overcharging will be best-guesstimates.

Now the question is —Who will help us fix this mess?

Background

New Networks Institute (NNI) has been tracking customer overcharging by our communications providers since the since the 1990’s; many know of our trilogy, “The Book of Broken Promises”, which started in 1998, and it includes, “$200 Billion Broadband Scandal” (2005) and $400 Billion Broadband Scandal” (2014). We also have the combined expertise of the IRREGULATORS, (and previously, Teletruth) our independent consortium of experts, analysts, auditors and lawyers who developed reports and FCC and state complaints, filings, and our case against the FCC, IRREGULATORS vs FCC. etc. (See the bibliography.) What we present are estimates that still require audits and analysis to know the full extent of the harms.

NNI & IRREGULATORS Reading Library

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