Charter, (Spectrum) Altice (Optimum) and Verizon’s FiOS Cable TV Franchises Expired in New York City. Do Not Renew but Investigate — Finally.
To be very blunt, NYC should not renew any of the current cable franchises that have expired and it should start with a real change — a clean sweep — to address the actual problems with NYC and NY State’s telecommunications and cable company services; These issues have been here for decades, but they are a political hot potato and ignored.
And, this is not just about cable TV or broadband but the price of your wireless service, and solving the Digital Divide, once and for all.
“DoITT is hereby commencing a proceeding, as contemplated in Section 546 of Title 47 of the United States Code, to consider the possible renewal of cable television franchises held by subsidiaries of Charter Communications, Inc. (covering Brooklyn, Manhattan, Queens, and Staten Island), by a subsidiary of Altice USA, Inc. (covering the Bronx and Brooklyn), and by Verizon New York, Inc. (covering the City as a whole), all of which current franchises will expire in July of 2020.
“The current term of the Verizon NY, Inc. franchise began in 2008; the current term of the Charter and Altice franchises began in 2011.”
Note: This article is an abridged version of the IRREGULATORS’ testimony in front of the NYC Franchise and Concession Review Committee Public Hearing January 11, 2021.
IF YOU ARE IN NEW YORK CITY — READ THE REST OF THIS — AND THEN CLICK TO FILE COMMENTS.
The Covid pandemic has exposed that New York City and New York State have massive holes in the deployment of broadband services. Worse, there is no serious competition — and prices have been on a continuous rise for 30 years. And these agreements were signed a decade ago or more, in 2011 for Charter-Spectrum and Altice-Optimum, and 2008 for Verizon FiOS.
Unfortunately, the City of New York and the other city officials have been clueless to what has really transpired. In fact, the City put together a Master Internet plan that left out important facts, thus creating basic flaws in the plan that we believe will make it fail.
On top of this fiasco, Governor Cuomo announced “Broadband for All”, which is now just a comedic punchline. In 2021, Cuomo claims that 98% of NY State has been completed and that he now has a plan to finally solve the Digital Divide with a broadband-to-the-press-release announcement.
Too Lazy to Follow the Money.
Let’s start with this — At the core of all of the Verizon telecommunications — broadband, wireless and internet services, is Verizon NY, the NY State public telecommunications utility that covers most of the State as well as NYC.
NOTE: This is not Verizon Communications, Inc. — the holding company, but the financial report of a state telecommunications public utility. And every state used to or still does require one of these reports, using the same FCC accounting — but no state that we know of makes these reports public, and they are all being strip-mined of basic information.
This financial report shows billions in cross subsidies of the state wired utility and the other lines of business — including wireless. And this is in just one year. This is the official Verizon NY Annual Report and it contradicts the City and Governor plans that were announced; it strips-bare what happened.
The Digital Divide was created over the last 2 decades and no one seriously noticed. The annual report shows the flows of money; the revenues and expenses. Had the State audited the books, as we have suggested multiple times, this could have averted the severity of the current Digital Divide.
In fact, no one mentioned that Verizon NY is the state telecommunications utility, nor mentioned in the Master city plan that NYC is part of this utility. And no one even quotes the annual reports revenues, profits, and expenses or the cross-subsidies. We will get back to this.
But, as we discuss, if you actually examine the revenues and expenses it also reveals billions in potential funding that is available to fix the Digital Divide as well as lower prices, even increase tax revenues.
Let’s go through some of the primary issues for your cable, phone, internet, broadband, wireline and wireless services.
America’s Communications Prices are 5–20 Times More Expensive than Overseas.
Wireless: In Europe, based on Rewheel Research’s extensive wireless surveys:
- Overseas, wireless “truly unlimited” means over 1000 GB with prices hovering around $35 bucks or less.
- US big “unlimited” plans are just deceptive and are capped, usually 50 GB — with prices of $70–$90 dollars.
- On these plans, we are overcharged, on average, over $50 a month — and we don’t have ‘truly unlimited’ GB wireless plans.
US Triple Play (broadband, phone, and cable TV) averages $210 month and rising.
- Overseas, the price, on average, is under $50.
- We’re overcharged about $160 a month.
The European Union’s 2020 Full report Study on Mobile and fixed broadband prices in Europe at the end of 2019, findings is that ‘standalone’ broadband with 30–100 Mbps is only 22 Euros. The triple play in the US is now $210, dollars — Europe is paying 41 Euros. (The dollar’s exchange rate has been $1.10 and now is $1.20; 22 Euros is about $24–25 dollars.)
But it gets worse: The report also has a ‘cheapest’ price and the ‘stand alone’ broadband price is 8.71 Euros — around $9-$11 dollars, and the triple play is around $23–25 dollars, depending on the exchange rate.
Take a moment; if prices were this low there would be little need for government subsidies of $15.00 as proposed.
Our Bills are filled with Garbage: Made-up Taxes, Fees and Surcharges.
- The “Cost Recovery Fee”, the “Broadcast-Sports fee”, or the “Admin” fees are not government mandated and add 15–40% on our bills for no reason.
- “Broadcast TV and Sports Programming fee”, is a separate charge and it is now $19.15 a month on the Brooklyn Spectrum triple play. It went up 751% from $2.25 in only 6 years ago. This is not-mandated by any government, and unaudited. Removing this made-up fee would make prices a bit more affordable immediately.
So, when politicians and pundits talk about making our telecommunications affordable, it is a punchline to a not funny joke that has been repeated over and over for decades. In Brooklyn NY, the Spectrum triple play is now $215.00 for basic service; it was advertised at $89.99, a price you can never get, and this was the promotional price; it goes up over 100% after the slight of hand promotion ends. And Verizon and Altice/Optimum all have the same made-up fees — even for wireless service.
- Deceptive Practices: America Is Paying ‘Hyper-Overcharged’ Prices for Wireless: There Are No ‘Truly Unlimited’ Plans.
- Note: Consumer Reports 2019 Report found that the average price for a Triple Play was over $215.00 nationwide.
- Verizon Wireless 4G & 5G are 5,000–33,000% More Expensive Per GB than Vodafone UK; Others Worldwide. Why?
- No more made up taxes, fees, and surcharges on our bills.
The rural areas of New York State and the inner cities all have Digital Divide issues.
There is a combination of those who can’t get the service tied to those who can’t afford the service.
According to the Gotham Gazette:
“At a hearing on Tuesday October 13th, 2020 ‘New York, City Council members sought solutions to the major gaps as they and advocates decried a slow pace of progress that has left far too many New Yorkers behind. According to city data, 40% of households in the city — home to roughly 3.4 million people — don’t have both home and mobile internet connections, and 18% have neither’.”
And yet Governor Cuomo has claimed his “Broadband for All” plan covers 98% of the state; this is just made-up gibberish.
In an op ed, Assemblymember Marjorie Byrnes, R-Caledonia, and Senator George Borrello, R-Sunset Bay from Livingston County states:
“All you have to say is “broadband access” and the frustration is palpable. Our offices have been inundated with calls and messages from parents, business owners and community leaders who are tired of Albany’s promises to bring high-speed internet access to their communities…. While Governor Cuomo claims his Broadband for All initiative has brought broadband internet to 98 percent of New Yorkers, that figure is widely acknowledged to be extremely inaccurate.”
Speed Matters, detailed a study by Microsoft showing that the FCC data is inflating the actual deployment coverage of high-speed broadband multiple times.
“The FCC estimates that about 25 million Americans do not have access to Internet at broadband speeds. But a new Microsoft study puts the number at 163 million — almost half the population of the United States.”
Cuomo’s analysis has been based on using FCC data that everyone knows is corrupted, or is quoting other sources that also rely on the FCC data.
Speed Matter continues:
“Part of the problem is that the FCC’s measurement of broadband access overestimates coverage. By the FCC’s measurement, if one subscriber in an area has broadband service, the entire area is considered covered. For example, FCC data shows 100 percent broadband access in Ferry County, WA, while Microsoft estimates coverage at 2 percent.”
When we look at the FCC compared to Microsoft, Cuomo’s broadband coverage appears to be made of Swiss Cheese. Instead of 98% coverage, Microsoft claims there is only 55%, And some regions where it is supposed to have 97% coverage, there was only 25%.
Where’s the Competition?
If you notice, none of the Governor’s info or Microsoft or the FCC ever supplies what was deployed by which company. Thus, the Governor’s numbers are not about competition. As long as some company is claiming to offer a service, that is good enough — so what if it isn’t telling the entire story.
To sum up so far,
- Prices are seriously inflated on all services, wireline, wireless or the cable triple play as compared to overseas.
- There are massive holes in deployment for high-speed broadband, both in New York City and State
- Verizon NY is a state regulated utility and no one mentions this fact;
- Worse, there is even a full annual financial report and no one mentioned this fact.
- And it shows billions in cross subsidies.
Simply put, no franchise should be renewed until America’s prices are the same as overseas, and all holes in deployment are filled — for Verizon and the cable cos. This would include removing any and all made up added fees and surcharges, which would lower bills 15–30% on average.
A few more details
The first letter requested that the Mayor hold Verizon accountable to provide to 100% of New York City’s households Verizon’s FiOS fiber to the premises (FTTP) cable and broadband service, especially in low-income areas.
As we pointed out, Verizon had an obligation under their NYC franchise to have FiOS service available to all areas of New York City, including low-income areas, by July 2014. Unfortunately, an estimated 25% of the City had not been upgraded and most of these are in lower income areas. …Read more
On, November 24, 2020, we were pleased that on the heels of our letter, NYC would be implementing much of our proposed plan.
“This settlement is complementary to other City-led efforts underway to achieve the goal of universal broadband, including the Taskforce on Racial Inclusion & Equity’s efforts…New Yorkers need more from the companies that serve them — they need affordable service options. At a time when nearly a third of New Yorkers do not have home broadband, New York City’s Internet Master Plan has made the single largest capital investment by any municipality in the country to end the digital divide.”
But, at the core, inflated prices still needs to be fixed, as competition is not bringing affordable broadband. Which brings us to Letter 2.
Our first letter laid out that the City should get Verizon to fulfill the commitment on the books — 100% of residences in New York City with fiber to all of the premises with FIOS. Unfortunately, even if the service existed, it will only be an expensive duopoly and not fix the excessively high rates we pay in America, much less NYC.
The second letter asks the City to join our call for an investigation to halt the massive financial cross-subsidy scheme underway, where an estimated $1.1-$1.6 billion has been overcharged in just 2019, based on the Verizon New York 2019 Annual Report, published June 2020. As discussed, Verizon funded much of the expansion of its wireless network by diverting construction budgets that should have been used to build out New York City and the rest of New York State with fiber optics. These subsidies must be halted and the funds redirected to upgrade all of New York State at affordable rates.
And these cross-subsidies can be seen in the actual Verizon NY 2019 financial report. However, the idea of there being massive illegal cross-subsidies of the wireless business is not new, just ignored.
In 2012, the NY State Attorney General claimed that 75% of the capital expenditures in New York State went to fund the building of the fiber optic wires to cell sites and to FiOS, a cable service, not to maintain or upgrade the State’s copper networks.
But, to fix this mess, the removal of all subsidies as well as other practices, such as the dumping of corporate operations expenses, or all of the subsidiaries not paying market prices, must be fixed.
Letter 2 laid out these details: Investigate the Billion + in Overcharging and Cross Subsidies
- We estimate that Verizon NY Local Service was overcharged an estimated $1.1-$1.6 billion, in just 2019, in just NY, including NYC. (This is the low number.)
- “Local Service” is the basic, wireline, voice-only, copper-wired based business.
- Verizon New York has shown losses of over $2 billion for most years over the last decade, almost all created by “Local Service”,
- Local Service was charged over $1/2 billion in “Corporate Operations” expense, 61% of the total Verizon assigned to NYS.
- In 2017, Local Service was charged $1.8 billion, 61% of the total for this line item.
- Local Service was charged $205 million, 54% of the total, for “Marketing”. When was the last time you saw an advertisement or video commercial for basic copper- based phone service?
- It was charged $1.2 billion in “Construction & Maintenance” and has historically actually spent only $75–$125 million.
- Over the last 5+ years, it appears that the wireline utility diverted $5.3 billion to illegally fund wireless vs building out cities with fiber optics.
Here’s the problem.
Local Service should not have been paying billions in corporate operations expenses, nor $1.2 billion in construction or $205 million in marketing, which means all of this is subsidizing other lines of Verizon’s business instead of having upgraded and maintained the NYS’ infrastructure or finishing Verizon’s FiOS New York City franchise.
Backhaul: Sometimes Called BDS, Business Data Services
- Verizon New York’s Backhaul had $1.9 billion in revenues but paid ½ of what Local Service paid for construction or corporate operations expenses. The result is a 55% profit margin.
There is a second deep problem that is very hard to understand — but, the core wires — the guts of the networks used for broadband or wireless are called ‘backhaul, or “BDS”, “Business Data Services”, or sometimes “special access” and they are not special but their profits are through the roof even though they are using the utility wires and the public rights of way.
Working with Consumer Federation of America, we filed comments among other activities about the inflation of these networks’ charges to competitors and the profits, which are clear in the Verizon NY Annual Reports. And a new CFA report examines the issues tied to antitrust concerns.
The Cable Financials Must be Investigated. Outrageous Profits
According to Time Warner’s 2013 Annual Report, high-speed Internet services’ average cost to the customer was $43.92 and the voice service, (which is Internet-based) cost $34.40. However, since these costs are incremental, the costs to the company were $1.32 a month to offer the high-speed service, revealing a 97% profit margin, and only $8.94 to offer the voice service, which includes long distance and calling features, i.e., a 74% profit margin. This information is taken directly from Spectrum/Time Warner Cable’s own SEC filed documents and Comcast has reported almost identical costs and profits.
Post 2014, Time Warner and Comcast stopped providing this information in this format.
There are those who argued that there are ‘common costs’ and so the profit margins aren’t this large… prove it.
Every cent a customer pays needs to be accounted for since these are ‘franchised’ cable services with out competition to lower rates— the revenues and profits should be examined and seriously adjusted — downward.
Time Warner & Comcast’s “Social Contract”on America — -Thanks to the FCC.
In 1995 an actual agreement called the “Social Contract” was put in place to have the cable companies upgrade their networks and provide broadband and Internet services to schools in their territories. The FCC created a contract with an expiration date that allowed the companies to add up to $5.00 a month, a ‘temporary’ fee that should have been removed when the Contract expired at the end of 2000. It didn’t; we tracked and Time Warner (at least) never stopped charging customers the extra fee. This means that the industry has been collecting a few hundred million a month in customer overcharging and it continues today unabated.
Or $5.00 per month is $60 per year; 20 years is $1,200 — and counting.
We are requesting that the City and State finally examine the fundamental issues. Did Time Warner, now Spectrum. ever reduce the fees after the year 2000? How much was collected?
Second, we request the State start data collection to see whether schools had been wired, for free or at cost as there is no evidence that the Company wired the schools as required.
The FCC has continuously raised the Universal Service Fund Tax, claiming that schools need to be wired and yet it has made no effort to find out whether, under this Contract, any schools had been properly upgraded.
We ask — Had the cable companies done these upgrades and wiring how much money would customers have saved in USF fees, how much of the USF could have been used to get the schools high-speed broadband, and how much extra was spent because the companies never fulfilled their obligations?
Moreover, Time Warner and Comcast’s profit margins for “high-speed Internet” were 97% in 2013; the “Social Contract” additions became pure profits but cost every cable subscriber hundreds of dollars.
BOTTOM LINE: The cable franchises are up and America is paying 5–20 times more for services than overseas. We pointed to a number of issues that could start the process of making prices affordable immediately, Second, fixing the Verizon cross-subsidies and what looks like the same shellgame mathematics being used by cable networks, is a must, especially when these companies are swimming in state and federal government subsides — with Covid related, much more is expected to come.
And with prices going up continuously for 30 years, we need to rethink whether our monopoly providers failed us and whether we should stop treating them as ‘free market companies’ with competition.
IRREGULATORS PROPOSE A CLEAN SWEEP:
Coda: During the proposed and failed merger of Comcast and Time Warner we created a series of reports and articles which were the starting points for the investigations.