Cuomo’s Gambit: The $15 Low Cost Broadband Plan Is Theater vs Fixing the Digital Divide.

According to Governor Cuomo’s press release:

“Governor Andrew M. Cuomo signed legislation establishing the first-in-the-nation requirement for affordable internet for qualifying low-income families,…requires providers operating in New York State to offer $15/month high-speed internet to low-income families across the state. This new affordable internet program will impact seven million New Yorkers and 2.7 million households.”

And, as if on cue, the “telecoms”, sometimes misnamed “ISPs”, took this to court Ars Technica writes:

Internet service providers today sued New York to block a state law that requires ISPs to sell $15-per-month broadband plans to low-income households.

“The lawsuit was filed by lobby groups including USTelecom and CTIA–The Wireless Association, both of which count Verizon and AT&T among their members. Lobby groups for many other ISPs also joined the lawsuit, with plaintiffs including NTCA–The Rural Broadband Association, the Satellite Broadcasting & Communications Association, and the New York State Telecommunications Association….”

Notice that those who are taking the case are not Verizon or Charter, who are the primary phone and cable company, or Verizon and AT&T Wireless — but are the lobbying-associations to hide the trail of who is doing this legal action.

And notice Cuomo never says the names of those who will be offering the service, such as Verizon and Charter, or Verizon and AT&T Wireless — so as to not call out companies that he has been helping, for years, like Verizon.

A Few Things

• This Cuomo plan is political theater — and it most likely won’t be implemented. It does nothing to fix the underlying problem that there’s no serious competitive high speed broadband at reasonable rates in NY State.
• Cuomo’s statements, even in the press release, shows it’s all about ‘show’ and no actual facts. Perhaps you didn’t know that 98% of NYS can get 100 Mbps services today? That claim is pure fiction and a ruse to divert attention from Como’s historical complicity with the industry.
• This law suit against the law is also a farce and just part of the theater. Of course the industry is going to sue when they are not going to get compensated for lowering their inflated rates, and just telling them to do it without any cost models, for example, is ridiculous.
• Moreover, this could be just a dance to get the telcos more money, compensation for discounts. But it appears that Cuomo is a doing this as a distraction to stop the calls for impeachment over a few different scandals, not to mention, he wants to ‘look tough’ on the big corporations.

NY State needs a serious plan that halts the current cross-subsidies of wireless.

• Full Stop: Cuomo’s plan and this case are just distractions. The State needs to get serious about broadband in NY State and that requires full audits of Verizon and of the state telecommunications public utility, due to the massive cross-subsidies that allowed Verizon’s other lines of business, like wireless, to use the state utilities as cash machine — raising all rates, including broadband — and creating the Digital Divide
• Halting these subsidies, requiring Verizon’s subsidiaries to pay for the use of the networks and refunding the billions in construction budgets that they used without reimbursement — and other items, will lower prices and give billions to the telecom utility to build out the fiber, which had been promised.
• Halting the ‘harvesting’, where customers have had continuous rate increases on all aspects of service, until they scream ‘Uncle’ and leave or continue to get gouged, has continued for 15+ years, and should also be investigated, especially when the increases in price are based on expenses to fund the build out of the wireless infrastructure, or to pay for the corporate operations expenses.
• Open the networks to competition for lower prices and choice, should be the next steps, but it requires auditing the guts of the networks known as “Backhaul” (or “Business Data Services”, “BDS”), the basic copper and fiber optic wires to cell sites or used by competitors or even banks — which now have obscene profits from also being subsidized, which, in turn, inflates all US communications/broadband service prices.

The Telco Case — Verizon, AT&T, Comcast and Charter — Is Made Up Fiction.

• FACTS: The case claims that broadband is an “information” service; In NY, Verizon’s fiber to the home, FTTP is “Title II”. The telcos claim there has never been state ‘rate regulation’ of broadband, (adjusting the price of broadband service to consumers with regulation). Yet, there is a regulatory scheme where all local phone customers have been overcharged through rate regulation to fund a fiber optic upgrade and worse, it now illegally subsidizes their wireless network infrastructure.

Cuomo’s Need for a “Public Interest” Push.

The New York Post, May 3rd, 2020, headline shows that Cuomo’s future is unclear, at best, and that the Agency that will be defending his $15 plan is investigating the claims against him — and he is attacking the NY Attorney General’s work.

“Gov. Cuomo claims he ‘did nothing wrong, period,’ says he will not resign.” “Gov. Andrew Cuomo dug in his heels and again vowed not to resign — while appearing to take a swipe at state Attorney General Letitia James.”

The NY Daily News, May 3rd, 2020, also covered the story. It appears to be a continuing saga in most NY media.

Cuomo cautions against ‘faith in anything’ uncovered by AG James’ probe “Gov. Cuomo sowed doubt Monday about the integrity of Attorney General Letitia James’ investigation into his alleged sexual misconduct…”

Cuomo’s $15 Broadband Plan

Times Union writes:

“The governor said he expected the industry would be upset by the law and would seek to stop it. His administration has continuously pushed the envelope to treat internet providers as utilities, like phone and electric companies, as the internet has gone from a luxury to a necessity the past 30 years.”

“Let me be abundantly clear — providing internet in the Empire State is not a god given right,” Cuomo said. “If these companies want to pick this fight, impede the ability of millions of New Yorkers to access this essential service and prevent them from participating in our economic recovery, I say bring it on.”

Note: Cuomo has never “pushed the envelope” about broadband as a utility. The telecom public utility networks have been left to deteriorate and New Networks Institute, Communications Workers of America. and Public Utility Law Project, not to mention the previous Attorney General’s Office, filed with NY State pertaining to the condition of the networks for the last two decades.

Cuomo’s ‘First in the Nation’ Was Not Even First in the NY State Legislature.

One has only to check the NY State legislature database to see that there were other previous bills presented to offer low income families broadband or to do other items that the Cuomo bill puts in play — like a study about broadband deployments, speed and price in the state — which Cuomo previously vetoed.

And, to repeat, Cuomo never takes ‘Verizon’ or ‘AT&T’ or the other companies to task by name.

Moreover, the other materials presented in the release are just not right.

• Cuomo claims that 98% of the State has access to broadband with speeds of at least 100 Mbps.

“In 2015, the State undertook the largest and most ambitious broadband initiative in the nation, dedicating $500 million to broaden internet access statewide. This investment, coupled with regulatory reforms, expanded the reach of broadband so today 98 percent of New York households have access to high-speed broadband with download speeds of at least 100 Mbps.”

As we pointed out, data from Microsoft showed that there are massive holes across the State in the deployment of high-speed networks for the delivery of internet services.

• The press release doesn’t even mention New York State statistics for the cost of broadband connectivity or who does and does not have it. It uses national statistics.

“Nationwide, 43% of those earning less than $30,000 are not connected to internet at home, and 26% of those making $30,000 to $50,000 remain unconnected at home. It closes to 8% unconnected for those making $75,000 or more. Meanwhile, nationwide only 66 percent of Black households, 61 percent of Hispanic households, and 53 percent of Native Americans living on tribal lands are connected to internet at home, compared to 79 percent of White households.”

Cuomo also claims that this plan will help 7 million people from 2.7 million households. Unfortunately, a large percentage can’t get high speed connectivity services with 100 Mbps — so this appears to be another made up statistic.

Ripping Apart the Telecom Case

This is from the telco court challenge.

“Broadband service “transmits data at much higher speeds” than preexisting technologies, such as dial-up connections provided over local telephone facilities. NCTA v. Brand X Internet Servs., 545 U.S. 967, 975 (2005).

“2. Under federal law, broadband Internet access service (“broadband”) is an interstate information service that is subject to a federal regulatory framework, under which a combination of mandatory disclosures, competition, and federal and state enforcement of preexisting laws benefit consumers. The Federal Communications Commission (“FCC”) has consistently — both in 2015 when it regulated broadband as a common-carrier service and in 2018 when it re-established the current, non-common-carrier federal framework — rejected ex ante rate regulation for broadband. Indeed, the broadband service that New York seeks to regulate has never been subject to rate regulation at the federal or state level.”

In English, the case claims:

1) The State does not have the right to set ‘rates’ of the broadband service and

2) Broadband is an ‘Interstate Information Service’ — not ‘common carrier’ networks.

Hiding in Plain Sight: Contradictory Facts

This has been one big, long-tail con job. Verizon wanted to build out FiOS, the fiber to the home service, but didn’t want to actually charge investors for it. Verizon was able to convince ALL of their state utility commissions that the fiber optic wire is part of the state utility — and a telecommunications, common carrier, Title II network.

At the same time, they told the FCC that it was an “interstate information service”, so that they can claim competitors can’t use the networks as an information service is ‘Title I”; Verizon et al. even claimed Title II harmed investment.

We believe Verizon committed perjury to either the states or the federal government — as well as to the public… and it cost the public billions. This is directly from Verizon NY.

Here is a collection of the same, almost exact quotes from multiple Verizon states; it was dubbed “Title Shopping”, playing the state off of the federal regulations. We filed with the FCC in 2014 and continuously since then on this topic.

• Comments First: FCC Open Internet Proceeding “Title Shopping: Solving Net Neutrality Requires Investigations” , July 14th, 2014
• Comment Second: Verizon’s FiOS Fiber to the Premise (FTTP) Networks are Already Title II in Massachusetts, Maryland, Florida, New Jersey, District of Columbia, Pennsylvania, New York

I.e., Verizon NY, New Jersey, PA, MA, MD, DC, VA, RI, etc — all had the same play.

IMPORTANT: If the fiber optic wires weren’t classified as “Title II”, then Verizon couldn’t put the expenses into the state public utility and charge local phone customers.

Rate Regulation vs Rate Increases to Illegally Subsidize the Fiber-Broadband to the Wireless Company.

The Telco Case:

“Indeed, the broadband service that New York seeks to regulate has never been subject to rate regulation at the federal or state level.”

This is a lot worse than this paragraph states. Local Service had rate increases to pay for the fiber optic wires — broadband — which Verizon and their lobby and front groups don’t want you to know about.

In NY, Verizon was able to charge local phone customers for the fiber optic network build out. Here is proof that local phone rates — were set — rate regulation — due to the “massive deployment of fiber optics” — i.e., the broadband wires for FiOS.

If this wasn’t bad enough, this capital investment is coming out of the state public telecommunications utility construction budgets, as told by the NY Attorney Generals’ office. In a response to an inquiry by the New York State Public Service Commission and the New York State Attorney General’s Office about capital investment, Verizon stated that in 2011 the company spent over $1 billion. The Attorney General claimed this was misleading, as the money had been shifted to fund Verizon Wireless and FiOS TV:

“Verizon New York’s claim of making over a “billion dollars” in 2011 capital investments to its landline network is misleading. In fact, roughly three-quarters of the money was invested in providing transport facilities to serve wireless cell sites and its FiOS offering. Wireless carriers, including Verizon’s affiliate Verizon Wireless, directly compete with landline telephone service and the company’s FiOS is primarily a video and Internet broadband offering….Therefore, only a fraction of the company’s capital program is dedicated to supporting and upgrading its landline telephone service.”

In fact, the reason NY is not fully upgraded to fiber optics is because of these illegal cross-subsidies of wireless.

In a recent report we documented that the construction budgets for the wireline networks were diverted to building out the wireless infrastructure, leaving rural and low income areas with the prospect of shutting off the existing copper wires and being replaced with wireless.

• An estimated $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 and other charges competitors pay and Verizon underpaid.

Halting these cross-subsidies are a must. Using this billion + would be enough to upgrade NY State and with the other monies help to close the Digital Divide — and lower prices for everyone, not just a fraction of the population.

NOTE: We focus on Verizon NY, the state public telecommunications utility, because it is required by NY State to publicly publish an annual report with financial and business information, and we have published analyses for over a decade that were used for a successful investigation and settlement of Verizon NY in 2018.

Conclusion: The consequence of all of this tomfoolery is that America’s prices are 5–20 times more than overseas and there is a Digital Divide, as we see, that has been created via political theatrics and the telcos.

Because these companies control the underlying wired infrastructure, i.e. the wires of the state public utility, the companies have also been able to set extremely inflated prices on all services; and without competition, prices are much more expensive for our communications than other countries.

This is Market Power 101. It is time to break up Big Telecom — and it appears that we need to trip up the telco and politician dance steps and expose what’s behind their theatrical performances — and what’s behind the masks.