Dear Donald Trump, Elizabeth Warren, FCC Ajit Pai, Mike Doyle, Et Al: Follow the Money to Solve the Digital Divide.

(Et al. includes Kamala Harris, Nancy Pelosi, Gavin Newsom, Frank Pallone, Jr, Alexandria Ocasio-Cortez, and Pete Buttigieg, among others.)

Let’s fix the Digital Divide together.

§ First, the only way to fix the Digital Divide is to deal with the fact that America has paid multiple times for fiber optic deployments, upgrades of the state-based telecommunications utilities that are mainly controlled by AT&T, Verizon and Centurylink. Unfortunately, for the most part, the companies never delivered and this, in part, created the Digital Divide.

§ Second, at the core — IRREGULATORS v FCC is new, current challenge to expose one of the largest accounting scandals in American history. We uncovered that the FCC’s accounting rules, either by design or happenstance, have been manipulated; they now put the majority of all wired expenses into the state utility’s local service, and this made the entire US wired state-based public utility infrastructure to appear unprofitable. At the same time, it has allowed the companies’ other lines of business, including wireless, or even the internet, to be cross-subsidized, funded by charging local phone customers, and inflating the retail prices of almost all other services, including wireless, broadband or phone service.

§ This must be addressed and fixed immediately, before the FCC completes the dismantling of the state utilities (in conjunction with a group called the American Legislative Exchange Council, “ALEC”), shuts off the wired retail services and hands over the publicly-funded state utilities to their wireless (5G) companies as private property for private use, while making sure that the wired and wireless customers pay multiples for all services.

§ (We address the cable companies’ financials and the failure of AT&T et al. to bring meaningful competition, elsewhere.)

The IRREGULATORS is an independent consortium of senior telecom experts, analysts, forensic auditors, and lawyers who are former staffers from the FCC, state advocate and Attorneys General Office, as well as telecom auditors and consultants.

We will divide up this extended letter in 2 parts:

§ Part 1: The Factual History of Fiber Optic Deployments in the US.

§ We will cover Verizon: New York, New Jersey, Pennsylvania, Massachusetts, as well as AT&T: Kansas, Indiana, and California.

§ Part II: Follow the Money: IRREGULATORS v FCC exposes the cross-subsidies created by the FCC’s accounting rules and why stopping them could mean billions per state in new funding for broadband, internet to throughout America. Not doing it allows $50–60 billion in annual overcharging to continue and fuels the movement by a few companies to control the fundamental wired infrastructure used for all services.

PART I: The History of Fiber Optic Broadband in America

In 1991, literally 28 years ago, the Clinton-Gore presidential ticket laid out a plan to replace the existing copper wires of the state telecommunications utilities with a fiber optic wire; America would be upgraded and completed by around the year 2010. Dubbed the “Information Superhighway”, when this plan was announced, it was suggested that the government fund this new fabulous Digital Future. The “Bell” companies, now AT&T, Verizon and Centurylink (with caveats) — who control most of the states’ infrastructure in America, claimed that they would do these upgrades if state laws were changed to give them more profits for construction.

Verizon

  • Verizon was created by the mergers of Bell Atlantic and GTE, (with the help of William Barr, the current US Attorney General and former Vice President and General Counsel of GTE, then Verizon, starting in 1994, for 14 years.)

In 1993, Bell Atlantic (Verizon) claimed it would spend $11 billion to have their East Coast states, from New Jersey to Virginia, including DC, upgraded with fiber optics. And Bell Atlantic and NYNEX (which controlled from Maine to New York) went to their respective states to change the laws and regulations. It was not a pretty picture. From 1993–2004, every state granted some deregulation, yet there was virtually no residential fiber optic services delivered. (We created this chart in 2015)

Image for post
Image for post

New Jersey and Pennsylvania

RE: (Energy and Commerce Committee Chairman Frank Pallone, Jr. (D-NJ) and Communications and Technology Subcommittee Chairman Mike Doyle (D-PA))

New Jersey — In 1991, Verizon New Jersey presented “Opportunity New Jersey” which was based on a report by Deloitte & Touche. Then-New Jersey Bell would replace the existing copper wire with fiber optics in 100% of their territory by the year 2010 with speeds of 45 Mbps in both directions.

Verizon Pennsylvania, using a cookie-cut version of the same Deloitte report, claimed that “Opportunity Pennsylvania” would have 100% of the state upgraded to fiber optics by the year 2015 in rural, urban and suburban areas equally, with speeds of 45 Mbps.

This would have solved the Digital Divide issue in a large part of these states, (including the farm areas), but what happened was that neither company, from 1993–2005, did the upgrades to customer’s homes, even though they both collected billions per state to do it; the state laws were never fixed to remove the ‘price cap’ incentive regulations.

(NOTE: The Bell companies had varying percentages of coverage by state and there are independent telcos as well. We address the primary utility, such as Verizon NJ, with 95% of the state, or Verizon NY, with 90%. This is ‘coverage’ and not customers for the different services.)

Fiber Optic Promises, Part II: FiOS Fiber to the Home, Starting 2004

In 2004, Verizon announced FiOS, and it started deployments as a cable franchise, even though these networks were also charged to local phone customers and the state utilities.

In 2010, Verizon announced it was halting any further deployments, (unless there was an existing obligation), leaving most of these two states unfinished, but state laws had again been changed to give Verizon more money in each state.

Wireless Bait and Switch: In both of these states, Verizon was able to get the states to modify the agreements so that wireless (at the speed of DSL in New Jersey), and 1.5 Mbps in Pennsylvania, could substitute, thus completing their obligations.

This is from the current page of the PA Department of Community and Economic Development. Broadband is defined as 1.544 Mbps down and 128 kbps upload speed — which can’t do HD video.

Image for post
Image for post

In fact, both Verizon states claimed it was no longer profitable to actually wire their state utilities. Just the title of this Centre Daily Times story, April 10, 2019, says it all:

“Broadband internet access scarce in Pennsylvania rural areas.”

NYNEX: Massachusetts and New York

Massachusetts and New York were part of NYNEX, one of the original “Bell” companies that controlled the state utilities from Maine to NY State. According the NYNEX 1993 Annual Report, NYNEX was going to start with 130,000 fiber-to-the-curb lines by 1994 and have 1.5–2 million fiber optic lines by 1996.

In 1996, NYNEX would merge with Bell Atlantic and take the Bell Atlantic name.

Massachusetts

RE: Senator Elizabeth Warren, MA

Verizon MA claimed it would be upgrading 330,000 lines of fiber optics by 2000 (and it applied for 60,000 in Rhode Island) and in 1995 it was granted price cap deregulation, giving the company more profits.

Like the rest of these states, there were no fiber optic deployments and replacement of the existing copper wires, just billions collected to do the work that never happened.

In Massachusetts, Verizon came back, claiming it would be deploying FiOS, its fiber optic service, in the 2005 time frame.

This was part of the large cable franchise-statewide-sweep that was occurring throughout the US; Massachusetts and New York had a city-wide franchises, like cable TV.

This map of Massachusetts cable providers (and broadband) shows that Verizon simply abandoned the majority of the Bay State — causing the Digital Divide, as Verizon Massachusetts covers 99% of the state. (Note: this map is the last info we could find, from 2012.)

Image for post
Image for post

In April, 2016, Verizon cut a deal with the City of Boston for FiOS, but there are a host of caveats. First, most of the same parts of Beantown should have been done in 1996, then again in 2005 with the FiOS announcements. Now, it appears that Verizon is using the funds to illegally cross-subsidize the wireless 5G and small cell deployments.

  • New York

RE: Representative Alexandria Ocasio-Cortez and President Trump, NY

Verizon NY received a round of deregulation in 1995, based on reports where it claimed it would have 16% of the State upgraded by 2000. However, in 2005, Verizon convinced the NY Public Service Commission, (NYPSC) that it would start, in earnest, and deploy FiOS — and it was able to secure multiple rate increases for the “massive deployment of fiber optics” and “losses”, raising rates over 84% on basic service, and 50–250% on ancillary services.

In June 2009, the NYPSC issued a press release stating the rate increases were being done due to a “massive deployment of fiber optics” and “losses”.

“We are always concerned about the impacts on ratepayers of any rate increase, especially in times of economic stress… Nevertheless, there are certain increases in Verizon’s costs that have to be recognized. This is especially important given the magnitude of the company’s capital investment program, including its massive deployment of fiber optics in New York. We encourage Verizon to make appropriate investments in New York, and these minor rate increases will allow those investments to continue.” (Emphasis added).

And Verizon convinced NY and other states that FiOS is really a fiber optic wire that is part of the state telecommunications utility. And crazy, Verizon claimed it was put in as a “Title II”, common carrier network. This directly contradicts Verizon’s statements that Title II harms investment — it is the investment mechanism to charge customers.

Financial Losses

Then we have the losses. In the 2009 request for a rate increase, Verizon New York’s filing quoted the State that had paraphrased Verizon’s statements about their losses.

“There seems to be little question that the company is in need of financial relief; Verizon [New York] reported an overall intrastate return of a negative 4.89 percent in 2006 and its reported intrastate return on common equity was a negative 73.6 percent. For 2007, Verizon reported an overall intrastate return of negative 6.24% and an intrastate return on common equity of negative 46.0 percent.”

There were problems with this. Verizon NY is supposedly under “price cap” deregulation, where expenses to run the networks are not supposed to be used to grant rate increases. Moreover, as we tracked, by 2010, the “massive deployment of fiber optics” construction budgets that should have been used to upgrade rural cities, were moved to fund the wireless build out, violating state and federal laws. (And Verizon quoted the State quoting them because if they said they were losing money directly, it would trigger a ‘rate case’ and all of the investigations that might cause.)

NOTE: We will come back to these issues in Part II, as IRREGULATORS v FCC relies on Verizon NY’s 2017 and 2018 Annual Reports: it is the only state-based utility we know of with published financial reports.

Verizon also has a franchise agreement with New York City to have 100% covered with FiOS by 2014; Verizon has been taken to court as it appears that about 25–35% of the City was never completed.

AT&T

Kansas

RE: FCC Chairman Ajit Pai

FCC Chairman Ajit Pai has never mentioned that AT&T had made state-based, utility commitments to do upgrades in his home state of Kansas, with a focus on rural areas.

According to Mobile Health News reporting on Ajit Pai’s initiative to fund broadband and telemedicine services in rural areas, October, 2018:

“When I was a kid in the late 1970s and 1980s, my dad, who was a urologist in the small town of Parsons, Kansas would often hit the road…And it’s becoming harder to recruit physicians to serve rural communities. It’s getting harder to keep rural hospitals afloat.”

“Pai spoke about a number of initiatives the FCC is funding or spearheading to help bring broadband and telemedicine services to those rural communities. Many of these initiatives come via the Universal Service Fund, the mechanism by which the FCC subsidizes telecommunications networks.”

This means that Pai has presented a plan in 2018 to address what could have been solved, in Kansas, starting in 1994. Moreover, Chairman Pai never mentions that Southwestern Bell-Kansas, now AT&T Kansas, had a plan called “TeleKansas” to upgrade rural areas for telemedicine.

TeleKansas vs Fake History

This is an excerpt from a report written for Southwestern Bell, Kansas (now AT&T) in 1994 to highlight the upcoming deployment of fiber optics. Known as “TeleKansas”, laws were changed to give AT&T-Kansas more money to pay for this new wondrous future. And the report clearly laid out the new ways this upgrade of the state utility would be used for medicine, education, and consumer services — especially in rural areas.

Image for post
Image for post

And the research presented for TeleKansas by now-AT&T-Kansas detailed how rural areas would benefit with Distance Learning, Telemedicine — essentially tele-them-anything to raise rates. This is part of the Table of Contents:

Image for post
Image for post

This report is 25 years old and was one of thousands of reports that were created explaining how fiber optic upgrades, especially in rural areas, was going to change lives and deliver economic prosperity.

Of course, Chairman Pai was obviously too young or naïve to understand that AT&T was using TeleKansas as a way of getting more money via ‘deregulation’, read ‘price caps’, to fund this. According to the pitch, all Kansas high schools, colleges, universities and hospitals in the AT&T-Kansas footprint were supposed to be upgraded to fiber.

California Fiber Optic Failure, Round 1

RE: Senator Kamala Harris, Speaker of the House, Nancy Pelosi, and Governor Gavin Newsom

This page from the Pacific Telesis 1994 Fact Book details the deployments of fiber optics in different parts of the state that were to be done by 2000–19 years ago.

Another page from this report states that AT&T California was going to spend $16 billion to have 5.5 million households completed by 2000 with fiber optic upgrades.

The punchline of California is ugly. In 1996, Pacific Bell (now AT&T California) merged with Southwestern Bell (“SBC”) (which is another Bell company). Then, SBC closed down the state broadband plans, and started rolling out DSL over the old copper wires.

In 2003, SBC (AT&T) claimed it was rolling out fiber optic services to the home, and even filed with the FCC (as SBC) about this. Once the FCC helped by removing obligations on the utilities to open their networks to competition, this allowed SBC to merge with AT&T, (which was then a long distance company), and rename itself. And, to save money, it rolled out a copper-to-the-home service called “U-Verse”, with a fiber optic wire somewhere in the neighborhood.

And these actions started the Net Neutrality wars. Without competition, the companies can control multiple services and can block or degrade your service.

Merger Commitments should have Solved the Digital Divide. The next merger, AT&T-Bellsouth, put together the combined AT&T, (which included Pac Bell), with BellSouth, and this merger had commitments to make sure that 100% of AT&T’s 21 states had broadband, albeit slow, completed by 2007. Yet, we find that California had many unserved areas in 2007, not to mention in 2019, and AT&T never showed up, except when the company got paid more via government funding. This appears to have happened throughout the AT&T territories.

Had AT&T actually completed this task, the Digital Divide could have been, in part, solved — 100% coverage of 21 states, and the government funding could go to companies that really needed it.

We note that AT&T only has 3 million total fiber optic lines to the premises but covers 76 million locations.

AT&T Indiana

RE: Mayor Pete Buttigieg, South Bend Indiana

We end Part 1 with a very screwy series of events to demonstrate to the reader that something underneath is very wrong.

The headline and opening of this previous Medium article ties the state-based fiber commitments of the past in Indiana with the newest hype — a bait-and-switch wireless service called 5G. America’s high-speed fiber optic future is being hijacked.

We wrote:

“FCC Brendan Carr to Use ‘ALEC’ 5G Bill for Upcoming FCC Wireless Debacle; 25 Years of AT&T Vaporware to Rural Areas Revealed in Indiana.

“FCC Commissioner Brendan Carr went to Indianapolis, Indiana on September 4th, 2018 to announce the FCC’s new proposed 5G wireless regulations that are directly tied to ‘model legislation’ most likely created by ‘ALEC’, the American Legislative Exchange Council. On the floor of the Indiana Senate statehouse, he was joined by the Hoosier politicians, (most, if not all, appear to be getting money from AT&T el al.).

But, there is no mention of Indiana’s past. We wrote:

“In 1993, Deloitte & Touche created “Opportunity Indiana”, paid for by AT&T (then Indiana Bell), the incumbent phone utility. It claimed that this plan would deliver advanced telecommunications, including fiber optic-based broadband, to Indiana, including rural areas, if the laws were changed to give the company more money and the state got rid of regulations.”

That’s right. This is yet another cookie-cut report by Deloitte used by another one of the Bell companies in 1994 to convince the state regulators that if laws were changed to give the company more money, (and remove some regulations), it would replace the existing copper wire with fiber optics.

But, as it relates to the Digital Divide, this plan claimed it was going to deal with rural areas.

Click to see the actual excerpts from Deloitte’s Opportunity Indiana.

Image for post
Image for post

Answer (From Excerpts)

  • Without the deployment of advanced services and capabilities rural areas may be less attractive to information incentive businesses.”
  • “Rural America is following urban America into the information age, in which a wide variety of are critical factor of production to all businesses.”
  • “A significant opportunity exists to advance the public agenda for excellence in education through the adoption and expansion and availability of advanced telecommunications capabilities… the most rural areas…”
  • “Telecommunications could be especially useful in rural areas by helping organizations and communities to overcome barriers caused by inadequate information and distance to markets.”

Before the FCC, Brendan Carr was a lawyer for the CTIA, the wireless association, in a case that sued the City of San Francisco over wireless policies.

But what is really telling are the conflicts of interest; the current FCC is now using an actual ALEC bill, (funded most likely by AT&T et al.) as the basis of the FCC’s current 5G strategy. According to the FCC,

“Carr’s plan, (which became the FCC’s 5G plan) is modeled on the small cell bills enacted in 20 states across the country … We do not disturb nearly any of the provisions in the 20 state small cell bills that have been enacted.”

Notice that there is no mention that this is based on “model legislation” created at ALEC. This plan is designed to block the rights of cities and states from interfering with the FCC’s vision.

There is also no mention of Indiana’s previous fiber optic plans or the monies collected.

This is a cautionary tale: while the FCC claims that 5G will solve rural broadband issues — 5G is just another techno-bait-and-switch, another version of a technology that will fix everything if the regulators just get rid of any obligations or in this case, block any interference from states or even cities about wireless deployments.

=====

Next, the companies not only failed to deploy wired, fiber optic broadband to America, but they have been dismantling the public state utilities to hand them over to the wireless companies as private property by manipulating the FCC accounting rules… since 2001.

§ Part II: Follow the Money: IRREGULATORS v FCC exposes the cross-subsidies created by the FCC’s accounting rules and why stopping them could mean billions per state in new funding for broadband, internet to throughout America. Not doing it allows $50–60 billion in annual overcharging to continue and fuels the movement by a few companies to control the fundamental wired infrastructure used for all services.

Written by

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

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store