Dear LA County: Time to Investigate How AT&T (Pac Bell) Helped to Create the Digital Divide.

Los Angeles County, (and the iconic cities, towns, and municipalities that it encompasses, such as Santa Monica and Los Angeles, to Hollywood and Compton), like most of America, has proclaimed it is time to close the Digital Divide once and for all. And yet, there are fundamental, underlying facts that shake the foundations of any solution.

The chart above supplies, on the left, the official LA County Digital Divide Map, showing massive areas where there are households without internet access. The middle map shows the coverage area of AT&T-California, (formerly known as Pacific Bell) in LA Country, supplied by the FCC. AT&T California is the state’s largest telecommunications public utility. And, on the right, we see the AT&T coverage map overlaid onto the Digital Divide map. It shows that much of the problem areas in LA County are in the AT&T California territory.

And yet, LA Country Digital Divide Regional Strategy never mentions AT&T California, much less the AT&T Digital Divide areas — even though they are hiding in plain sight.

LA County isn’t alone in failing to identify this fact. No state broadband agency we examined has actually figured out that the companies that are getting state and federal corporate welfare funds and have been the state telecommunications utilities for over 100 years, are the same ones that created this ‘Digital Divide’. Pac Bell started in 1906.

On November 15, 2022, LA County is going to have a hearing and possibly vote to modify some current regulations — as the plan is to have these areas — the low income areas — offered wireless services as a solution to the Divide. Wireless still requires fiber optic wires to work, however.

And the current psychology in America is to just throw money at the companies. Over the next few years over $100 billion of state and federal government subsidies will be distributed, and California, itself, will be spending over $6 billion, and more, as there is a current corporate welfare, government subsidy, feeding frenzy..…

The AT&T-LA County Digital Divide Map is a call for major investigations and audits. AT&T et al. should not be rewarded for helping to create the Digital Divide.

We recently published a new book: “Violations & Egregious Acts”, which is a 30-year summary of how America was supposed to have fiber optic future. Billions of dollars per state were charged to America’s phone customers since the 1990’s to fund these new networks. In fact, there were multiple changes in state laws to raise rates for these new builds.

To summarize, there are major points that LA County must address:

§ AT&T never upgraded the networks to fiber; where’s all the money?

As we will discuss, Pacific Bell, now AT&T California, had big fiber optic plans. Announced almost 3 decades ago, Pacific Bell was going to spend $16 billion to have 5.5 million households upgraded to fiber optics by 2000, and this included upgrades by replacing the existing copper wires with fiber optics. Los Angeles was one of the areas that was supposed to see a fabulous fiber optic future.

The announcement of a fiber optic future happened multiple times throughout America, which, in California included California First, AT&T’s U-verse, Gigapower, and other marketing campaigns. But, in the end, there have been continuous rate increases, ‘Harvesting’, and made-up fees, (and corporate tax perks) that continue the overcharging and inflated fees in 2022. Whole urban areas of LA County with underserved and unserved families, not to mention the more rural areas, all paid extra.

§ AT&T et al. still control the infrastructure; the prices of all services are out of control.

AT&T, with Verizon and CenturyLink, have control over the wires, and thus has control over all pricing; also, AT&T did not show up with wired broadband competition to lower rates. And, AT&T uses the wires to keep control of the wireless prices. LA County must investigate why America’s prices are out of control.

§ In 2022, the average price of a wireless service overseas with 100 GB is now under $10.00, (according to Rewheel Research).

§ Spectrum-Charter cable, (which now resells Verizon Wireless) is charging $14.00 per GB in NY City. That’s $.10 cents vs $14 dollars per GB.

§ NOTE: Verizon controls the price of the wholesale rates and thus the profits for competitors who buy the resale service.)

§ America’s triple play (phone, cable, and internet) now averages $215.00, while overseas it’s about $35.00. — That’s over $180 a month extra, over $2000 a year.

Fixing these prices should be the priority to make prices affordable and solve a part of the Digital Divide.

But this is not just about history or the current customer overcharging, but about billions of dollars that could be recovered from the Telecom Holding Companies — AT&T, Verizon and CenturyLink, (now Lumen Technologies) — funding that could be used to build out critical fiber infrastructure.

§ One of the largest accounting scandals in America has allowed massive financial cross-subsidies — and it is ongoing.

Starting around 2001 these Holding Companies have been involved in one of the largest accounting scandals in American history where the accounting formulas used to determine how expenses are allocated to different lines of business (subsidiaries) that use the networks, were shifted to be charged mainly to the utility wired phone customers, while the other lines of business, including wireless, were able to be illegally subsidized by the local subscribers.

In our filings with the CA Public Utility Commission and CA Broadband Council, (based on the actual financial Verizon NY 2020 Annual Report, published June 2021):

“We believe there is massive cross-subsidizing leading to overcharging of the wired networks by AT&T, costing consumers $1.7–2.4 billion annually and that this money can be redirected to fund fiber optic broadband to all, not at 100 Mbps speed for downloads but 1Gbps in both directions, as well lower dramatically lower rates on all communications.”

§ There may be Dark Fiber that can be put into service.

There are questions as to where all of the rate increases and added fees went to, not to mention the construction expenditures that should have been bringing fiber to cities. Besides funding media companies, it is clear that the construction budgets were diverted to build out the company’s wireless services.

More surprising, based on FCC reports, there were fiber optic wires that were rolled out but were never turned on. Known as ‘dark fiber’, in 2007 the FCC showed 4.8 million kilometers of fiber optic wire in the AT&T California utility territories, but only 21% were actually put in use. Are there really fiber optic networks that were never put in use but are in LA County that the cities could use?

§ The proposed change to the laws to help wireless appears to be related to AT&T and ALEC.

In reviewing the changes in the laws over the last 2 decades, we found another side that needs investigation — LA County appears to be relying on changes to regulation that helps the wireless companies — but it also appears to have the fingerprints of an organization called ALEC, the American Legislative Exchange Council, where AT&T and the telecom industry create model legislation that is then filtered into the state’s regulatory and legislative bodies via compromised-corporate politicians to help the company’s corporate interest and not the public interest.

In fact, as we pointed out, Governor Newsom already vetoed a previous wireless bill that had the same fingerprints of ALEC. These bills were designed to give the wireless companies the ability to force the roll out of their wireless services with the cities not having control over their own streets and facilities. And wireless is an inferior service to a fiber optic wire that should have been put in as promised over the last 3 decades.

Yet, somehow, no one ever mentions that these were created by AT&T et al. at an organization that is never named in public or tied to their legislation. You would think a failure to present these material facts would matter.

Conclusion

Not even mentioning that AT&T California is the largest state telecommunications public utility and it covers the majority of LA County, or excluding the history or not examining the current financials, begs the question — how can the State or the County expect it will make the right decisions when it doesn’t detail how the Digital Divide was created in the first place.

With continued rate increases and changes in state laws and regulations to accommodate claims of a fiber optic future, the opening chart clearly shows that Pacific Bell (now AT&T California), helped to create the Digital Divide and let their networks deteriorate, and did not properly upgrade the County, much less the State, over the last 30 years.

Moreover, we believe that there are billions of dollars potentially, that could be used to solve the Digital Divide once and for all — from halting the AT&T cross-subsidies to other areas of interest, especially turning on the dark, unlit fiber that appears to have been installed but was not put into use.

We repeat: There are fundamental, underlying facts that shake the foundations of any solution.

(Written with the assistance of the IRREGULATORS team.)

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Part 2: Let’s help LA County with some facts they should have been examining.

  • AT&T never upgraded the networks to fiber; where’s all the money?

There were multiple plans filed by Pac Bell at the FCC, the state commission, as well as highlighted in annual and quarterly reports, and a blizzard of stories-starting in 1989, but speeding up in 1993 — 30 years ago. And there were also city-municipality-based plans, state ‘incentive regulations’ plans and FCC-based video dialtone plans that all overlapped — as they were all talking about replacing the existing state public utility, copper wire-based phone line with a fiber optic line — and got the basic phone subscribers to pay for it, as well as tax breaks, etc.

This quote was filed by Pacific Bell for their ‘California First’ plan with the FCC.

That’s a $16 billion dollar investment for 5 million households to be upgraded with fiber optics by the year 2000, (Note, at one point it was 5.5 million households.) And notice that Pacific Bell is rolling out video and broadband, and data services using these new networks, and they are integrated with the existing services. Thus, Pacific Bell was never just the aging state utility that only offered basic voice phone service over copper wires, yet most continue to repeat this rewrite of basic facts.

Here are two quotes; one from the LA Times and then PC Week. Notice that the first quote covers parts of LA County.

“Interactive TV Will Come to Valley in ’94”, Los Angeles Times, November 16, 1993

“Areas of Canoga Park, Reseda, Sherman Oaks, Northridge, Van Nuys, Calabasas and Hidden Hills have been targeted for Pacific Bell’s Los Angeles roll-out of a high-speed fiber optic network that will bring customers everything from phone and cable television services to movies-on-demand, video catalogue shopping and video research libraries.”

“The Copper Age Is Over in California.” PC Week, October 3, 1994

“Hundreds of Pacific Bell technicians have begun yanking thousands of miles of twisted-pair copper telephone wire and replacing it with broadband fiber and coax. Lasers and light — that’s the future for this Baby Bell’s 10 million telephone customers, who will be among the first in the nation to ride on the information highway.”

In this second quote, notice that the copper wire is being replaced with fiber optics, that the future covers all of Pacific Bell’s (Baby Bell’s) 10 million subscribers in the state, and that this was starting in 1994.

  • Were there other plans to have LA Country upgraded to fiber optics? Yes.

These fiber optic deployment plans, then known as “video dialtone”, were filed with the FCC at the end of 1993, and they were an additive piece of the fiber optic announced plans. Notice Pacific Bell had filed for Los Angeles to start with 360,000 lines of fiber optics to the home, with other areas including San Francisco, Orange County, and even San Diego, CA — and all of these ‘permanent’ buildouts were cancelled right after the companies got deregulation for more profits and the loosening of regulations.

And, believe it or not, the amount of marketing hype was for years even louder than the marketing rants about 5G. (We added other cities in the other states, just to show that this was a nationwide fiber optic deployment — and virtually nothing was built.)

Thus, there were plans to upgrade the networks in California, as well as Los Angeles County. Starting in the 1990’s would have had ½ of the what is now AT&T California with fiber optic wires by 2000; by 2010 the state should have been enjoying their fiber optic future.

  • The dark fiber issue — i.e., fiber optic wires were put in but not turned on.

All of AT&T-Pacific Bell’s financials, number of lines, and other critical data were filed with the FCC — since 1939. Known as ARMIS data, the FCC stopped publishing the official reports in 2007; the last was “Statistics of Common Communications Carriers”, for the year ending December 31st, 2007

  • Out of 4.76 million kilometers of fiber wire that were put into the ground or on a pole, only 19%, 922,000 kilometers were actually in use, known as “Lit”.
  • This means that at the end of 2007, 81% of what had been installed had not been turned on — not used.
  • Where’s the dark fiber? Can the cities light it?
  • Were these wires put in with the state public telecommunications utility construction budgets as “Title II” — and charged to local phone customers, making them de facto investors?
  • Was this wire illegally transferred to wireless and lit for wireless?

In short, of the 4.8 million kilometers of fiber optic wire that had been installed by the end of 2007 in the California Pacific Bell state telecommunications public utility, how much of it was put in the Los Angeles County and can it be turned on and used — and connected to customers’ homes?

Could it be? Would the companies really put in a fiber optic wire then not turn it on?

LA County made some strides by adding to a plan “public assets”, to quicken the solution of the Digital Divide.

“August 31, 2021, the Board of Supervisors (Board) adopted a motion, “Utilizing Existing Infrastructure and Resources to Accelerate Digital Equity” to assess viable options for the County to facilitate residential access to reliable broadband service in low-income

“This week, ISD announced a master services agreement for several pre-qualified firms to deploy a community broadband network more quickly in heavily underserved areas using public assets to deploy internet access to the surrounding community. This groundbreaking approach serves as a last mile solution for households not currently served by or not able to afford broadband access.”

However, an actual groundbreaking approach would be to audit the actual physical wired infrastructure of the state telecommunications utility and take back the wires that were paid for but never put into use as the budgets for these networks has been essentially charged to the wired phone customers.

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We will continue this letter to LA County with the hopes that they ‘do the right thing’.

Next, we will detail the issues surrounding the manipulated financial accounting of AT&T et al. and the use of ALEC model legislation that have been used to put through harmful public policies and have gone unchallenged.

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Bruce Kushnick

New Networks Institute,Executive Director, & Founding Member, IRREGULATORS; Telecom analyst for 40 years, and I have been playing the piano for 65 years.