Dear Reimagine NY: Governor Cuomo’s Broadband Plan Is Broken. Let’s Fix It.

This shows New York State’s broadband availability based on the FCC’s data on the left side vs the right side supplied by Microsoft. Governor Cuomo has been quoting and using the FCC’s damaged statistics showing broadband is available in 98% of New York State, yet Microsoft is showing only 54.6% has access to high-speed broadband; some areas have as low as 25% coverage, and there is ample examples that the lower numbers are more accurate.

About Reimagine NY Commission:

“The Reimagine New York Commission aims to develop real solutions to build back better in the wake of the COVID-19 pandemic. The Commission will focus initially on recommendations to increase opportunity in three essential ways: reducing the digital divide, improving access to healthcare, and creating more and better employment in an increasingly digital economy. In each one of these areas, we will count on New Yorkers to share ideas and to propose new solutions.”

It is time for new solutions and Governor Cuomo should help NY State by examining key facts about telecommunications in New York State that have been left out of the discussion.

Governor Cuomo Announced:

“Proposal to Enact a First-In-The-Nation Guarantee of Affordable Internet for Low-Income Families as Part of the 2021 State of the State”

  • Internet providers would be required to offer affordable service at $15 per month to low-income households. The affordability requirements are part of the Governor’s nation-leading 2021 connectivity agenda.
  • Includes a series of actions to protect consumers through better. disclosures, promote broadband build-out and market competition, and undertake new digital inclusion efforts.

Returning to broadband coverage, the press statement continues:

“…his 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.”

Governor Cuomo’s plans over the last 5+ years have not come out as planned, and we present some critical pieces to bringing world class affordable broadband infrastructure to New York State.

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

And we have been active in New York for decades, including the settlement with NY State and Verizon NY, in July 2018, which requires Verizon NY to bring fiber optics to unserved areas in New York State as well as maintaining the copper networks that have been left to deteriorate.

Getting NYC Upgraded: More recently, on September 24th, 2020, the IRREGULATORS sent NYC Mayor de Blasio two letters. Letter 1 Letter 2

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. Verizon NY has an agreement to the City completed by July 2014, and the City took Verizon to court. However, we noticed that, not only was the franchise expired in July 2020, but that all areas of the city, including low income areas, had to be served — and weren’t.

On, November 24, 2020, we were pleased that on the heels of our letter, NYC would be implementing much of our proposed plan. “Mayor de Blasio Holds Verizon Accountable to Connect Half a Million New York City Households to Broadband”.

But, putting in a fiber optic wire doesn’t fix New York’s problem when customers can’t afford the service — and there is no serious competition to lower rates.

The second letter “New York City Must Call for a Halt to the Billion + Dollars of Cross-Subsidies and Overcharging by Verizon NY, the Public Telco Utility” requested financial audits of Verizon. Based on a decade of examination, we know there are billions of dollars of cross-subsidies, including wireless, that need to be halted and the money to be used to do upgrades of the state — and solve the Digital Divide — with no government subsidies required. It also could dramatically lower rates and increase the tax revenues, as we will explain.

However, we recently learned that the franchises for Spectrum-Charter and Altice-Optimum cable have also expired and the same issues haunt NY State’s ability for world-class-infrastructure and competition at affordable prices.

What’s Broken

Broadband coverage areas should be investigated — a NY-focused, serious survey needs to be done.

Cuomo’s press release states:

“Today 98 percent of New York households have access to high-speed broadband with download speeds of at least 100 Mbps.”

Richard Parsons, Chair of the Rockefeller Foundation and Co-Chair of the Reimagine New York Commission’s Connectivity Working Group, pointed out, using other data, that there are 2 million NY households with no ‘fixed’ broadband at home.

“Governor Cuomo’s broadband program enacted in 2015 represented a best-in-nation approach to addressing fixed broadband coverage for rural New Yorkers. Yet, over 2 million New York households remain without a fixed broadband subscription at home”

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 everyone knows is corrupted, or is quoting other sources that also rely on the FCC data.

Speed Matters 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.”

Returning to the opening chart, 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%.

To sum up.

  • The Census claims that there are 7.3 million households in NY State.
  • Using the 2 million statistic, this means that only 73% of households have available service;
  • Using the Microsoft analysis, we find that only 54.6% have a service available — only 4 million households are covered– i.e., 3.3 million are without service, and there are many areas with coverage being only 25%-40%.

Prices in the US are 5–20 Times More than Overseas — Why Hasn’t This been Investigated?

Darren Walker, President of the Ford Foundation and Co-Chair of the Reimagine New York Commission’s Connectivity Working Group said:

“Internet access is a human right, yet historically marginalized communities are still denied affordable broadband….Through the Ford Foundation’s work addressing digital equity and the digital divide,…New York can shine a light on what could be possible if we had a robust, diverse, competitive market to deliver affordable, fast broadband to every single home and business. This is a first and crucial step in building back a better and more just New York.”

At the core of the Digital Divide issue has been and continues to be affordability and making sure everyone is served in the rural and low income communities. Unfortunately, America’s prices are hyper-inflated compared to to overseas.

America’s Costs of Wireless vs Overseas

Using Rewheel Research extensive wireless surveys.

  • Wireless prices for 4G and 5G services overseas comes to $30–40 dollars with “truly unlimited” GB meaning, 1000 GB or more.
  • In the US, our carriers have decided to change the actual definition of the word “unlimited” to mean — we can say what we want — 5–50GB is ‘unlimited’.

The term “truly unlimited” now means no data caps — “1000 GB” is not the top amount of usage allowed.

On average, we are paying over $50–$90 on our unlimited plans. But on the smaller sized wireless packages, customers can pay $10–20 per GB; the average of these countries was $.05-.07 US cents per GB.

Those who claim that wireless would replace a fiber optic wire fail to take into account that a) there are extensive data caps, b) wireless requires a fiber optic wire, c) most of AT&T and Verizon’s wireless networks were cross-subsidized out of the wireline budgets and d) this inflated the wireless profits and caused losses in the wireline utility.

The “Triple Play” — Which Is Broadband-Internet, Cable Service, with Phone, Is Equally as Overcharged.

Consumer Reports found that the average price for a “triple play” in 2019 was $210.00.

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. And on the triple play, while the US is now $210, dollars, Europe is paying 41 Euros.

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 20.50 Euros, around $23–25 dollars, depending on the exchange rate.

Governor Cuomo:

Under the Governor’s proposal, all internet providers would be required to offer affordable service at $15 per month to low-income households.”

Besides only going to low income families and what caveats will present themselves to obtain service is being worked out, we ask:

How is it possible that all of these other countries are charging a fraction of what Verizon, Charter or Altice are charging for the same basic telecommunications broadband, cable TV or wireless services”?

Made Up Additional Fees.

One reason has been the addition of made up charges on the bills, such as the “Broadcast and Sports Programming Fee”. On the current Spectrum, Brooklyn NY, basic triple play, this fee is now a disgrace at $19.15 a month — up from $2.25 only 6 years ago — a 741% increase.

Cuomo’s plan calls for disclosure rules and consumer protections:

“To combat practices that limit consumer choice and increase the cost of internet services, the Public Service Commission will require adherence to a universal “broadband disclosure” that explains all charges, such as device, termination, activation, and equipment fees in plain and easy to understand language so consumers will no longer get hit with unexpected charges. “

This truth-in-billing, truth-in-advertising is not new, nor innovative and has been discussed as a problem since 1998, when we filed in the first Truth-in-Billing proceeding at the FCC, or as part of the FCC’s Consumer Advisory Committee, in 2004.

What will be innovative is when Governor Cuomo calls for audits and recommends removing all these fees, and not just to identify made up charges. The Broadcast fee is not audited or mandated by a government agency.

This broadcast fee is almost the same amount as the entire broadband service average overseas.

Verizon New York 2019 Financial Annual Report — Hidden in Plain Sight.

Verizon New York is the Telecommunications State-Based Public Utility for New York State and New York City.

This fact is never mentioned, ever, by Governor Cuomo or even Mayor de Blasio.

  • This is the Verizon NY 2019 Annual Report which was released to the public on June 8th, 2020 as part of it’s requirement as the NY State’s largest public telecommunications utility.

Click for Verizon New York 2019 Walkthrough — and Pop Quiz

First, basic some basic points:

Back to the History of Broadband in NY

  • Starting in 2004, Verizon announced FiOS, a ‘fiber to the ‘premises’, FTTP, “Title II”, common carrier network, (which contradicted Verizon’s FCC, Net Neutrality arguments that Title II is harmful.).
  • State laws were changed (price caps) so that Verizon could charge local phone customers rate increases and/or keep profits from services like Call Waiting or nonpublished numbers.
  • In 2010, Verizon announced it was stopping FiOS and it appears it began to move the utility construction budgets to wireless — leaving most cities and lower income areas, undone including NYC — creating the Digital Divide.

Alongside this, all of the telcos were able to manipulate the FCC accounting formulas which allocates how the expenses are divided up among the different lines of business. These are the expenses and revenues, excerpted from the Verizon NY 2019 Report — it reveals why America is paying 5–20 times more than overseas, including our wireless communications, but also why the companies could claim that their wired networks were unprofitable, when it used this accounting to help create the Digital Divide.

NOTE: We renamed some of the columns and removed some of the sub-items listed, but every dollar listed here was presented by Verizon NY to the state commission.

Click for Verizon New York 2019 Walkthrough — and Pop Quiz

Highlights

  • “Local Service” is the basic, wireline, voice-only, copper-wired based business.
  • “Nonregulated” is FiOS video, VoIP, inside wire maintenance and formerly regulated services.
  • “Backhaul” is also “BDS” and it has the largest revenue as it goes to cell sites, used by competitors as well as business services, like ATM machines.
  • 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.)
  • Line 3: Local Service was charged $1.2 billion in “Construction & Maintenance” and has historically actually spent only $75–$125 million.
  • Line 4: 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?
  • Line 5: 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.)
  • Line 6: Verizon New York has shown losses of over $2 billion for most years over the last decade, almost all created by “Local Service.

Line 7: Backhaul, BDS, Business Data Services — has a 55% Profit Margin, and Is Paying about ½ of What Local Service Paid.

Those who control the wired infrastructure not only control who does and does not get upgraded, but also the costs of service, and at the core are the guts of the networks — known as Backhaul, which we just discussed.

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 trivial: $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 Time Warner’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.

Conclusion

We all want to solve the Digital Divide and make New York’s infrastructure be world class and affordable to everyone in the state — and replicate this throughout America. This has to include actual competition that lowers rates and offers choices.

The members of the consortium known as the IRREGULATORS all have 35+ years in telecommunications. We have seen it all before and testified and filed about it, in NY, at the FCC, and other states since 1999, while some of the team has been working in telecom before the Bell system was ‘broken up’ in 1984.

The questions are:

  • Will Reimagine fight to finally fix what is broken as we have just laid out — and work with the Governor to deal with the hard issues?
  • Can New Yorkers count on Reimagine to share ideas and to propose new solutions or will we still be sitting here wondering what happened 5 years from now?

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