Explosive, New Unredacted Report by CA Commission about AT&T California

Corroborates IRREGULATORS Call to Investigate Billions of Cross Subsidies.

  • “A succession of rate increases has continued… and by the end of 2017 AT&T California’s rates for flat-rate and measured residential POTS (Plain Old Telephone Service) access lines had risen to 152.6% and 325.4% of their 2009 rates respectively.”
  • “Harvesting” is AT&T California’s overarching strategy for its legacy services and customers.
  • NOTE: “Harvesting” is a when a company has loyal clients and decides to discontinue the service so it continuously raises rates until they either scream uncle and leave — to another product owned by the same company, such as wireless, or they get gouged until the service is no longer being upgraded.
  • As of December 31, 2017, AT&T served approximately 2,245,171 residential and small business legacy circuit-switched (POTS) access lines.” (NOTE: This is a fraction of the total copper lines in use.)
  • “The succession of annual rate increases applicable to AT&T California’s legacy POTS services were not in any sense cost-driven or cost-based, and instead appear to have been driven by the company’s pursuit of a harvesting strategy with respect to these services.”
  • “The quality of AT&T … voice services has steadily declined over the 8-year period from 2010–2017 that is covered by this examination, with the number of outages increasing and the service restoration times getting longer.”
  • “Over the full 2010–2017 period, less than 1% of all AT&T capital spending on network plant additions, just under $47-million, was for outside plant rehabilitation projects.
  • “Extraordinarily small portions of AT&T California’s Plant Additions and Maintenance expenditures have been directed at legacy POTS (Plain Old Telephone Service) services over the 2013–2017 period.”
  • “AT&T California financial statements show an incomplete assessment of the ILEC’s financial condition due to the large volume of inter-affiliate transactions made at transfer prices that are not set on the basis of arm’s length negotiations.
  • NOTE: “ILEC” is the “Incumbent Local Exchange Company”, another industry name for one of the state telecommunications utilities that controls the based wired infrastructure in a city or state.
  • “The AT&T California ILEC entity engages in extensive intra-corporate purchases from and sales to a number of other AT&T affiliates. Since both the seller and buyer are wholly owned by the same parent company…setting an inflated transfer price can accomplish this as effectively as making a dividend payment to the parent, but with far less exposure.”
  • “AT&T California remains the underlying provider of most retail local network services being offered under the AT&T California or other AT&T affiliate brand names. Broadband Internet access is provided utilizing many of the same AT&T California network facilities as POTS. Bundles of circuit-switched local and long distance telephone service are furnished jointly by AT&T California and by AT&T’s long distance affiliate. From its recent acquisition of DirecTV, AT&T is also offering bundles of voice, Internet and satellite TV services furnished by several affiliates.
  • NOTE: The largest affiliate ‘transfer’ is between and among the state utility and AT&T Wireless, which is not focused on.
  • “Mechanically, and with the exception of tariffed switched and special access services, each of the providing affiliates will ‘purchase’ the underlying network services and functions, including billing and collection services, from AT&T California at mutually-agreed-upon prices.”
  • “Out of nearly 17.8-million homes passed within AT&T California’s operating areas, only about 315,000, or 1.8%, are currently served with fiber-to-the-premises technology as of 2017.
  • “Notably, the county with the highest FTTP penetration — Santa Clara — is still at only 7.6%, while its neighbor in Silicon Valley — San Mateo — shows FTTP penetration at 0.0%.”
  • “AT&T is focusing on higher income communities — AT&T wire centers serving areas with the lowest household incomes exhibit higher trouble report rates and longer out-of-service durations than areas in higher income communities.”
  • New: Decision (D.) D.20–12–021, Decision Addressing Carriers’ Confidentiality Claims Related to Network Study Ordered in Decision 13–02–023, as Affirmed in Decision 15–08–041.
  • “Category 4: Annual financial reports AT&T California, Verizon California, and Frontier California file with the CPUC that conform to the Federal Communications Commission’s Automated Regulatory Management Information System (ARMIS) reporting requirements. While largely discontinued by the Federal Communications Commission (FCC) after 2007, the CPUC has continued to require these reports to be filed by Uniform Regulatory Framework Incumbent Local Exchange Carriers (ILECs).”
  • There are added ‘extraordinarily large’ rate increases to ‘Harvest’ customers.
  • AT&T lowed investment, which helped the networks to deteriorate and lower service quality.
  • AT&T created sweetheart deals with all of the other ‘subsidiaries’ so that they do not pay market prices as competitors would.
  • The price of the basic AT&T California state utility phone service went up 143% from 2004–2016.
  • The price of every ancillary service went up, from Call Waiting, which went up 240%, to unlisted numbers, which went up 525% (a fact that was also uncovered by the LA Times in 2016.)
  • “But even AT&T California’s nominally reported revenues, expenses and net income cannot by themselves provide a complete or accurate picture of the company’s financial performance. The AT&T California ILEC entity engages in extensive intra-corporate purchases from and sales to a number of other AT&T affiliates. Since both the seller and buyer are wholly owned by the same parent company…setting an inflated transfer price can accomplish this as effectively as making a dividend payment to the parent, but with far less exposure.
  • The California PUC has not investigated AT&T’s cross-subsidization of services, even when the Office of Ratepayer Advocates (ORA) raised the matter years ago. The Commission claimed that the FCC’s accounting, known as ARMIS data, did not include data to determine if there were violations,
  • The Commission even claimed that it would be too “onerous” to do an audit, and worse, there has not been an audit done for decades because of the New Regulatory Framework, which was created in 1998, though there were audits that found overcharging during this period.

--

--

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