EXPOSED: Verizon NY 2020 Annual Report Reveals Billions in Overcharging & Corporate Subsidies

Audit the Cooked Books: Get Back the Money to Fix the Digital Divide.

Source: Verizon New York 2020 Annual Report, published May 28th, 2021

Click to Download the Verizon NY 2020 Annual Report or Read the IRREGULATORS’ Report and Walk-through.

The Verizon NY 2020 Annual Report was published on May 28th, 2021.

Verizon NY is New York State’s primary telecommunications public utility and New York is the only state we know of that requires a full, public annual report. Established in 1896, Verizon NY is a wholly owned subsidiary of Verizon Communications, Inc, a holding company.

This is NY State’s critical infrastructure and it has never been just the copper wires used for phone service, but it is also the fiber optic wires used for the FTTP, fiber to the premises, for FiOS, or ‘backhaul’, (sometimes called “Business Data Services”) which are the wires, the data lines that connect to cell sites or are used by competitors.

Since 2010, Verizon has been transferring the state utility-wired construction budgets for fiber optic networks to be used by Verizon Wireless and the other Verizon subsidiaries, leaving most of upstate NY and low income inner cities undone.

It has also been dumping the majority of all expenses, including Corporate Operations expenses — everything from the executive pay, lobbying, lawyers, or even the corporate jet, as well as ‘marketing’ into these wired networks — into the utility and local service, making them appear unprofitable.

This is billions of dollars per year in just New York that should have been used to give high speed broadband to New Yorkers at reasonable rates.

Every state has a primary state utility mostly controlled by only 3 holding companies — AT&T, Verizon and CenturyLink (Lumen), though they are hiding in plain sight, and every state has been relying on the same, exact accounting that has been causing these questionable transfers, but no state has audited the financial books for decades, nor has the FCC.

But, make no mistake; this caused the Digital Divide. Verizon et al. never properly upgraded the state utilities; they left their entire utility state-based infrastructure to deteriorate, and this has been going on for over a decade.

And to all you pundits, politicians, reporters, advocates, business folk, and public who keep claiming there are no state utilities, or that they want a broadband utility or they think that Verizon is an “ISP” — sorry, there are still state telecom public utilities in the US — hiding in plain site.

• But I have wireless service? Verizon controls most of the wires and therefore can inflate the prices your pay, or ‘limit’ the ‘unlimited’ wireless plans.
• Cable Service? Because there was no competition, Verizon and the cablecos have a deal to resell Verizon wireless and not go after the continuous rate increases or the multiple added, made up fees.
• Why do you think America’s prices are 5–20 times more expensive than overseas?

Bottom Line: Solving the Digital Divide requires fixing a number of outstanding issues that must be addressed now.

FOLLOW THE MONEY: SUMMARY OF FINDINGS

Verizon NY 2020 Annual Report.

• Revenues of over $3.9 billion, but had expenses of $5.3 billion, creating Net Operating “losses” of $1.4 billion.
• Local Service had $1 billion in revenues, representing 26% of the total and are the basic wireline Plain Old Telephone Service, “POTS”. At the end of 2018 there were 1.9 million phone access lines in service in just Verizon NY.
• (NOTE: The information on the number of access lines has been redacted in the 2019 and 2020 Annual Reports. NOTE 2: This information has been manipulated to leave out 50–80% of all access lines in service.)
• Local Service, alone, lost an alleged $1.9 billion, creating the total losses for Verizon NY, of $1.4 billion.
• Verizon received federal and state tax benefits, over $½ billion from these losses.

MASSIVE FINANCIAL CHICANERY

• Local Service had 26% of revenues but was charged 55% of all expenses and 42–67% of total expenses for specific expense items.
• Local Service was charged $833 million, 61%, in Corporate Operations expense, which is 81% of the Local Service revenues.
• Local Service was charged $144 million in Marketing expenses, 54% of the total — Verizon no longer markets basic phone service.
• Local Service was charged $1.1 billion in Construction & Maintenance, yet it spent only an estimated $75-$100 million for maintaining and upgrading the copper networks. Where did the $1 billion in overcharging go?

Meanwhile

• “Backhaul” Services (including “Access Services”, “Business Data Services”, and “Special Access”) represented $1.8 billion in revenues, (45%), but only paid 28% of expenses; i.e., Backhaul had double the revenues by paid ½ the expenses.
• “Nonregulated” Services (which include formerly regulated or not regulated services, such as FiOS video and VOIP), were $1.1 billion in revenues, but paid a fraction of all other costs as compared to Local Service.
• Local Service paid 263% more in Marketing expenses than Nonregulated services 826% more in Customer Operations expenses, 497% more Corporate Operations expense 217% more in overall expenses.

Overcharging: A Partial List:

• Local Service was Overcharged an Estimated $925 Million in Corporate Operations and Marketing Expenses, in Just New York, in Just 2020. These 2 expenses were 95% as compared to Local Service revenues. We estimate only $50 million of the $977 million ($833 million +$144 million) could be considered legitimate.
• Verizon NY Local Service was Overcharged an Estimated $1.02 Billion due to the Construction and Maintenance Expenses Put into Local Service.
• Local Service paid 73% in “network construction in progress” expenses while only 11% of the total was charged to ‘nonregulated’, (which includes FiOS and VoIP.)
• Tax Avoidance and Rate Increases based on artificial losses, underpayments from all of the Verizon affiliates and lines of business — needs to be investigated and halted.

In short, for just these few basic expense areas, Verizon NY Local Service was overcharged almost $1.9 billion dollars in 2020, and this does not include the other areas we identified.

Read the IRREGULATORS Analysis:

See our other reports and analyses:

• Harvesting’ Customer Impacts
• Backhaul monopoly profits and the price of America’s communications services
• Broadband commitments and failure to upgrade impacts
• Fixing the Digital Divide
• Big Telecom & Cable Impacts

Coming up: What you can do to help fix this mess.