IRREGULATOR TREASURE MAP; PART 1: Hiding a $5 Billion State Telecommunications Utility that No One Even Knows Exists.

  • Why do my communications bills keep going up?
  • Why isn’t the internet and broadband a utility?
  • How do we stop the FCC’s current attack on the public interest with over 30 different interlocking actions and proceedings, each designed to erase Net Neutrality, shut off the copper networks and block competition.
  • How can anyone believe that 5G, a wireless service that requires a fiber optic wire and has a range of 1–2 city blocks is going to service America?
  • How do we get billions for fiber optic broadband in America, close the Digital Divide, lower prices and finally bring in real competition?
  • How do we get the municipalities, especially rural areas and low income areas, the same high-speed fiber optic services — that we all paid for? (I’ll come back to this point.)
  • How do we explain that Verizon’s wireless services use these utility wires (in region) or that Verizon’s internet, broadband and even Cable TV also use these wires?
  • Most importantly, how do we explain that the companies that control the wires control the pricing of almost all services, as well as who gets upgraded and who doesn’t?
Verizon New York 2017 Annual Report
  • No one knows that the FCC’s cost accounting rules have run amok. As we discuss elsewhere, the FCC cost accounting rules were established to allocate the expenses to the different lines of business using the utility infrastructure and in 2001 they ‘froze’ these rules to reflect the year 2000, when Local Service represented 65% of the revenues and it paid 65% of the expenses. However, over the last 19 years the FCC never examined that the rules distorted and have been putting the majority of all expenses into Local Service, even though it is only 21.6% of revenues in New York.
  • No one knows that these rules are still in place, as shown in the Verizon NY Annual Report, even though they are supposedly been erased (“forborne”).
  • We call this “Zombie Rules”, for like the Walking Dead, they still are working to harm the public.
  • And no one knows that the FCC decided to extend this freeze in December 2018 for an additional 6 years.
  • But no one knows that while the total revenues in New York are being accrued but are not used to upgrade and maintain the state utility wires; instead, the expenses are now mostly paid by local phone customers — due to these rules.
  • No regulator, not the state commissions, not the FCC, ever examined all of the revenues in the State and where the expenses went, as far as we can ascertain. It is hard realize that the state commissions never actually audited the flows of money when they were increasing rates.
  • If the regulators actually examined the expenses, they would all find that the expenses were not caused by Local Service and that the losses are artificial.
  • It is also mind-boggling that the FCC has never examined the state-based construction expenses yet has made pronouncements about the “investments”. In the Net Neutrality decision, the FCC claims that investments declined under Net Neutrality and “Title II”.
  • If the FCC had examined all of the investments made, it would have found that the majority was done, at least for Verizon, as Title II and part of the state utility. Moreover, the FCC would have found that its own accounting rules have been diverting billions of expenses into Local Service, and was paid by local phone customers — as rate increases.
  • The State Utilities have been Abused and Harmed Customers and the State. No one knows that these other lines of business have been “cross-subsidized”, getting a free ride; the revenues go into separate financial buckets and subsidiaries, but the expenses end up being paid mostly by the wireline part of the utility, the copper-wired part of this state utility — and improperly charged to local phone customers. And all of these cross-subsidies make the networks appear unprofitable.
  • In fact, the FCC’s cost accounting rules have allowed billions of expenses, per state, to be put into Local Service, making it unprofitable to influence public policies, among other harms which include:
  • Follow the Money: None of this financial hanky-panky should be allowed to continue. There are billions of dollars in just New York that should never have been allowed to be diverted to fund these other lines of business.
  • Let’s get the money back: Let’s bring fiber optic broadband to everyone, closing the Digital Divide, as well as lower prices across-the-board on all services, and refunds for having charged everyone for network deployments of wireless — or using the money to buy OAF or Time Warner or…
  • There are Billions in Taxes that were Dodged.
  • What Happened in Your State? This Happened in Your State. This financial shell game is based on a manipulation of FCC accounting rules, which are federal and the last financial report published showed that this is happening in your state.

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bruce kushnick

bruce kushnick

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