IRREGULATORS to NY STATE: Halt the Verizon Wireless and Corporate Operations Subsidies: Get Back Billions Overcharged by Verizon, Now.

(Excerpt taken directly from Verizon NY 2020 Annual Report, published June 2021.)
  • Overcharging has been a continuous, calculated problem that neither the state nor the FCC has examined. Worse, the state has allowed “Harvesting” of basic service customers — continuous rate increases.
  • Verizon Overcharged Local Service an Estimated $927 Million in Corporate Operations and Marketing Expenses, in just New York in 2020. It assigned expenses totaling 95% of Local Service revenues. NOTE: 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 in 2020 due to the construction and maintenance budget put into Local Service that it used for its Wireless Network.
  • Verizon Wireless “Cellco Partners”, we estimate, owes over $1 billion annually, in construction and payments for the right-of-way it has been getting in violation of the law for the last decade. Verizon NY’s diversion of funds to wireless meant that entire parts of NY State were not upgraded — causing the Digital Divide.
  • Verizon NY shows losses of over $2 billion a year for the last decade, saving hundreds of millions of dollars in taxes annually. All of these were caused by the dumping of the corporate expenses, the failure of the wireless company to pay for use of the construction budgets and rights-of-way.
  • We demand the State start immediate investigations of Verizon NY’s financial cross-subsidies and the illegal subsidizing of the wireless business, and the misallocation of billions in corporate operations expenses.
  • We demand that the Governor’s Office and Attorney General investigate the NY State Public Service Commission for negligence, and Verizon for fraud and the manipulation of the financial accounting.
  • We have submitted primary analyses using Verizon New York Annual Reports, which detailed these cross-subsidies, over the last decade, using experts, auditors and lawyers — at our own expense — and they were ignored.
  • There have been no audits of the Verizon NY’s books for 2 decades and no ‘rate cases’, even with 100% rate increases.
  • The Digital Divide cannot be fixed with government subsidies; they will just be captured by Verizon, (and nationwide with AT&T and CenturyLink (Lumen Technologies) the Bell holding companies that have merged to control America’s critical wired infrastructure — which is also used for wireless).
  • There is No Institutional Memory — and this current NY State broadband proceeding runs the risk of compounding the felony if more money is thrown at the bad actor, Verizon NY.
  • Start Proceedings for a Just Result — Separate Verizon from the networks they let to deteriorate. By 2010, America was supposed have been a fiber optic nation. Verizon et al, multiple times, charged customers for upgrades to the utility plant — and took the money for their other lines of business.
  • States have Jurisdiction Over Broadband; ‘Common Wisdom’ claims that the states do not have control of the broadband infrastructure — and they are just wrong. As we will discuss, the fiber optic wires have been charged to local phone ‘intrastate’ customers, the cross-subsidies have these regulated services illegally subsidizing the fiber — and worse even the fiber that is being built for wireless. Also, we show that the fiber optic wires are Title II, and thus part of the state utility as defined by the State.
  • The IRREGULATORS vs FCC case was taken to ‘free’ the state commissions from the FCC’s powers over the corrupted accounting that is in place.

Comments Summarized: PART 1 and PART 2

PART 1: SOME BASIC FACTS THAT HAVE BEEN IGNORED

  • FACT: Almost all of Verizon’s fiber optic deployments to date are part of the existing state public utility. Verizon has classified them as “Title II”, common carrier networks, and claims that they are an upgrade of the existing telecommunication networks, thus giving them the ability to get rate increases, as well as the advantage of use of the rights-of-way and other perks.
  • FACT: Verizon has claimed Title II harms investment. The quote below proves Title II is, in fact, the investment mechanism.
  • FACT: In 2005–2009, Verizon NY was granted rate increases for a ‘massive deployment of fiber optics’ and losses.
  • FACT: Verizon halted the fiber optic deployment in NY State — but the State did not adjust rates to reflect that.
  • FACT: Illegal diverting of the construction budgets to Cellco Partners, the wireless subsidiary, has been going on for over a decade.
  • FACT: The accounting used by Verizon has been manipulated to do these cross-subsidies and use Local Service as a cash machine.
  • FACT: These actions created the Digital Divide.
  • FACT: Almost all of Verizon’s fiber optic deployments to date are part of the existing state public utility and was put in as “Title II”, common carrier networks.
  • FACT: Verizon has claimed Title II harms investment, which is directly contradictory to what is in the Verizon franchise agreements.
  • FACT: In 2005–2009, Verizon was granted rate increases for a “massive deployment of fiber optics” and to compensate the company for the artificial losses it manufactured.
  • FACT: Verizon halted the fiber optic deployment in NY State — but did not adjust rates to reflect that.
  • Customers paid for the upgrades for ‘massive deployment’ and this, in and of itself, was illegal if Verizon claims these networks were Title II.
  • Customers in rural areas never got use of upgraded networks but paid for it.

PART 2: FOLLOW THE MONEY

Verizon, with the help of AT&T, and CenturyLink (Lumen Technologies), created the Digital Divide on purpose. And we will prove it, using the Verizon NY 2020 Annual Report which details billions that can be used to solve the Digital Divide in NY, with no government subsidies.

  • Verizon Local phone service was charged $833 million in Corporate Operations expense, over 61%, (Line 5, Column f) From corporate jets to executive pay, virtually none of these expenses are to offer wired phone service; these expenses are probably NOT even generated in NY State.
  • Verizon Local Service was charged $1.1 billion in construction expenses and maintenance. There is virtually no construction for the copper wires? (Line 2, Column F)
  • Why has NY State allowed overcharging of almost $2 billion dollars? (See our previous analysis of Verizon NY Corporate Operations for 2017. Moreover, it is clear that billions of dollars of the utility construction budget have been primarily charged to the Local Service line of business.)
  • LEARN THE DETAILS: DOWNLOAD the Verizon NY 2020 Annual Report (Spreadsheet), and the IRREGULATORS Analysis and “How to Read the Report — Walk-through”.

MASSIVE FINANCIAL CHICANERY — BY THE NUMBERS

The Manipulation of the Accounting Created the Digital Divide

  • Local Service was charged $833 million, 61%, in Corporate Operations expense, which is 81% of the Local Service revenues. — These include the $1,200 an hour lawyers, the corporate jets and executive pay — and is NOT part of Local Service or even an expense generated in NY State.
  • Local Service was charged $144 million in Marketing expenses, 54% of the total — Verizon no longer markets basic phone service.
  • Local Service was charged $1.3 billion in Construction & Maintenance, yet it spent only an estimated $18-$47 million for maintaining and upgrading the copper networks. Where did the $1+ billion in overcharging go?
  • 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.
  • 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.
  • Verizon NY shows losses of over $2 billion a year for the last decade, saving hundreds of millions of dollars in taxes. All of these were caused by the dumping of the corporate expenses, the failure of the wireless company to pay for use of the construction budgets and rights-of-way.
  • Verizon Wireless “Cellco Partners” we estimate, owes over $1 billion in construction and payments for the right-of-way it has been using illegally for the last decade. Verizon illegally transference meant that entire parts of NY state were not upgraded — causing the Digital Divide.
  • 30 Years of Rate Increases and Harvesting: How is it possible that basic local phone service had increases for 30 years when there has been claims of competition? — and the harvesting of customers when prices were supposed to be ‘just and reasonable.
  • SUMMARY: 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.
  • DOWNLOAD the Verizon NY 2020 Annual Report (Spreadsheet), IRREGULATORS “How to Read the Report — Walk-through”.

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Bruce Kushnick

Bruce Kushnick

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