IRREGULATORS v FCC Moves Forward: We Won Round 1.

  • Local Service — are the mostly copper-based, state-based phone line revenue, commonly called “POTS”, “Plain Old Telephone Service”.
  • Nonregulated — are the FiOS video revenues, VoIP and Digital Voice revenues and other services.
  • “Access” and “Special Access” — also called “Backhaul’ or “Business Data Services”, and they are both copper and fiber wires for ATM machines or wires to the cell sites.
  • “Black Hole” — are revenues that were part of the state utility but without an explanation.
  • Subsidiaries — are a large collection of other companies owned and/or controlled by Verizon Communications, Inc. including Verizon Online, Verizon Business and largely, Verizon Wireless.
  • The FCC’s rules are supposed to divide up the expenses so that the majority of expenses would never, ever be diverted into the Local Service regulated business that did not create the expenses.
  • It is against multiple state and federal laws to have the regulated state-based local service utility ratepayer pay the expenses of nonregulated subsidiaries.
  • The FCC’s accounting rules were set to mimic the year 2000, so that the percentages each service paid in expenses would be continued.
  • The FCC has not examined the rules or their impacts on the state utilities or examined anything pertaining to the state-based companies for 19 years. In fact, the FCC never acknowledges that there are state utilities.
  • Yet, the FCC’s decision was to extend this financial shell game 6 more years.
  • Corporate Operations Expenses are a collection of expenses that cover executive pay, corporate jets, golf tournaments, lawyers and lobbyists, etc.
  • Local Service was charged $1.8 billion in Corporate Operations expense, 61% of the total, and this is the exact same formula set to the year 2000 by the Freeze.
  • In the next exhibit, we see that the Corporate Operations expenses are not being fairly distributed based on revenue; they all use the freeze.
  • And since the freeze froze the percentages, Local Service has paid 60+% of this expense, almost unwavering, for 2 decades. Thus, we see a straight line for the percentage of this expense for almost a decade.
  • When compared to the other lines of business, Access Services (Special Access) brought in around 48% of the revenues and Nonregulated had 29%, but compared to revenues they are paying a fraction of this expense.
  • With only 22% revenues in 2017, this means that Local Service is paying for the expenses for these other lines of business. Moreover, this one expense makes Local Service unprofitable.
  • Verizon NY Local Service only had $1.1 billion in revenues but was charged $1.2 billion in construction and maintenance, even though Verizon NY spent about $100 million on the copper networks.
  • Shut off the retail wired networks and force customers onto more expensive wireless in the home and office.
  • Privatize the majority of the current wireline networks as “Business Data Services” for wireless and block competitors.
  • Get rid of all obligations and constraints, from financial accounting to Net Neutrality or privacy.
  • Use the FCC, the government, not market forces, to push through the plan.



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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.