IRREGULATORS vs. FCC: Exposing One of the Largest Accounting Scandals in American History.

The IRREGULATORS are planning on appealing a recent FCC decision that tries to bury one of the largest accounting scandals in American history. It is directly tied to AT&T, Verizon and CenturyLink’s state-based utilities.

This is probably one of the most bizarre cases you ever heard of. Unbelievably, the FCC, (with the help of AT&T, Verizon and Centurylink) ‘froze’ the cost accounting rules that are supposed to divide up the expenses of the different lines of business that use the state-based telecommunications infrastructure, the state-based utilities, to reflect the year 2000 –19 years ago.

AT&T et al. figured out that they could use these FCC rules, (which no one has a clue exists), to put the majority of all expenses into local service and it made the entire wired telecommunications networks in America appear to be unprofitable. At the same time, all of the other subsidiaries and lines of business using the same networks got a free ride.

Most people don’t know that there are still state utilities, like Verizon NY or MA or AT&T California. Moreover, no one knows that these utilities are not just the copper wires but appear to be almost all of wires within the state; copper and fiber. And this scheme diverted billions of dollars of construction budgets per state to pay for the FiOS video, fiber to the home service, or AT&T’s U-Verse, as well as the wires used for the wireless networks, even the special access wires, also known as “back haul” or business data service

And, if you want sneaky? Verizon was able to convince the state commissions to not only grant rate increases to fund these fiber networks, but they allowed Verizon to claim that these were “Title II”, common carrier, and part of the existing state utility! This quote is from a Verizon franchise for FiOS; this language is almost identical in every state.

This is the same “Title II” that is part of the Net Neutrality battle, but this has been ignored. Verizon, elsewhere, has claimed that Title II harmed investment; here it shows that Title II was used to charge local customers for broadband upgrades using the state utility construction budgets.

In December 2018, the FCC extended this freeze for 6 more years, through 2024. Unbelievably, for almost 2 decades the FCC never audited the books. But what is most surprising is — this has been going on for almost 2 decades and it has been completely under the radar.

This Freeze:

  • Created the Digital Divide. In almost every state, Verizon et al. had agreements, which started in the 1990’s, to upgrade their entire state territory; rural, urban and suburban areas were to be done equally. In fact, in most states, the state laws were changed to charge local phone customers rate increases for this work. Instead, the companies left much of the rural areas to deteriorate claiming they were ‘unprofitable’; even many of the inner-cities weren’t upgraded, especially in low income areas. But this was just part of this artificial financial shell game.

How do we know all this? We know where the skeletons are buried and we MUST appeal the FCC’s plans, as it impacts every AT&T, Verizon and Centurylink state.

First, We Have Hard-Core, Irrefutable Evidence:

  • The Verizon NY 2017 Annual Report was published June 2018 — and supplies the full financials of the state-based telecommunications utility.

Second, What We Found in New York is Obscene — Billions in Cross-Subsidies, Tax Dodging and Customer Overcharging.

  • From 2005–2017, local phone customers were overcharged an estimated $2,700.00 per line due to rate increases using artificial losses and cross-subsidized expenses.

Third, This Happened in Every State. NY is the only state that still requires a full annual report that we know of. The FCC, in order to hide these financial maneuvers, stopped publishing any data in 2007, but all of these manipulations are federal and matched Verizon NY.

Fourth, 5G Is a Bait and Switch. This is just another play to remove all regulations, preempt state laws and charge more money. Anyone who thinks that these companies are going to put in fiber optics for a small cell wireless service, with a range of 1–2 city blocks — is delusional. Moreover, in-region, it appears that these wires are being cross-subsidized and charged to local phone customers via the utility construction budgets.

Fifth, If We Stop the Cross-Subsidies, the Money Can be used to Help Cities and Customers. The Freeze has harmed every aspect of communications and this and related cases will hopefully slow down and even reverse the FCC decisions — and lower prices for customers.

Sixth, We Found a Structural Flaw in Every FCC Decision. Ironically, the FCC has left out everything dealing with state-based issues for decades. The FCC does not even acknowledge that there are state-based utilities, and the FCC never examined how their own rules were harming America, or the broadband commitments that were made as part of the state utility. We wrote a separate report about this flaw.

If the IRREGULATORS don’t take this appeal now and expose the corruption of the accounting now — i.e., it made the AT&T, Verizon and CenturyLink utilities artificially unprofitable for public policy manipulations, it will be harder to reverse the FCC’s decisions later.

The IRREGULATORS are an independent consortium of senior telecom experts, analysts, forensic auditors, and lawyers who are former staffers from the FCC, state advocate and Attorneys General Office, as well as telecom auditors and consultants.

Click to Read the Details, Help out, Get Pissed.

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