Rattle the Cage: $20+ Billion Annually to Fix the Digital Divide — Now.

If you can’t afford high-speed broadband and your kids can’t learn online from home, or it isn’t available and they want you to use crap wireless or WiFi instead — Now you know why it is time:

Let’s Rattle the Cage-Together. Here is enough money to fund the closing of the Digital Divide in your state and lower prices.

Image for post
Image for post

The pandemic exposed a new dark, harsh reality about America’s communications. Our article discussing America’s Digital Divide quotes the NYC Comptroller’s analysis about households without broadband in NYC who can’t go online when school starts. The Brooklyner writes:

“46 percent of households in Kensington, Boro Park, and along Ocean Parkway do not have access to the broadband internet. Other neighborhoods include Chinatown & the Lower East Side (50 percent without access), Hunts Point, Longwood & Melrose (48 percent), Morris Heights, Fordham South & Mount Hope (44 percent)… Socioeconomic factors play into these numbers, the Comptroller’s report says.”

================

The chart above supplies the partial estimated overcharging of AT&T, Verizon and CenturyLink‘s controlled public utility Local Service, by state. This is based on a model developed by the IRREGULATORS using the Verizon New York 2019 Annual Report, which was published on June 8th, 2020 and it is— EXTREMELY FRESH FINANCIAL DATA FROM A PUBLIC UTILITY — as well as incorporates data from the FCC.

Verizon NY is the primary public telecommunications utility in New York State (and NY City), just like water, gas or electricity.

The Verizon NY Annual Reports have been using the FCC’s manipulated accounting formulas that now puts 40%-75% of all expenses into Local Service, while the other lines of business, such as Wireless, are being subsidized. Our research shows that all of the other states appear to be using the same, exact deformed FCC formulas, as they are federal. Some states were fooled and don’t even know that they are still in use as they never audited the company’s financial books.

Moreover, this is a “partial” accounting of the total overcharging because these findings are based on only 3 primary expense areas: Corporate Operations expenses, Construction & Maintenance, and Marketing expenses applied to Local Service.

IMPORTANT: This overcharging is NOT just about Local Service but also about the control of ALL of the wires in the state, fiber optic and copper, and all services that are using these wires, including wireline and wireless, phone, broadband and internet. It is about who gets service and who doesn’t, what services are available and at what price. It is even about controlling competitors that use the wires and Net Neutrality issues.

Our analysis is accompanied by a series of reports and summary articles to supply documentation pertaining to the Verizon.

Overcharging is Based on a “Low” and “Medium” Analysis for 2019 and for the last 5 Years, 2015–2019.

“Low Scenario 2019” is created based on applying the actual expenses that were generated by Local Service. For example, Local Service is the basic, copper-based wireline phone service, yet it was charged $1.2 billion in construction and maintenance, even though it only spent, historically, approximately $75-$125 million. The difference, the overcharge of over $1 billion dollars, was used to subsidize the wireless service, it appears, and not to upgrade and maintain the state utility infrastructure.

The “Medium Scenario 2019” assigns these basic expenses to Local Service based on the percentage of revenues. I.e.: Local Service was 21% of the total revenues in 2019 and should have paid no more than 21% of the expenses. Yet, in 2019, Local Service was charged 61% of the total Corporate Operations expenses, which came to $507 million. In 2017, Local Service paid $1.8 billion in Corporate Operations which was also set at 61% of the total charged to Verizon NY. Corporate Operations includes the executive pay, corporate jets and even lawyers and lobbyists. This 61% was set in the year 2000 and this charge should have only been $200–$300 million, tops — an overcharge of $1.5 billion in 2017, $250+ million in 2019.

Add this up and in Verizon New York, between $1.1 -$1.6 billion dollars was overcharged in just 2019, for just 3 expense areas.

The “5 year, 2015–2019” takes the 2 scenarios and merges them per year.

And we are talking about an enormous sum created by AT&T, Verizon and CenturyLink. Over the last 5 years, we estimate that a whopping $95 billion that should have been used to upgrade America’s wired networks throughout the state utilities — wasn’t.

AT&T controls 21 states, for example, which includes California and Texas. This next chart shows that AT&T’s partial estimated overcharging was $9.3–$13.6 billion for just these 3 expense areas in just 2019; over $57.3 billion over the last 5 years.

Image for post
Image for post

Who are these companies? Learn about the mergers that created AT&T , Verizon and CenturyLink and why they were failures.

Note: This accounting has multiple caveats as the FCC’s data did not match the state information and without audits it is impossible to know the extent of the harms as there are other buckets of overcharging besides what is presented here.

SEE THE FULL REPORT AND DATA, AND ANALYSES

Some Claim that there are No State Telecommunications Utilities.

There are those believe that there are no telecommunications ‘utilities’. The Verizon NY 2019 Annual Report shuts down that argument.

Even in California, AT&T is still a public telecommunications utility. This is from a recent proposed piece of legislation, SB1130, that did not go through as of September 2nd, 2020. But notice it refers to a “Public Utilities Code” and that Telephone Corporations are public utilities

Ironically, while this legislation was billed as a ‘fiber optics to all’ solution in California, in the end it was about a surcharge on the bill to still supply slow, mostly wireless services, with data caps.

We Freed the States from the FCC

On March 13, 2020, IRREGULATORS v FCC delivered the decision that has freed the States; the States are now independent from the FCC and can remove this financial overcharging and cross-subsidies, saving America an estimated $16-$23 billion dollars annually that can now be used to solve the Digital Divide. — Let’s call it $20 billion a year.

And, as we pointed out, the FCC is a corrupt, captured regulatory agency where the Republican Chairman and commissioners, and even the advisory committees, have direct ties to groups and associations that are funded by AT&T et al. — They are part of the problem and not the solution.

Let’s Rattle the Cage-Together.

It is time for investigations to halt the cross-subsidies and use the funds to fix the mess called the Digital Divide.

Forward the link for this article or:

  1. Take the Verizon New York 2019 Annual Report, (or this link) which is an official Verizon financial report, published June 8th, 2020.
  2. Take the IRREGULATORS analysis (or this link) NEW REPORT Solve the Digital Divide: Halt the Cross-Subsidies in the Verizon NY 2019 Annual Report, August 24, 2020
  3. Find the estimated amount of overcharging in YOUR STATE: (caused by excessive cross-subsidies of 3 expense areas; Corporate Operations expense, construction and Maintenance and Marketing). (Sorry we couldn’t do ALL states.)

Examples:

  • AT&T California should be investigated for the $1.7–$2.4 billion dollars overcharged in 2019; and the $10.3 billion over the last 5 years.
  • Verizon Massachusetts should be investigated for the $446 million to $649 million, and the $2.7 billion over the last 5 years.
  • CenturyLink Washington, should be investigated for the $326 to $479 million or the $2 billion over the last 5 years.

4. Send them the next 2 links as well that detail how America’s communications prices for broadband to wireless are 3–14 times more expensive than other countries, world wide.

  • FACT SHEET 1: Triple Play for $45; Deals for Only $15 a Month? Why is America Paying 2–5 Times More for Our Broadband, Internet, and Cable Services?
  • FACT SHEET 2: Wireless Overcharging: Why is America’s Wireless Prices 6–10 Times More than Other Countries?

Send these links (or reports or just send this post) to the media and ask them to investigate. Tell your local government, state commission, all politicians:

Here’s how much the IRREGULATORS estimate is overcharged in our state. We want the overcharging to stop. We want the money back and we want the funds directed back to where they belong— to close up the Digital Divide and lower rates.

When they say: But the companies are not utilities and are under ‘deregulation’, price caps, blah, blah, blah

Answer it with:

“This ‘deregulation’ was granted based on the manipulation of the financial books, or the promise of delivering fiber optic services to the state — which never showed up. And, the last data from the FCC shows that Our State used the same corrupted FCC accounting as New York — because the rules are federal.”

ADD:

“And, of course, you examined the Verizon New York 2019 Annual Report and saw for yourself the billions in cross-subsidies — on page 25?”

And Ask:

“Why are America’s broadband and wireless prices 3–14 times more than other countries worldwide?”

“Is this why we can’t afford high-speed broadband? Is this why there is no serious competition? Is this why they are pushing crap wireless instead of a fiber optic line to my home?

Don’t Let them Lie to You: No state we know of stopped using these FCC deformed rules or ever audited the books.

In 2017, we examined AT&T California’s massive rate increases. We wrote: Californians Paid Billions Extra: The State Assembly Should Investigate AT&T’s Cross-Subsidies. 08/23/2017

  • The price of the basic AT&T California state utility phone service went up 138% from 2008–2016. Ancillary services went up 60%-525%.

The California Public Utility Commission actually said there has been no audits for decades and they would be too onerous to do.

“To make this determination significant analysis is required. Revenues for residential basic service, video service and other services that use the shared network to provide video service would need to be compared to their respective costs. The Commission would need to audit those costs to ensure they have been accurately assigned to each service. Such an audit would be onerous as it would require the Commission to perform a cost of service analysis, which has not been performed in decades, since the Commission adopted its New Regulatory Framework and established price caps to replace cost of service regulation.”

You got to be kidding me. AT&T wasn’t even mentioned by name in the last proposed piece of legislation but it is the primary state telecommunications public utility.

The Final Insult: Let’s Go to the Maps

If AT&T et al. comes back with — We’re doing a great job….

This is an excerpt of a map for the latest Connect America Phase II Auction:

Image for post
Image for post

Final Eligible Areas

According to the last available data, AT&T California controlled about 80+% of the State of California, while CenturyLink Oregon and Washington cover 87% and 89% respectively (as of 2007, the last available FCC data).

This map shows that the government is giving billions to get crap wireless services to AT&T and CenturyLink franchised utility areas that are ‘unserved’ or ‘underserved’.

There are no maps of AT&T or CenturyLink’s franchise coverage from the FCC that we could find. These companies not only were able to overcharge customers but moved billions to other lines of business instead of upgrading their franchised territories — their state telecommunications utilities, even though customers have been the defacto investors as the Verizon NY Annual Report clearly shows.

The FCC writes:

“The Auction: The Connect America Fund Phase II Auction (Auction 903) will use competitive bidding to award up to $1.98 billion of universal service support over 10 years to areas currently unserved by broadband. For more information, see the CAF Phase II Auction webpage.

The Eligible Areas:

Include high-cost census blocks in states where larger telephone providers (called price cap carriers) declined an earlier offer of model-based support

Also include other areas that are not served by the incumbent price cap carrier or an unsubsidized service provider with broadband at speeds of 10/1 Mbps or higher (based on December 2016 FCC Form 477 data)

This is outrageous. Now you know why there is a Digital Divide. Now you know where the skeletons are buried and billions of dollars in funds that should be used to fix this mess — And this is only a ‘partial’ examination. More to come.

So, if you can’t afford to have the high-speed broadband service your kids need so they can learn from home, or it isn’t available and they want you to use crap wireless or WiFi instead — now you know why it is time:

Let’s Rattle the Cage-Together.

Written by

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

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store