Redacted Verizon Report Hiding Why America’s Wireless, Broadband & Internet Services Cost 3 to 14 Times More Than Overseas…?
Imagine our surprise when we found that this 19 page report, provided by Verizon New York to the NY Public Service Commission, pertaining to something called “Special Access”, had been totally redacted. This has been going on month after month, year after year (since at least 2013).
In 2020, the term “Special Access” is now usually referred to as “Backhaul” or “Backbone” or “Business Data Services”, “BDS”. Moreover, these network services and wires are not special. These can be copper or fiber optic wires to the homes or business, ATM machines or hospitals, but most recently, they connect to the wireless 5G small cell sites.
New Data and Financials: On June 8th, 2020, the Verizon NY 2019 Annual Report was released and Verizon has redacted multiple important information. We have filed to have this data made available immediately.
Most people do not know that Verizon NY is the primary public telecommunications utility in New York State and controls critical infrastructure — backhaul.
By redacting information, combined with the FCC and states’ deregulatory strip-mining campaign to remove all obligations and regulations on the wired networks, the FCC now claims that 5G is the answer. What we uncovered is that the backhaul being constructed for the wireless networks has been funded by cross-subsidizing/charging local phone customers. At the same time, the companies have figured out how to manipulate the FCC accounting formulas, (in use in these financial reports) to have ‘backhaul’ reap excessive profit margins, which keeps the prices of all end-user services inflated, and, at the same time, they even figured out how to make the utility networks appear unprofitable.
NOTE: Missing Data is Common: New York State is the only state we know of that requires a full annual report. The FCC stopped publishing this information in 2007. This means that what is happening in your state with your state-based utility will require FOIL requests and potentially legal actions to pry loose the basic information, much less the requiring discovery.
Let’s start and present data showing that prices in Europe and overseas are a fraction of what America is paying.
1) America’s Wireless 4G and 5G Users Are Being Overcharged, Big Time.
This chart from Rewheel Research supplies how many Gigabytes a customer gets for 30 Euros for 1st quarter, 2020, country by country.
On the right you can see a collection of 12 countries with red markers to the top of the chart. For 30 Euros, (about $33.70-$33.99 dollars) these countries have providers offering business and residential 4G or 5G wireless broadband which comes with over 1000GBs. In the middle of the chart there is another group of 8 countries that supply 200–700 GB for 30 Euros. All the way on the left side at the bottom there is a box which shows the ‘worst in class’; the US shows the 3rd worst result.
In fact, in 2019, Rewheel wrote:
“US Wireless median mobile broadband gigabyte prices were 6 times higher than the median price in the 36 OECD countries (from South Korea and Japan to Spain, Slovakia and the UK), and 10 times higher than the median price in European Union (EU28) markets.”
NOTE: Rewheel did not include the taxes, fees and surcharges in the US; most of Europe only applies the VAT tax, unlike the made-up ‘cost recovery charge’ or ‘admin’ charge.
2) The Wired Broadband and Cable Networks Are Also Overcharged.
In comparing the Triple Play pricing using the European Commission and OECD data, we found that America’s basic Triple Play is being overcharged between $70-$155 a month, not counting add-ons.
- OECD-EU: Triple Play ‘basic’ averaged $44.77 a month in 2017, but the ‘cheapest’ was only $15 a month.
- US Bait and Switch: AT&T, Verizon, Comcast and Spectrum et al. have an advertised averaged price of $88.95, but the actual first bill has added fees, which comes to about $115.00 a month.
- Post-Promotion: The average cable Triple Play after the promotion ends, is around $205.00.
- US Triple Play Prices are 258%-479% above the OECD-EU average; 766–1410% above the ‘cheapest’ basic Triple Play service offered by some OECD-EU countries’ carriers.
Without direct competition or even with the current ‘duopoly’ in some cities and states, the inflated rates for broadband, internet and cable TV, as well as phone, on the wireline side, are all inflated as compared to overseas.
At $15 a month for the cheapest price or $45.00 a month on average vs $200.00 a month in the US, this difference is too large to continue to be neglected and not fixed.
3) The Hidden Backhaul Wired Networks
On any given block in almost every town or city, there has been a utility telecommunications provider who has had the monopoly on most of the existing wires, fiber optics or copper.
This is a picture of E79th Street in New York City and there are wires everywhere, yet virtually know one knows that as they walk down the street, under their feet or on the poles, or connecting on roof tops, are wires, physical wires, that connect the wireless cell sites, for example.
In many cities, there are other providers of backhaul or who own control the wires used in certain buildings, but, there have been very few competitors that came in to offer wired services to homes, or even wireless by installing wires. Google, for example, started the wiring of cities, like Kansas City, but soon found it to be a daunting task, for many reasons.
We bring up the idea of the number of lines in service because Verizon NY has decided to redact the basic accounting of lines in the current annual report.
4) Redacted Accounting of Lines
How many Backhaul lines are there? On June 30th, 2020 we filed with the NY Public Service Commission about Verizon redacting even the basic lines in service.
“We request that the NY Public Service Commission (NYPSC) immediately deny Verizon’s motion to hide basic information and to require Verizon NY to supply the redacted information for Schedules 3, 8 and 61 of the Annual Report of Verizon NY Inc. for the Year Ending December 31, 2019, which was released on June 8th, 2020.”
This was the only information supplied about access lines, Schedule 61. If you compare the lines that are ‘not counted’ in the last graphic it is clear that most of the lines were never included in this accounting.
5) Inflated 55% EBIDTA Profit Margins of Backhaul.
The Verizon NY 2019 Annual Report supplied some basic information about the revenues and expenses for “Backhaul” — and it is seriously problematic.
- Local Service in 2019 had revenues of $864 million and showed a loss of $1.92 billion, which gave a ‘tax benefit’ to Verizon Communications, Inc., the holding company.
- Access Services, including Special Access, had $1.94 billion in revenue, 125% more revenue than Local Service but somehow paid half of the expenses charged to Local Service.
- (It is coincidental that Local Service had a loss of $1.9 billion and backhaul had $1.9 billion in revenues, rounded.)
In fact, Backhaul shows a 55% profit margin (Earnings Before Income Taxes, Depreciation and Amortization) “EBITDA”.
Zero Actual Lines in Service for Special Access. This is important — Verizon NY 2019 Annual Report showed these revenues and expenses, but no access lines in use are listed.
6) Context: 55% Compared to 11.25%
On October 15th, 2002, a previous version of AT&T filed a Petition with the FCC to investigate the “special access” service rates, claiming that they were grossly excessive.
These were and are controlled by the “Bell” companies, now AT&T, Verizon and Centurylink. Historically, these services would have a profit margin of 11.25%, not 55%. This second version of AT&T (1984–2005) merged with SBC, one of the Bells, that would then change its name to AT&T. From the Petition:
7) ADDING IT ALL UP
§ There are basic copper and fiber optic wires, known as ‘backhaul’ that are part of the state utility, in this case Verizon New York.
§ While “backhaul” is now very profitable, 55% EBITDA, Local Service, which relies on much of the same infrastructure, has $1.9 billion in losses.
§ Part of the Backhaul profits are created because this line of business is being cross-subsidized by basic Local Service.
§ By keeping this critical infrastructure at record profits and the prices are multiples of what should be charged, ALL of America’s wireless services have inflated rates, as well as all broadband, internet, cable and even voice services –not to mention the Triple Play bundle.
§ These inflated rates and the ability to block competition and add multiple extra made up fees, make America’s communications services some of the most expensive in the world.
Going forward, there is a continued trend to redact and hide basic information, even though Verizon NY is still a state-based public telecommunications utility.
8) POSTSCRIPT: Excerpts from the Redacted Docs
I leave you with excerpts from 2 separate letters filed 6 years apart (and once a month), though this all started earlier. It would seem that the NY State would notice over 70 letters and then 70 redacted reports. Isn’t it time to let the public see what’s been redacted all these years.
Do you think that the Verizon lawyers have a bag of key words and put them into different configurations to liven up the letters?
Part II: The FCC’s “5G Fast’s” attack is to remove the wired networks’ obligations and regulations.
While the FCC and Congress plan massive financial give-aways for 5G, our next article will highlight how the Wireless services are not paying market prices for Backhaul and Access to the networks; they are being illegally cross-subsidized charging local phone customers.
i.e. 5G is a con and it is not profitable once these cross-subsidies are removed.
Moreover, fixing all of these cross-subsidies can lower rates dramatically and help to fund a fiber optic based state-public utility, open to all competitors and customers at reasonable rates.