The “Landline” Scandal: Verizon’s Art of the VoIP and Wireless Scam.
Notice: None of this story is just about voice service or landlines. The NY State law claims that the increases to local phone rates were for ‘advanced voice-data-video networks’. This is a nationwide shell game — and it needs to be investigated and fixed. We have all been played.
NOTE: This analysis was created by the IRREGULATORS.
“Cut the copper off” said Lowell McAdam, former Chairman and CEO of Verizon Communications, speaking at the Guggenheim Securities Symposium, on June 21, 2012.
“And then in other areas that are more rural and more sparsely populated, we have got LTE [Verizon Wireless] built that will handle all of those services, and so we are going to cut the copper off there. We are going to do it over wireless. So, I am going to be really shrinking the amount of copper we have out there, and then I can focus the investment on that to improve the performance of it.”
Common Wisdom says no one is using landlines anymore and when I searched for “Verizon New York landlines”, on the main Verizon website, I was surprised that it did not take me to the page for the existing “POTS”, “Plain Old Telephone Service” based on the aging copper wires. Instead, it took me to a page to get Fios “Landline home phone” and to up-sell me on other, more expensive plans. There were also links to Verizon Wireless Home Phone — even though the page heading says “Landline Home Phone”.
The page continues to explain that the Fios service, which uses a fiber optic wire, is using VoIP for its phone landline service, sometimes referred to as “Digital Voice”. Notice that “some individuals refer to residential VoIP services as a landline phone when referring to home phone”.
“Is VoIP the same as a landline? Landline phones use traditional copper wiring and wall jacks to make and receive voice calls, whereas VoIP phone service utilizes a broadband internet connection through a modem and corded or cordless phone. Though the technology is different, some individuals refer to residential VoIP services as a landline phone when referring to home phone.”
The more I searched, it is clear Verizon has decided that customers don’t have the right to get basic information about their state regulated, public telecommunications utility , copper-based phone service — such as the price of the service, or what basic additions cost, such as ‘inside wire maintenance’ — or even ‘non-published’ service.
Ironically, according to the FCC, there are over 100 million ‘landlines’ in America; people are using a wired connection for voice calling, it would seem.
The FCC 2020 Marketplace Report claims that there are 108 million customer landlines that are used for ‘voice calling’.
“Fixed Voice. There were 108 million wired basic. retail voice subscriptions are provided through two fixed technologies: Traditional switched access and interconnected VoIP subscriptions. This includes 38 million basic landlines and 70 million interconnected VoIP subscriptions.”
Notice that the FCC has different names for everything — “switched access” which are ‘basic landlines’ vs “interconnected VoIP subscriptions” — as if anyone reading this knows the difference or cares. Ironically, this doesn’t include your cell phone services; just a line used for voice calling that is attached to a wire; copper, fiber, or cable (coax).
In NY State, Verizon NY, alone, had about 2 million lines in 2018, (the last time this data was available), but it doesn’t include all of the wired lines, such as data lines used for DSL, or lines for “Business Data Services”, (or “Special Access” lines). And it doesn’t include VoIP lines or Fios lines. Historically the basic voice lines accounted for only 15% of the total wired lines in service. Moreover, it doesn’t include the wireless lines, even though their traffic almost always ends up on a wired network connection.
(NOTE: We can not get a straight answer about whether the number of landlines during the pandemic, in 2020–2021, went down, was flat or went up.)
And even though there are revenues for VoIP on the Verizon New York books, there are zero VoIP-based lines listed — anywhere.
We note that the cable companies also now offer ‘wired’ voice calling as part of their triple play. Spectrum calls their page “Home Phone and Landline Providers”. And it is also is a VoIP based service. We will come back to this in a future article.
The Digital Divide Was Created by Verizon Et Al.
The goal of the Verizon et al. has been to totally confuse the public, regulators and politicians so that they don’t see the massive financial shell game going on underneath — and it is based on how the different services are classified, which then determines what sort of financial games they can play — never in the Public’s favor.
Verizon has been able to manipulate the accounting, not only of the actual lines in service, but to make the utility landlines to appear unprofitable so that they could force customers onto wireless and dismantle the state telecommunications public utilities — and this is happening in every state.
VoIP is not regulated like a basic phoneline, and as we show, it is illegally being subsidized by the basic phone line customers; and the wireless ‘home phone’ is being pushed as a substitute for a landline, and ironically, Verizon has been subsidizing their wireless networks with basic phone customers, even though this ‘fixed wireless’ product for ‘home phone’ has been panned as a substitute.
And there are no prices given, no model utility landline phone bill , much less that Fios is not available in most areas. How does the price of Fios voice compare to an actual landline, which should be available everywhere?
But it is the billions of dollars being moved — so that Local Service will appear to be unprofitable because in many states there were obligations to replace that copper based line with fiber optics, that is seriously been hidden from the public, even though customers paid billions per state for this, though it varies by state.
And the pandemic exposed this plan –a financial and regulatory scam to remove regulations, make more profits and create a false narrative that it is unprofitable to upgrade America, much less New York State, with fiber optics vs using the legacy copper wires, which should have been replaced with fiber optic wires over the last 3 decades.
This allowed prices to have dramatic increases for no reason, but that didn’t stop many telcos to claim this was to cover the expense to bring fiber optic broadband to even rural areas. It has been used to create artificial tax losses and using corrupted accounting, made the entire US infrastructure appear unprofitable.
And because Verizon and the other telcos control the wires and can manipulate the accounting, the reality is they never showed up to upgrade whole states — nor did they provide competition to lower rates — thus creating the Digital Divide.
Verizon NY is the state primary telecommunications public utility yet there is no mention by Verizon anywhere of this fact. And the infrastructure has been left to deteriorate, as have all of the other state telecom utilities controlled by Verizon, AT&T and CenturyLink (Lumen) .
What is true market power? It is the ability to erase and rewrite common wisdom and institutional memory and make everyone forget that there are still state utilities and that the companies could create this three-card-Monty scheme in plain sight.
Let’s review some of the basic points.
- Verizon appears to have removed all information about the actual copper-based phone lines in at least NY State; you can’t find the service listed, the price, NADA, on the web site.
- VoIP and wireless substitutions are now considered “landlines”, which they do to save billions in expenses, remove all regulations and obligations, as well as shut off the copper wires and NOT replace them with fiber optics.
- All of these services are actually using the state utility infrastructure, so while these lines of business get a free ride, Local Service is paying through the nose.
- These actions have been ‘harvesting’ local phone customers with continuous rate increases, when prices should have been in steep decline.
- This is done via an accounting scandal; illegal subsidies to the other lines of business have been created based on antiquated accounting rules — which were supposed to be removed but instead now put the majority of expenses into Local Service.
- Example, as we will discuss: How can Local Service be charged $145 million in marketing when there is no marketing and you can’t even find a remnant of the marketing of the product, much less the pricing?
DISCUSSION AND DATA
First, These Landlines are Not Landlines. Wireless is not a Substitute. People Have Revolted.
Verizon writes: “The Verizon Wireless Home Phone
“The Verizon Wireless Home Phone connects your existing landline phone to the Verizon 4G LTE network or your Verizon LTE Home Internet connection for reliable, high-quality voice service. It even lets you keep your old phone number.”
Verizon has been pushing a ‘wireless only’ solution after the Sandy Storm knocked out some of the infrastructure in 2012 and Verizon didn’t want to repair the copper or upgrade the networks as promised with fiber. But, in going through the site I did find reviews of the product. This wireless home phone was rated overall at 2.1 out of five.
- “Landline service is terrible Hate Verizon — Jul 14, 2021 ★☆☆☆☆ My line constantly crackles and at times no dial tone at all. I’ve had 3 service calls, will get a good clear line for a week and then back to problems. Will just live with no landline because I am disconnecting as soon as I can get thru to a person, which is next to impossible as most of you know.
- “They keep breaking down Jeremy — Apr 27, 2021 ★☆☆☆☆ Garbage waste of money just quits working after a couple months
- “Changing my previous review backwoodsman — Apr 18, 2021 ★☆☆☆☆ The first few days it worked good. Then it started dropping calls. After many, many calls and hours spent to try to correct the problem, it still drops calls. This home phone really has a lot of problems. If they don’t get it corrected soon I am going to quit using Verizon. Until they work out the problems on this I suggest not using it.
- “Never works! Verizon customernoservice — Jan 24, 2021 ★☆☆☆☆ The first box would never work. After days and days and literally hours and hours and hours on the phone with customer no service, they finally sent out a used unit to replace the one that didn’t work. This one was no better. We were locked into a two-year contract with this, so just suffered through with no landline for 2 years. It is beyond me how this thing wouldn’t work because Verizon has the most coverage in our area and the cell phones work just fine. Northwest Iowa
The 5G Bait and Switch.
And to say that Verizon can’t seem to ever tell the whole story, its 5G nationwide roll out to replace the wired network has been a joke. Wireless 5G was supposed to deliver 1Gbps speeds starting in 2017, with no latency (meaning no delays, especially when gaming). Now, it’s only in certain areas in select cities. Worse, it appears you have to spend $1,400.00 on equipment to get this ‘deal’.
“5G Ultra Wideband available only in parts of select cities. 5G Nationwide available in 2,700+ cities. Up to $1399.99 device payment purchase w/new smartphone line on select Unlimited plans req’d.”
But what you probably don’t know is that 5G requires a fiber optic wire — and much of the wireless infrastructure buildout, overall, has been illegally cross-subsidized via this local phone service scam.
Verizon Fios Phone Home
Verizon is using the fiber optic wires to offer home phone service, as part of the Fios brand, but there are caveats.
§ First, Verizon’s Fios coverage is less than ½ the state and so only advertising this VoIP product is deceptive.
§ Second, the existing copper-wired networks cover 100% of their territory — though it has been left to deteriorate.
§ Third, the deception continues into the accounting of access lines (or landlines. The accounting of lines has been manipulated and it originally showed all of the lines only dedicated to match the ‘local service’ revenues — i.e.; the POTS services. VoIP was NOT included in the accounting of lines, ever, and there is no information about the total lines in New York State — or any state.
§ Fourth, ‘back up battery’ available? This is the fine print that comes up; Fios requires a battery back up, unlike a basic ‘landline’ which is powered by the network. — and they admit Fios is only in select areas. (NOTE We do not know if basic phone service requires a credit approval and possible deposit.)
And to point it out again — the fiber optic wires for Fios were also paid for via overcharging local phone customers.
Local Basic Phone Customers Illegally Funded All Other Voice Related Services.
In the previous sections we talked about different types of services that can offer voice calling, but all from Verizon.
This is an excerpt from the Verizon NY 2020 Annual Report, the primary public telecommunications utility in New York, published May 27th 2021. No other state we know of has a requirement to make the annual financial reports public.
Verizon NY had revenues of about $4 billion dollars, with Local Service having about $1 billion.
(NOTE: “Local Service”, in this case, is a line of business within the utility that covers the revenues for ‘intrastate’ services, which includes the basic POTS phone service.) There are also services that are classified as ‘nonregulated’ services, which also uses the networks, including VoIP voice service, or even Fios video. This was part of a response by Verizon NY in an investigation that ended in a settlement.
This next excerpt gives the break out of the Verizon NY revenues and expenses based on 2020, and all of these services are using the network infrastructure — but notice that while Local Service is 26% of the revenues, it is being charged a whopping 60% of the ‘Marketing’, ‘Customer Services’, (which handles the calls and online for Verizon’s services, including ordering or changing service, etc.) and ‘Corporate Operations’, (which is a garbage pail bucket for executive pay, lobbyists, lawyers, political contributions and the corporate jets).
§ The Nonregulated services are paying only 11% of Marketing, Corporate Operations and customer service.
§ There is no marketing for Local Service; how can it be charged $145 million in marketing alone?
§ Local Service is paying 60%, for a total of $1.1 billion of these expenses, while Nonregulated, which includes Fios video and VoIP, is only pay $195 million.
Comparing the expenses per category to the revenues and how much more Local Service is paying compared to the other lines of business:
§ The expenses applied to Local Service are 109% as compared to revenues. This means that nonregulated had only 18% while Backhaul had 30%.
§ Local Service is paying 514% more than VoIP and Fios video — and is paying 258% more than backhaul, even though backhaul, the business data services, is almost double the revenues.
All of the ‘Local Service’ expenses must be going somewhere else, to pay for something else. Where is the marketing budget going or the customer service expenses or all of the other cross- subsidizing?
And the idea that there is zero information about the basic regulated phone service, which still has a requirement to make sure everyone in the state has at least phone service, known as‘carrier of last resort’ obligations in NY — is problematic.
But, Verizon, using other lines of business, robustly funded by the service that is being cannibalized, with a series of various deceptive strategies — all of which are designed to use the state utility and the utility customers as a cash machine — is seriously problematic.
Harvesting and Rate Increases — Based on Artificial Losses.
The expenses being applied to Local Service have virtually nothing to do with providing local phone service. How did Local Service get charged $833 million in Corporate Operations or $145 million for marketing?
In a separate article we will highlight how over $235 million on average was given to Verizon New York annually for rate increases that are based on these artificial losses.
Separately, we examine how the state and Verizon have been using manipulated accounting formulas — deformed so that the majority of expenses were diverted to have Local Service pay the majority of expenses — thus the $833 million for corporate operations placed into Local Service was created from using the FCC’s USOA accounting rules that have 60% of the total charged to Verizon NY end up in Local Service.
But, as ludicrous as it sounds, local phone service has had continuous rate increases for 40 years… an impossibility if there was actual competition.
Overcharging and Harvesting
As we have shown in multiple reports, Verizon’s entire series of rate increases were based on ‘losses’ and the massive deployment of fiber optics. — and the losses were artificial and the massive deployment was charged to local phone customers — but by 2010, the construction budgets were diverted to wireless.
But this also says that an ‘advanced voice/video/data’ network’ is being funded by ‘local service’ rate increases. and the losses were created by the crap we just saw thrown into Local Service.
Overcharging Per Line
Based on actual bills, we estimate that local phone customers have been overcharged since 2005 around $3,490 per line, based on this deregulation; the current overcharge average is about $352.00, ranging from $300-$400 per year.
The primary item is simple. The rate increases are not justified; there have been no audits of rate increases based on artificial losses and no audits of the actual deployment of fiber — using ratepayers as the funding sources in violation of multiple state and federal laws.
This chart shows the deregulations and changes to the price of basic local service. I.e., if you had basic phone service in 1980, this is what you’d pay for the same thing in each year. There are caveats, and more rate increases than are listed here.
For a full model of harvesting and overcharging in NY, see the 2017 Verizon NY Analysis. For a more detailed model see Verizon’s Manipulated Financial Accounting & the FCC’s Big “Freeze” December 10th, 2015. For an overall examination of harvesting of AT&T California see: “Harvesting and Monopoly Stranded & Harvested & the Creation of the Digital Divide.”
Postscript: On April 12, 2021, the “Communications Workers of America Launched Multi-State Effort to Regulate Broadband” was announced — a multi-state proposal for new legislation which would include VoIP, which is not currently regulated, and would make broadband be part of the state utility.
The analyses we presented over the last decade shows that the fiber optic wires are already part of the state utility funded by local phone customers; We just presented the law detailing that ‘massive deployment of fiber’ was part of the utility. Moreover, what we just presented details that VoIP service has been illegally subsidized by a manipulation of the financial accounting.
The “FTTP”, fiber to the premises- wires have been put in as part of the state utility as “Title II”, Common Carrier, networks.
None of this story was just about voice service or landlines. The NY State law claims that the increases to local phone rates were for ‘advanced voice-data-video networks’. This is a nationwide shell game — and it needs to be investigated and fixed. We have all been played.
NOTE: This analysis was created by the IRREGULATORS.