Verizon NY 2023 Annual Report: Dear Ladies and Gentlemen of the Jury:
On May 23rd, 2024, the Verizon New York 2023 Annual Report was made public by the NY Department of Public Service.
We will lay out billions of dollars in just New York State that should be used to upgrade the state with fiber optic wires to the home, even in rural and low income unserved and underserved areas, and immediately lower basic phone rates. We will also address why America’s prices for all telecommunications, including wireless, broadband and internet should be immediately reduced — and what immediate investigations and actions should be taken throughout America.
How much are you owed? How much will prices go down? Will your area get fiber optic upgrades, and how does this solve the Digital Divide? We will come back to these questions.
Now, you probably have no idea about any of this, and most will think that this excerpt of the Verizon NY 2023 Annual Report looks like gibberish. You probably don’t know who or what Verizon New York is; maybe you think Verizon is a wireless company. And we’ll place bets virtually no regulator, politician or even ‘academics’ and experts know the basic facts — so whatever we lay out we will have to prove to substantiate any claims, right?
The Start of the IRREGULATORS’ Analysis.
We will present this in a series of posts. While some of the details to make these calculations require data that is not in this chart, (but is in this report or other filed documents) this is just the first group of items we will discuss. And these are estimates and rounding, based on the current 2023 financial report, not a history lesson but continuing in 2024.
§ $900 Million “Construction” Annual Overcharge -Item 2
§ $100 Million “Marketing” Annual Overcharge -Item 3
§ $750 Million “Corporate Operations” Annual Overcharge- Item 4
The BIG Question: If Local Service only had $640 million dollars in revenues, how does $1.75 billion extra get charged for just these 3 expense items, especially when virtually none of these expenses were generated by Local Service?
We will attempt to explain this as simple as possible, and use the “show me the money” as our mantra.
And this is not just about New York or Verizon; this exact same financial annual report, impacts every state, as this financial report and the other states are based on something called “Uniform System of Accounting” — USOA.
Click for our reading library, a collection of reports, filings, posts, and other documents pertaining to Verizon NY over the last 2 decades.
We need to point out most pundits will claim — Blah, blah, blah — These are legacy rules, an accounting burden, no one is using these legacy wired networks, and this has nothing to do with the costs of broadband much less wireless service.
This “common wisdom” is based on a rewriting of history by Verizon and AT&T in the states in which they are incumbent utilities over the last 30 years. Of course, as our jury, you can decide on your own, once we present the facts. But, there is enough money on the table to upgrade the state and lower rates without government subsidies — and actually solve the Digital Divide.
Why Is this Discussion Critical Now? ACP is Going Away and This Is Not a History Lesson.
The Pandemic woke up the public to the fact that America did not have affordable high speed broadband and large areas of America were never upgraded properly.
The idea that 23 million Americans require a government subsidy, known as ACP, to purchase basic broadband services — is outrageous at any level, and with it going away, even if parts are reconstituted, America should not be subsidizing wealthy communications companies with government subsidies. These companies have been overcharging consumers for decades with impunity. Government is only compounding the harms by giving them subsidies, particularly the BEAD billions from the Infrastructure Bill.
Worse, every state has been creating a 5 year broadband plan to receive hundreds of millions-billions of dollars, in BEAD government subsidies from the NTIA, yet not one state has even mentioned that there are still state telecommunications utilities that have been charging customers for network upgrades — even in these unserved areas, and this includes New York. But the kicker is, in most states, the funds are being given to the phone and cable companies who helped to create this mess.
We created a separate series of analyses about the 5 year plans and the fact that they all left out material facts, like an accurate history of how the Digital Divide was created in their state.
Some Basics: The State Telecom Public Utilities are Hiding in Plain Sight.
Before we discuss the opening chart, we need to supply the lay or the land. We place bets that you don’t know most of these facts.
- QUESTION: Who the primary state public telecommunications utility in your state that covers 80–100% of the state territory?
Verizon New York, AT&T California, AT&T Michigan, Verizon Pennsylvania, or Centurylink (Lumen), Colorado are all state utilities that have a telephone franchise that covers 80–100% of the state. These are NOT ISPS, they are not cable companies, they are not wireless companies — though all of these are controlled by holding companies — AT&T, Verizon and CenturyLink (Lumen) that offer these other services.
And all of these utilities have been there since the turn of the century — that’s the 19th to 20th Century.
- Verizon New York is the primary NY state telecommunications public utility. Established in 1896, (formerly NY Telephone to NYNEX NY, Bell Atlantic New York and now Verizon NY, and it has a coverage area of 90%, according to the last FCC information, and this includes NY City.
QUESTION: What you’re saying has nothing to do with me. I have a wireless service and I’m using the Spectrum cable service.
ANSWER: Good for you… Overseas prices are a fraction of the US, so you should care because:
§ US: The Spectrum triple play in Brooklyn — that’s phone, cable TV and broadband-internet, costs $225.00 a month — about the national average.
§ Overseas, a report by the European Union shows that the average price for the triple play is around $35. a month.
§ Overseas: Wireless, the price of 5G broadband wireless can be about $11.00 with hundreds of gigs — averaging 4–6 cents; “unlimited” means unlimited.
§ US: Spectrum’s wireless service has cost $14. per gig, not counting taxes, though prices go down with larger packages, and it is reselling Verizon Wireless — but, regardless, the prices are multiples of overseas offers.
§ Of course, there are always sales and promotions, but after these expire, usually in a year, the price of service in the US is inflated with a collection of made up fees, pass-through taxes and advertising gimmicks, such as the term “unlimited” to mean — We were just kidding”, and the prices can double, but also can the taxes applied to the services or even the made up fees.
Spectrum is reselling Verizon Wireless, so the wholesale price is set by Verizon. Verizon also failed to properly upgrade the territory, so there is no serious competition for high speed services to drive down the prices, and since Spectrum-Charter is reselling Verizon, you have the 2 wired companies in bed with each other. In fact, there has been a defacto arrangement to not compete; the cable companies got the wired broadband and Verizon et al took over wireless.
QUESTION: What does this have to do with the legacy utility and shutting down of the copper wires?
SHORT ANSWER: The state utility was supposed to be upgraded — “modernized” — starting in the 1990’s and in every state, laws and regulations were changed to give the utility more profits that would be used to replace the existing copper wire with fiber optic wires. The upgrades never happened.
And this happened multiple times. In New York, there have been multiple increases in the cost of all services, including inside wire maintenance to Caller ID, to do these upgrades; in 2005 it was for the FiOS fiber to the home deployments. Unfortunately, that never happened to a large extent, and the utility construction budgets were diverted to wireless.
But, and most importantly, through manipulating the accounting and a lack of regulatory oversight, the State never halted the rate increases or examined these financials — nor did the State properly monitor the deployments of the fiber upgrades.
EXAMPLE: The State hires a contractor to build a new highway, replacing the existing old roads. They do part of it, then put in some shrubs, but the State keeps paying for the upgrades. A decade later someone complains about the roads and the exact same thing happens again — but no one noticed that the previous funds were still being paid out, not to mention noticing that even with the new monies paid, the contractor decided to just take the funds and move them to other projects.
Now imagine — -customers are paying so instead of building the FiOS, fiber to the home networks, Verizon and the other companies:
§ Manipulated the accounting to make ‘Local Service’, the revenues and expenses for the existing copper wires — pay the majority of the expenses.
§ The rate increases to pay for the fiber optic upgrades never stopped, and prices continually went up through 2024 and continuing as you read this. This is known as “harvesting”, in the industry.
§ Virtually any fiber optic wires being put in would be classified as part of the existing utility and charged mainly to Local Service, and thus could be charged to the state utility customers.
§ The construction budgets would be diverted to build our the wireless networks — a bait and switch.
§ And when Verizon halted building out the fiber networks for FiOS and the previous fiber optic plans, this created the Digital Divide, as it has left the rural areas to be left on copper or given inferior wireless services.
§ They get utility perks, including the rights of way, and other utility perks, and get to use the Local Service as their cash machine.
§ Verizon et al still uses a corrupted version of the USOA accounting that helps to do all of this.
§ This has gone undetected or worse, there has been a regulatory failure to properly hold the companies accountable.
§ Verizon Wireless and Verizon Online are all separate subsidiaries of Verizon and they are using the existing utility networks for a fraction of the actual costs, but through lack of oversight ALL of the underlying costs have been designed to inflate the actual costs to you, the customer.
The Title II Conundrum: And just to boggle the mind a bit more, Verizon was allowed to charge the state utility for the fiber optic upgrades by making the wire installation be classified as Title II, common carrier networks, a telecommunications service. At the same time, Verizon told the public and FCC, etc., that Title II harms investments, which has been part of the “net neutrality” debacle. See the above link for more detail, but the bottom line is — broadband-internet has been classified as Title I, an information service. Verizon could only put in the fiber and use the budgets if it used Title II, not Title I.
Confused? Think of this as — all of the regulators are in a clown car, but it is driven by Verizon et al. And all of the clowns are shouting, honking horns, and squeezed into the car, while Verizon is in the front seat comfortable and laughing.
Show Me the Money
Business Accounting is revenues created and expenses incurred, with caveats and taxes, leaving the profits. For any business there are financial books with the revenues coming in and the expenses that include everything from advertising and marketing, to staff and executives of the company, as well as the offices, and, of course, the profits after the taxes are paid — or avoided.
In the case of a telecommunications utility the major expenses are the wires, and networks that are in place and being built — known as ‘infrastructure” or telco jargon is called ‘the plant’. There are also the buildings where the wires are connected and the poles that are all over the place and there are wires that will eventually go from the pole to a wire to the home, or wires that are buried underground, running up and down streets.
In the case of wireless, your call goes to a cell site or wireless hotspot or WiFi. But, in the end, even the wireless calls mostly end up on a fiber optic wire to carry your wireless activity.
And the revenues to the utilities are divided up into buckets with different classifications; Voice calling, depending on the technology or even whether the calls are local, or crosses state lines and becomes “long distance”, or if it is Voice over-IP, or what is classified as “data”, like an alarm service, or streaming video service — every service, etc. is classified and there is a library of classifications and how the revenues and the expenses should be divided up.
Classifications and obscure terms which virtually no one really understands includes: “regulated”, deregulated, nonregulated, tariffed, detariffed, information service, Title I, telecommunications, Title II, cable TV, Title VI, etc.
This utility networks have many different uses of the networks and there are different taxes and more importantly, regulations and policies that are supposed to apply. Worse, the laws and regulations are under different jurisdictions, state and federal, FCC, FTC, etc. and so the charges on your bills has no one providing oversight. And to add to the confusion, this is a moving ‘captured’ mess, as the companies continually try to remove all regulations, laws, etc. And here’s what happens because America has a dysfunctional marketplace.
The primary lines of business: (using the original column letters on the opening chart)
F) Local Service: This is the column marked in red, with the numbers 1–6 — These are the revenues and expenses for the basic wired copper-based voice phone service known as POTS, plain old telephone service.
NOTE: We use the term “Local Service” to refer to the actual phone service, as well as the classification for the line of business.
C) Nonregulated services include FiOS Video, VOIP phone service and previous ‘regulated’ services, such as inside wire maintenance.
G) Access Backhaul are data lines that are used by banks as well as the lines that go to the cell sites. They are also called “Special Access”, or Business Data Services.
NOTE: All of these services are using the exact same franchised utility network.
NOTE: No part of these financials of Verizon New York addresses the total revenues and expenses from the wireless services or FiOS cable TV revenues.
What this says is Verizon Local Service is paying the majority of all expenses, and the differences can be considered an overcharge.
And Here’s The Challenge — The details of the Local Service overcharging for the different expense items is clearly in plain sight, but no regulator, no 5 year broadband plan, in any state, addresses any of this. These are estimates, rounded, based on Verizon, just New York and just for the year 2023, and with the almost certain guarantee that this will be the same or increased in 2024.
§ $100 Million “Marketing” Annual Overcharge
§ $900 Million “Construction” Annual Overcharge
§ $750 Million “Corporate Operations” Annual Overcharge
Now, here’s some of the details that may be worth your time.
The opening excerpt chart is a summary of the revenues and the expenses broken out into these lines of business. Let’s focus on Local Service and the Nonregulated services.
Follow the Numbers: The Revenue and Expense Items that are Allocated to Each Line of Business
1) Revenues — Local Service brought in less than 20% of the total revenues — $631 million; Nonregulated had revenues of almost 50%, and it is a billion dollars more than Local Service at $1.7 billion.
Expenses
2) Construction and Maintenance — Local Service was charged $940 million, while Nonregulated paid almost the same amount, but more than double the revenues of Local Service.
3) Marketing — Local Service paid $128 million, while Nonregulated paid $78 million.
4) Corporate Operations — is a garbage pail of expenses that can including lawyers, lobbying, or even the corporate jets. Local Service was charged $800 million, which is 61% of the total, while “Nonregulated”, FiOS video and VOIP, only paid $134 million
5) Total Expenses — Local Service paid $2.7 billion in expenses.
6) Losses (Revenues Minus Expenses) Local Service lost $2.1 billion dollars, while “Nonregulated” had profits of $463 million dollars.
But wait, Nonregulated line of business is paying a fraction of the actual business expenses, so the profit margin is artificially high; the losses of local service are artificially inflated.
SMELL TEST: THIS STINKS.
IMPORTANT: Local wired telephone service is no longer for sale or being marketed, and there is no major push to maintain the wires, but to do a bait and switch and ‘cut the copper’, and so there is no construction, there is no marketing and charging for ‘corporate operations’ is an unjust and unreasonable scandal waiting to happen. At the same time, while FiOS and VOIP are actively on sale, these lines of business are paying only a fraction of the expenses, especially based on the revenues in each line of business.
These numbers show a massive financial cross-subsidy scheme in play because Local Service became the cash machine for these other lines of business — making it lose $2.1 billion dollars.
For every annual overcharge there is also a reciprocal ‘undercharge’ I.e.; not only was Verizon NY Local Service line of business overcharged $100 million extra for marketing in 2023, the other business should have paid that charge — a double whammy.
2) Marketing — $100 Million Annual Overcharge: Local Service is being overcharged at least $100 million — annually, and Nonregulated based on revenues should have been paying this difference and more.
§ There is virtually no marketing for voice basic phone service or the other wired services.
3) Construction — Historically, Verizon has only spent around $30 million on construction of the ‘utility’. But this one charge makes Local Service unprofitable, and losing money — $940 million vs $640 million in revenues.
§ Verizon stopped maintaining and upgrading the copper wires at least a decade ago.
§ $900 Million Annual Overcharge: Local Service should have been charged around $30–60 million; Local Service was overcharged at least $900 million in construction. Conversely, “backhaul’ is only paying less than ½
§ BIG QUESTION: If Local Service isn’t creating these expenses — where is all the money going?
4) Corporate Operations: — Local Service is not being sold and the amount of these expenses should be $30–50 million at best. And yet, the Nonregulated category is paying 1/5th the expense, but has more than double the revenues.
§ $750 Million Annual Overcharge: Local Service did not create these expenses and worse, the Nonregulated side underpaid at least this amount
Our estimates of this group of expenses and overcharging:
§ $100 Million “Marketing” Annual Overcharge
§ $900 Million “Construction” Annual Overcharge:
§ $750 Million “Corporate Operations” Annual Overcharge
We’re going to take a brief recess before we resume.
Before we go, we need to make sure that the Blah-blah-blah- pundits’ statements — that these are legacy rules, an accounting burden, no one is using these legacy wired networks, and this has nothing to do with the costs of broadband much less wireless service — are disproved.
FiOS Cable TV Financials are Hidden in this Verizon NY Financial Report.
This is an excerpt from Verizon New York discussing this annual report and its requirement to do a separate Verizon NY FiOS Cable TV Franchise Annual Report, and that covers the broadband — internet-cable TV FiOS service, but more importantly, especially the questionable financial ties.
This 2023 Annual Report has direct financial ties to the broadband, internet and cable TV subsidiaries, as well as previous rate increases applied over the last 2 decades, some of which, as we will discuss, are directly tied to everything from basic Local Service prices to all of the business expenses.
And what is crazy is that Verizon has been filing with the State but was allowed to redact their public report — for over 14 years.
And this is not legacy; this is a direct hit. FIOS is based on fiber optic deployments and it appears that this budget is also part of this annual report — but there are no breakouts or any indications.
And finally, if all of these other expenses have been added to Local Service line of business, how can the state not investigate that for 14 years Verizon ‘just made up’ the amount it wanted to pay in the separate cable report?
Proof: The Separate Accounting for FiOS is MADE UP and Redacted.
This is from a request for an extension to file the FiOS Cable TV report. At the core: Verizon claims it can not separate Verizon FiOS from the rest of the financials, the state annual reports.
“Verizon provides a wide variety of services other than cable television and does not have accounting systems or procedures in place that would enable it to separately report financial data for its cable television operations. Indeed, to the best of our knowledge there are no generally accepted accounting standards governing the preparation of this type of report for a company such as Verizon. Last year, however, Verizon developed and implemented a methodology that enables it to submit, with appropriate caveats, reasonable estimates that will substantially comply with the Commission’s requirements for the Report.
And this part makes it clear that the FIOS books are actually hidden somewhere in the actual larger Verizon NY Annual Reports.
“2. The starting point for the methodology is Verizon’s total-company financial data for 2023, as reported in the company’s Annual Report to the Commission. Assuming that Verizon’s concurrent request for an extension of time is granted,3 Verizon will be filing its Annual Report on May 23, 2024. We estimate that separating the total-company data in the manner required for Part II of the Report will require an additional month. The extension we request here is based on that estimate.”
Dear ladies and gentlemen of our mock jury. We know we threw a lot of jargon, concepts, and numbers around and you properly had no idea about any of the workings of telecommunications and NY State, much less America.
We will have a short recess and come back to continue this crazy quilt tale. But remember this:
We want the money back and a halt to the current overcharging of customers for work that should have been done but that went to other services. We also want a halt to all cross-subsidies that are apparent and even visible on the actual annual report statement we just presented.
Should the returned funds be used by the municipalities and counties or should there be a fund to deal with the digital equity, digital divide issues?
