Why We Requested an Investigation of the Verizon NY 2019 Financial Annual Report.

  • On June 8th, 2020, the Verizon NY 2019 Annual Report was released. It is the freshest data of a state-based telecommunications public utility in America.
  • On June 8th, 2020, Verizon filed a Motion to hide, (they call it ‘redact’), basic financial and business data.
  • On June 30th, 2020, the IRREGULATORS filed comments to block Verizon NY’s Motion to redact information and we are now calling for investigations.
  • First, we filed to stop the cover up, the “redacting” of basic information. Verizon NY is attempting to hide (“redact”) critical information. On June 8th, 2020, Verizon filed a Motion with the NY Public Service Commission to hide basic financial and business data and has left out some basic data.
  • We filed because the current pandemic has exposed that large parts of New York State, including rural areas, and even the inner cities, were never properly upgraded to fiber optics over the last 2 decades and don’t have affordable, very high speed services at home or at their business.
  • We filed because we found that Verizon NY Local Service was overcharged an estimated $1.1 to $1.6 billion in just 2019. (This is the low number and only includes corporate operations expenses, cross-subsidies of the construction expenditures, and marketing expenses.)
  • “Marketing” expenses were charged 54% of the total, $205 million. There is no marketing for basic copper-based phone service.
  • “Construction & Maintenance” paid $1.2 billion. Local Service actual expenses historically are $75–125 million; the rest is overcharging.
  • “Corporate Operations” (executive pay to the corporate jets) was charged at 61%, over $½ billion dollars. In 2017, Local Service paid $1.8 billion.
  • We Filed because of the Wireless Overcharge in Just Verizon New York, 2019. In just 2019, of the $1.2 billion in construction budgets that were charged to Local Service; we estimate over $1 billion was diverted to build the wired networks used for wireless, but there is no payments from the subsidiary to cover this and multiple documents lay out that the wireless construction budgets were being paid via the wireline networks.
  • Over the last 5 years, the utility construction budgets were improperly diverted and used for wireless, which underpaid an estimated $5.3 billion from 2015–2019.
  • We filed to expose that these maneuvers caused local rates to have continuous increases. Basic phone rates had multiple rate increases that were based on “massive deployment of fiber optics” in NY State, as well as losses, which were artificially created but used as an excuse to not properly upgrade and maintain NY City and NY State. Meanwhile, the fiber optic budgets which were supposed to upgrade NY State with fiber to the home were used to do the wireless networks.
  • We filed because of the massive holes in deployments for FiOS and broadband in New York City in low income areas — and the diversion of the state utility construction budgets. Verizon NY also has a contract with NYC to have 100% of the City upgraded to fiber optics, which was to be completed by July 2014. This is a map from a NYC Report showing fiber availability, cross-referenced with low income areas. Green is bad, in this case.
  • In 2017, Verizon was taken to court by NYC because it had not fulfilled the obligations. Verizon has claimed it will be doing wireless, but this diversion of the construction has now been exposed — it created the Digital Divide.
  • We filed because America’s telecom prices are 3–14 times more than other countries, world-wide — Investigate Backhaul. “Backhaul”, (sometimes called “Special Access” or “Business Data Services”), are the wired guts of the telecom infrastructure of the state utility. It uses the same copper and fiber optic wires as phone service but are mainly ‘data services’; Banks use them for ATM machines and wireless carriers use the wires for the small cell 5G wireless sites as most wireless requires a fiber optic wire to work.
  • FACT: Verizon NY 2019 Annual Report shows that Backhaul has EBITDA profits of 55%; Local Service lost $1.9 billion.
  • America’s wireless and broadband services are now 3–14 times more expensive than other countries worldwide.
  • We Filed to Stop the Knee-Jerk Reaction; Stop Wireless and 5G Cross-Subsidies. This financial shell game has been going on for 2 decades and yet suddenly, due to the Covid-19 pandemic, we have the government and public, who want to solve the newly-exposed Digital Divide overnight. This means that America will continue to not examine and fix these core issues but instead offer knee-jerk reactions to roll out wireless and WiFi. The FCC is throwing billions to do wireless yet, ironically, there has been no mention or examination that wireless is not profitable once the costs of the fiber optic wires required for these services are incorporated; it is like giving a heart attack patient some aspirin and a band-aid, vs fixing the underlying problems.
  • New Funding for Fiber Optic Broadband: Halt the Subsidies: We filed because the Verizon NY Annual Reports expose billions of dollars in a financial cross-subsidy scheme that needs to be halted and the money be redirected to bring fiber optic broadband to the home and businesses, especially in low income and rural areas and even in the inner cities.
  • We filed to make others aware that there are billions per state that are being overcharged, as the accounting formulas being used were identical, based on the last FCC data.
  • We filed because New York and the other states can halt these cross-subsidies. On March 13th, 2020, IRREGULATORS v FCC was concluded and the DC Court of Appeals affirmed that the states are independent of the FCC and can stop this overcharging.

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Bruce Kushnick

Bruce Kushnick

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New Networks Institute,Executive Director, & Founding Member, IRREGULATORS; Telecom analyst for 40 years, and I have been playing the piano for 65 years.