The Copper-Wire World of AT&T: The Reason to Investigate AT&T, Now

09/04/2017 04:02 pm ET

The chart above is a summary of how AT&T has been manipulating the accounting of its mostly copper-based, state-based, utility networks. AT&T claims no one is using the networks and if they can ‘shut off the copper’, this time they will bring next generation wireless services, including 5G, to America. And to help AT&T et al. push this plan along, there is industry-created legislation, like the California bill, SB-649, as well as proceedings at the FCC. (SB-649 preempts state and city laws to put in ‘small cell’ wireless, with the claim it will replace (and shut off) the wired networks.)

Ironically, these ‘next generation’ wireless services, when and if they do show up, will require a fiber optic wire to connect to small cell antennas every block or two. Does anyone really believe that AT&T is suddenly going to wire cities, much less rural or even suburban areas with fiber now?

In fact, poor AT&T claims that there have been major declines in access lines.

“Retail POTS (Plain Old Telephone Service) subscriptions have declined to the point that less than 17% of households purchase switched-access voice service from an ILEC, and these services will only continue to decline.”

Unfortunately, this is a useless, made up statistic designed to get rid of regulations. Though it sounds convincing, the fine print reveals that AT&T is leaving out the majority of other copper-based lines that are used for VoIP, DSL, U-Verse, Business Data Services; it even leaves out business lines. Stare at the quote and you’ll see it is only for ‘residential’, ‘voice’ services. I’ll come back to this chart in a moment. (”ILEC” is an industry term for the companies that control the wires, mainly AT&T, CenturyLink and Verizon.)

The Fiber Optic Embarrassment

Not including most of the access lines is one thing; But worse, even though AT&T has claimed multiple times it was going to bring fiber optic upgrades to America over the last two decades, instead, AT&T’s fiber deployment has been an embarrassment. AT&T is the state utility in 21 states, which covers about 76 million residential and business ‘locations’, but as of July 2017, AT&T only ‘passes’ a paltry 4.6 million locations with fiber-to-the-premises services—about 6% of the total. (Note: The term “passes” represents that a household or business should be able to get the service; it is not counting actual customers with the service.)

This deployment has been distributed to include 52 metropolitan areas. Do the math. This means that the company is only covering a fraction of the population in every city, which includes Los Angeles, San Francisco, Chicago and Atlanta. These new fiber lines, then, are more for publicity and to influence policy; they are just ‘fiber to the press release’. (Also, AT&T is required under the AT&T-DirecTV merger to do fiber deployments, so the plan has been to use this to help build their wireless networks at the same time.)

  • In short, AT&T had revenue of $154 billion dollars in the US in 2016, and yet, after 25 years, the company has only 6% of their territories covered with a fiber optic to the home service in 21 states.

Moreover, this means that the rest of the lines are mostly just the existing, aging copper wires. (U-Verse is a copper-to-the-home service, as is DSL, as are most of the Business Data Services, which are now the majority of lines.)

Another source of access lines in service was from the FCC’s “Statistics of Communications Common Carriers”, which the FCC stopped publishing in 2007. This excerpt shows that AT&T California had 13.7 million basic lines (switched lines), which would be the POTS lines, (but this included both business and other services that the AT&T conveniently left out in their 2017 data). However, there was an additional 22.2 million lines of the Business Data Services (originally called “special access”), the majority, that were not included in the current AT&T accounting. (There are a host of caveats, but in 2017 the FCC doesn’t supply any info on the actual number of lines in service.)

While the original POTS voice basic service lines have declined, a lot of lines ‘migrated’ to these other services, like U-Verse voice, or the wires to the wireless hot spots. When a migration happens, while the copper wire is the same physical wire, the service riding over the wire changes the classification – so it counts as a ‘line loss’ in the basic access line accounting.

In fact, all lines classified as “interstate” (crossing state lines) or an “information” service, or “IP”, or “data”, are not in the accounting and these are under the jurisdiction of the FCC. The only lines counted are classified as “intrastate”, (in-state), and this is only POTS.

In no proceeding has the FCC supplied the total number of lines currently in service or explained what happened since 2007 with the access line accounting.

Why Do This Accounting Manipulation?

AT&T’s plan is to force-march customers onto wireless service for the home instead of maintaining and upgrading the networks to fiber for residential and business customers—because it makes them more money. They can also charge by the gig instead of the more generous wireline service plans, thus make more money. At the same time, the company will privatize the data lines and dismantle the state utility, but give its own subsidiaries financial perks and benefits no other competitor can get.

And this plan is not new. AT&T’s original FCC IP Transition plan from 2012 stated that at least 25% of the wireline networks would not be feasible to upgrade - so they, too, would be ‘shut off’ and migrated to wireless.

“In the 25 percent of AT&T’s wireline customer locations where it’s currently not economically feasible to build a competitive IP wireline network, the company said it will utilize its expanding 4G LTE wireless network — as it becomes available — to offer voice and high-speed IP Internet services.”

What Should Happen Next?

Based on the accounting of lines and connections, as told by AT&T’s annual and quarterly reports, filings, and press releases, etc.:

  • Every regulator should now consider removing AT&T’s utility franchise for its failure to properly upgrade the original copper-based utility with fiber optics, as well as to stop the cross-subsidies of the utility networks and the other AT&T subsidiaries.
  • AT&T’s other businesses and subsidiaries should be separated from the state utility and they should be paying retail, market prices for all services, just like all competitors.
  • AT&T should be investigated for the billions of dollars transferred to these other lines of business (and for the transfer of funds for use in other countries)—and get the money back.
  • In fact, AT&T’s accounting of copper-based access lines has been manipulated and should be investigated as 50-90% of all lines in service are NOT counted.

We will discuss AT&T’s plan to ‘shut off the copper’ and move customers onto more expensive wireless, based on what the company filed at the FCC. And we will go through the miss-accounting of access lines detailed in the previous chart.

Let’s Go Through this by the Numbers:

1) AT&T covers about 76 million ‘locations’, which includes households and small businesses. These are not actual customers but homes and businesses that are in AT&T’s 21 state territories. (Note: AT&T had 22 states but sold off Connecticut.)

2) After 25 years of claiming that the company would deploy fiber optic upgrades, AT&T only “passes” 4.6 million locations that can get its fiber optic service, or 6% of the total, as of July 2017.

AT&T’s July 2017 FCC Filing:

“AT&T currently offers gigabit, fiber-based service to 4.6 million locations across 52 major metropolitan areas and plans to add 2 million more locations and 23 more metro areas in 2017.”

Considering there are only 4.6 million locations being ‘offered’, not customers, and it is spread across 52 major metropolitan areas, that means that, on average, there are only 88,000 locations in a city being covered.

NOTE: This fiber-based statistic is for both business and residential ‘locations’; the ‘decline’ mentioned is only residential voice customers, not data customers and not businesses. So, these lines are not part of the accounting.

Here is AT&T’s map of the US describing the fiber deployment. The large uncovered areas are because AT&T is only putting in fiber in their current wireline states, not in Centurylink (the western states), or Verizon, (the East Coast states, from Virginia to Massachusetts).

Click to see the list of cities which includes Los Angeles, San Francisco, Chicago and Atlanta, among others. (Note: The list shows 54 cities.)

This next excerpt is one of my favorite details—the deployment is in full swing to 650,000 apartments and condos, nationwide. Moving the locator , I focused on California—a few hundred units in/near San Francisco, a couple hundred more in LA. (The map gives different amounts every time I clicked on it.)

Worth repeating:

  • AT&T had $154 billion dollars of revenue in the U in 2016, and after 25 years, the company has 6% of their territories covered in 21 states with a fiber to the home service, which includes 650,000 apartments and condos.

Returning to the Chart

3) AT&T claims it has 5.8 million retail residential access lines. AT&T does not give the number of actual ‘total’ lines in service; these are only residential lines.

4) In the June 2017 AT&T filing, AT&T claims that there are only 17% of ‘households’ using voice phone service.

5) This would mean that AT&T should have approximately 34 million wired households in its territories (if 17% is 5.8 million). (NOTE: AT&T is using the overall national numbers for the number of households so as to hide how many actual copper-based lines are still in service.)

Missing from the Access Line Accounting: Copper Based U-Verse and VOIP

6) AT&T has 5.4 Million IP (VoIP) Consumer Voice Connections. These additional customer lines have not been included in the access line accounting of “POTS” lines, even though these are most likely using a copper-based phone line. And again, these are only ‘residential customers’; they are not total lines.

I.e.; AT&T has 5.8 million basic residential phone lines, while it has another 5.4 million “VoIP’ ‘consumer’ voice lines, which are not counted. Thus, the migration from the ‘legacy’ copper-based service to the U-Verse VOIP copper-based phone service, are NOT counted.

Moreover, in the accounting of the lines in Item 4, “Percent of Customers Using "POTS" – the migration to VOIP shows up as a ‘line loss’ of the POTS lines, but since it is the exact same copper wire, it is just a manipulation of the accounting of lines in service.

Then We have the Broadband Connections

7-10) The copper-based broadband connections include U-Verse, with only 4.2 million lines total, DSL with 1.3 million lines and “IP” broadband, which is now 13 million. Considering all broadband is IP, and some of these can be part of a triple play, where the voice, U-Verse cable and broadband are all part of a package, it would appear that there are probably 15-20 million total lines that are mostly likely copper wires in use that are not counted in AT&T’s declining copper wires. (We do not know if AT&T included any DirecTV services in these numbers, as there is a separate category in the AT&T accounting for DirecTV video.)

More Lines Not Counted

11) Business Data Services are NOT Counted.

12) Business Access Lines Not Counted

13) Access Lines Wholesale to Competitors

In reviewing AT&T’s FCC filings and AT&T’s SEC annual and quarterly reports, one thing stands out – it has decided to leave out the number of business lines as well as the number of Business Data Service lines, (sometimes called ‘Special Access’). And it doesn’t include the wholesale lines to competitors, which are also not detailed anywhere.

14) Lines Not Counted. We estimate that 50-90% of the lines in service are missing, which are mostly copper, and could be shut off. However, without an audit there is no way of knowing just how many customers are in ‘shut-off’ zones. This number includes Business Data lines (special access).

Thus, the FCC’s proposals to ‘shut off the copper’ and preempt state laws, with the data that they have presented, should be taken to court. It invalidates every part of the FCC’s argument. And since the FCC has made no attempt to identify the impacts on customers, what they will come up with is guaranteed to not answer the basic questions we presented or supply a valid calculation of harms on customers, cities and states.

This is what AT&T wants, according to their filings:

“COMMENTS OF AT&T SERVICES, INC. ON NOTICE OF PROPOSED RULEMAKING, NOTICE OF INQUIRY, AND REQUEST FOR COMMENT

AT&T writes:

  • “The Commission Should Preempt State and Local Laws and Other Legal Requirements that Inhibit Broadband Deployment.”

To Summarize AT&T’s Position:

  • AT&T’s filings call for preempting states’ rights where the state requires the incumbent phone company to continue its ‘carrier of last resort’ obligations; i.e., not have to supply service from the utility at all.
  • AT&T wants to ‘streamline’ the notification process so that they can ‘shut off’ customers at will and not have to notify the ‘retail customer’ or make sure that there is another replacement that is ‘adequate’. In the July 2017 AT&T filing at the FCC, the Table of Contents included:
  • “The Commission Should Eliminate “Mandated” Retail Customer Notice Requirements”
  • “The Commission Should Abandon the ‘Adequate Replacement’ Test.”
  • AT&T wants the FCC to ‘forbear’ so that it can share information with other entities, meaning their own affiliate companies, before there is a formal announcement.
  • AT&T doesn’t believe government entities, including the FAA, Federal Aviation Administration, or the government using legacy data services, should have special treatment.
  • AT&T wants no commitments required, no obligations left, no financial accounting to be submitted.
  • AT&T wants no state or even city zoning issues to worry about.

The fact that AT&T has created a shell game with the accounting of lines to deceive the public and regulators should be the best indication for the need to start investigations immediately, and to start the process to divest the affiliate companies from the state utilities, immediately.

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