IRREGULATORS: Stop the FCC and Investigate AT&T, Verizon, Et Al.

08/04/2017 02:22 pm ET

The FCC has put out a series of harmful proposed actions and regulations, all under the name “Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment”.

It should be called “Preempt state laws to allow the shut off of the retail wired services so that the companies can get rid of any obligations, (get rid of the unions), and only provide inferior wireless services (in place of a fiber optic wire to the home)—because it makes the companies more money. At the same time, the companies and the FCC will make outrageous claims about the future of “5G”, a wireless service that does not exist today and may never work as advertised. Ironically, “4G+1G HYPE” requires a fiber optic wire every block or two; no company is going to do that wiring. And the FCC has already gotten rid of the right of competitors to use any upgraded basic data networks (copper or fiber). Worse, once they get rid of Net Neutrality and privacy restrictions, the plan is to beef up the ad-tech to track you on all devices and sell the information. And keeping with their ‘say anything’ playbook, by using the magical terms ‘broadband’, ‘Internet’, ‘Digital Divide’, ‘revolution’ and ‘new tech’ as political carrots, the companies can get more subsidies and help from the government.

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This is what the FCC and companies have planned. We have a different take.

Every state, every city and every citizen should demand that the FCC stop the current series of proceedings to ‘shut off the copper’ and preempt state laws and request that the FCC start audits and investigations into the Agency’s own cost accounting rules and the massive financial cross-subsidies its own rules have created.

At the same time, every state, every city and every citizen should request that the state commissions, AG and advocate offices start state-based audits and investigations, as has been going on at the NY Public Service Commission (NYPSC), which has been examining Verizon New York’s (the state telecommunications utility) quality of service issues and financial cross-subsidies of the affiliate companies and the state utility.

In fact, at this time, Verizon has started to discuss a settlement, which we will address in an upcoming article.

We summarized our analysis in a new report: “Verizon New York 2016 Annual Report: Follow the Money: Financial Analysis and Implications” (which was also filed as part of comments at the FCC).

Moreover, while the FCC’s current proceeding is called “Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment”, one other thing needs to be stressed:

—History shows that this has virtually never worked and neither the FCC, the state commissions, or AT&T, Verizon and CenturyLink, or their co-opted and funded-groups, think tanks and experts—have ever discussed this fact.

And just to prove that the FCC et al. is clueless or in denial about the history of broadband, internet and the hundreds of billions of dollars in investment incentives that were given, over and over, to what is now AT&T, Verizon and CenturyLink to upgrade the copper wires to fiber optics, we have put “The Book of Broken Promises” into the record to stress this point.

The FCC should be asking – Why is most of America’s telecommunications infrastructure still based on the aging copper wires and not fiber optic wires? Where did all the money go?

In the end, the IRREGULATORS believe that the FCC needs to be taken to court over the decision they will make in this proceeding and we hope that commenters, organizations, cities and state organizations, and citizens will join us in these next steps.

In fact, based on history, we file this knowing that this FCC will not take any action based on our filings, will ignore basic facts and documentation that refute their plans and has been doing this long before this proceeding.

And, we challenge the FCC to a public debate in DC on this and the related proceedings. The FCC refuses to take seriously any of the data and facts we’ve presented in our previous filings, including the recent report submitted that used the Verizon New York 2016 Annual Report as the foundation of our analysis.

In short, the FCC has been working for the industry, not the public interest. The FCC’s goal is to remove basic consumer protections, free AT&T, Verizon et al. from any obligations of offering service, and erase the basic cost accounting rules instead of auditing the impacts that their rules have had.

Worse, the FCC lacks the basic data and analysis to prove that the phone companies, once freed, will be incentivized to build out their wireline networks. Instead, the goal is to ‘shut off the copper’ wires that are in use, and not replace them with upgrades to fiber but to have them be used for the wireless company’s 4G networks (and 1G of Hype), so that the companies can make more profits by charging per gig and at slower speeds—not to mention track you and collect whatever info they can cull and sell about you, your friends, business associates, etc.

Ironically, it is the FCC’s failure to audit its own cost allocation rules for 16 years, as well as a dysfunctional FCC Jurisdictional Federal-State Joint Board, that, in large part, is responsible for America not being a fiber optic nation; it is clear that rural areas have been left stranded, while every major city in the US has not been properly upgraded.

In fact, the FCC has never examined any of the state-based plans for fiber optic deployments. It has never examined the state-based local service rate increases that were used to fund imaginary fiber networks or the commitments, in writing, to do upgrades of most of a state, like New Jersey.

Instead, the FCC has been proposing the usual: throw more money at the companies that failed to properly upgrade and maintain their networks, but charged customers thousands of dollars per household for upgrades most will never receive.

Adding insult to injury, the FCC’s proposed plan neglects to even discuss that there are state utilities still in place, that the wires that they propose to ‘shut off’ are part of these networks and that they are classified as “Title II”. In fact, the FCC never once even used the “U” word, “utilities”, when referring to the wires that they are planning on ‘shutting off’.

I also note that these companies are not “ISPs”, or “broadband providers”, or “Internet” or entertainment companies. Their best talent has been to obfuscate the fundamental truth— they are state-based telecommunications utilities, like water or electricity, and they control the wires and networks these services, including wireless, use.

The secret: At the core of all of this is a dysfunctional regulatory system that has been gamed. The FCC only examines services that have been deemed ‘interstate’, (a service that crosses state lines) while the state commissions only examine ‘intrastate’ services, (that are classified as ‘in-state’). The FCC accounting rules have become so deformed that the “interstate’ services, like “Business Data Services” (also called “Special Access”) or FiOS—which are using the state utility facilities, rights of way, etc., do not pay most of the expenses that they are causing. Instead, the majority of expenses are now dumped into the ‘intrastate’ local service classification, even though it is NOT generating the expenses.

And imagine our surprise when we tracked down that the FCC’s rules were ‘frozen’ so that the expenses were based on the year 2000 and the FCC hasn’t audited their own accounting since the rules were implemented in 2001 – 16 years ago. Local Service was the majority of revenues and paid the majority of expenses. Local service is now 23% of revenues but still pays 57% of all expenses, due to this ‘freeze’.

More shocking, when the IRREGULATORS asked the FCC investigate their own rules and the harms being caused, the FCC ‘extended’ the ‘freeze’ until 2018—so it can erase the accounting rules and hide the tracks of their harms over this next year.

Thus, Local Service is unprofitable because of a manipulation of the accounting via the FCC’s rules. It is not based on actual costs generated by this line of business.

In fact, every part of the FCC’s analysis is flawed because the phone companies have been able to play the FCC, as well as the state Commissions, and are able to arbitrage the ‘best regulatory deal’. This is called “Title Shopping”. They simply reclassified the majority of lines to be ‘interstate’, and very profitable, leaving the expenses to be paid by local phone customers of the state utilities, and to ‘look’ unprofitable.

Even the accounting of access lines has been severely manipulated to make it look like there has been a massive drop in the wireline business. But, while some areas, like basic voice phone service, commonly known as “POTS”, Plain Old Telephone Service (which is intrastate) has been in decline, the ‘interstate’ access lines and services have been in steady growth, from special access lines to U-verse, or FiOS, or the wires to the cell sites.

And the ‘interstate’ lines are never mentioned and are not counted as part of the presentation of landlines by either the FCC or the telcos. How convenient.

To be frank, this whole proceeding is a farce based on AT&T et al. doing what they do best – misleading the public and the regulators. And, in this case, the FCC has been captured and it is clear that Chairman Pai and the newly minted Commissioner Brendan Carr, have a biased viewpoint to the point of harm as they both worked for the telcos.

Moreover, no one—except the company-funded pundits or their lobbyists (or the naïve)-- believe that AT&T and Verizon will start to put in fiber optic wires in areas that were not wired before; and the idea that rural areas will have new wires for antennas that only have a range of a few blocks—is ludicrous.

I note that the content in “The Book of Broken Promises” is not part of the FCC’s broadband analysis for ‘accelerating’ broadband via financial investment.

The rest of our comments highlight a few areas of the FCC’s negligence.

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Coda: We are in the Midst of Yet Another ‘Revolution’.

Just to show you how AT&T has continuously attempted to hype us, this phrase has been used over and over, like a coin held by a hypnotist, to make us ‘believe’ AT&T et al. will bring us a fabulous future if we get rid of regulations, etc.

“We are in the midst of a technology revolution

  • July 2017: AT&T Testifies in California

In California, there is a bill to let the companies put in small cell wireless networks wherever it wants and with little or no obligations; zoning and environmental testing challenges will mostly be a thing of the past. (This is also the exact same plan the FCC is proposing, except that it would be federal regulation that would preempt the state laws.)

In a hearing on July 12, 2017, Bill Devine, VP, AT&T stated.

“Building small cell infrastructure is a matter of statewide importance... The wireless industry is prepared to invest billions of dollars in small cell and 5G networks. We’re not seeking a government subsidy; we are not seeking tax breaks. We are in the midst of a revolution, a technology (communications) revolution”

And yet, listening to AT&T, no one mentioned that this phrase is the mantra to remove regulations and get other changes in public policies that benefit a few companies, including AT&T.

In 2012, AT&T used this same phrase almost verbatim.

“CALIFORNIA, JUNE 19, 2012American consumers are in the midst of a communications revolution, and AT&T’s technology has the power to help California and the world operate more sustainably. In the 2011 AT&T Sustainability Report, launched today, the company demonstrates how it is committed to improving our world and empowering consumers to do the same.”

This phrase has been so common that it should be tattooed on the CEO’s forehead, as it was used in 2005 when SBC bought the previous version of AT&T. (NOTE: This merger killed off the original AT&T as a competitor, and the company, SBC, then took over the name. AT&T then rolled out U-Verse, the copper-to-the-home service (that was supposed to be fiber to the home), then stopped.)

"Today's agreement is a huge step forward in our efforts to build a company that will lead an American communications revolution in the 21st century," said Edward E. Whitacre Jr., SBC chairman and chief executive officer.
  • 1998: AT&T Testifies

If that wasn’t proof enough that the statements made by the companies are suspect, this phrase was part of AT&T’s testimony in 1998—almost 20 years ago, claiming that it was going to wire all schools with internet service.

And I note that this is being said by the previous version of AT&T, before the SBC merger. Why get rid of what works, right?

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Conclusion: “Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment” – is a not funny joke that has been repeated over and over by those who don’t know the history, or, more insidious, the FCC’s agenda is to help AT&T et al. over the public interest.

We’ve divided the filing into three parts and we will highlight each in separate articles.

  • Part I: The Accounting of Access Lines has been Manipulated to Create Line Losses Used for Public Policies.
  • Part 2: The FCC Can’t Shut off the Copper because Its Own Cost Accounting Rules have Manipulated the Financials
  • Part 3: How Many Times Will America Give AT&T Et Al. Financial Incentives – Read, Extra Charges on Bills, Killing Off Competition, Relaxation of Any Obligations, and No Accountability?
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