“Title II” Is Used to Overcharge Local Utility Customers, Turning Them into “Defacto” Investors.

05/12/2017 12:10 am ET

We’re all being played. Title II of the Communications Act of 1934 has been the investment mechanism to charge wireline customers for fiber optic build outs for the company’s’ other lines of business, including wireless or cable TV service. (We focus on Verizon’s East Coast holdings, including District of Columbia.)

And yet, there are those who make statements that Title II, based on the Communications Act of 1934, harms investment. Here’s proof that they are, simply put, wrong.

  • Verizon New York, cable franchise, 2005

This excerpt is a standard addition to Verizon NY’s cable franchises. It states that Verizon has been using Title II for the deployment of their FTTP, Fiber to the Premises services, claiming that the fiber optics wires are nothing more than an upgrade of the state utility networks.

And below is an excerpt from the new Verizon-Boston franchise for the build out of the city’s FiOS fiber optic network. Verizon claims that the fiber optic wires are Title II and are part of the 1934 Communications Act, as well as part of the “existing wireline telecommunications network”. In this case, Verizon claims that it doesn’t have to supply the public with maps of where the build out is occurring; it’s just an upgrade of the existing state-based utility.

  • Verizon Massachusetts’ Boston cable franchise, December 2016

In short, we are being lied to.

Verizon et al. have continuously told anyone who will listen that using the Title II classification for its broadband networks would harm innovation and investment, yet Verizon appears to have failed to disclose a basic fact to regulators and the courts:

FiOS uses an FTTP, ‘fiber to the premises’ network which has been based on the Title II, common carriage, telecommunications classification for at least a decade. Why? Title II gives Verizon the ability to use the existing telecommunications rights of way, but it also has allowed Verizon to use basic phone customers as defacto investors through multiple rate increases to fund this FTTP network, which we documented in New York State.

Title II Makes the Fiber Optic Build Outs Part of the State Utility Infrastructure.

This is part of a Verizon NY franchise referring to an Order from the NY Public Service Commission that allowed Verizon to make this FTTP for FiOS part of the state utility under Title II from 2005

Title II Fiber Optic Networks Were Paid for, in Part, by Rate Increases.

And to be exceptionally clear, this allowed Verizon to receive multiple rate increases to pay for the “massive deployment of fiber optics”, and supposed losses that occurred. This was the 3rd increase since 2006, granted by the NY Public Service Commission in June 2009.

“VERIZON GRANTED RESIDENTIAL RATE INCREASE
“We are always concerned about the impacts on ratepayers of any rate increase, especially in times of economic stress,” said Commission Chairman Garry Brown. “Nevertheless, there are certain increases in Verizon’s costs that have to be recognized. This is especially important given the magnitude of the company’s capital investment program, including its massive deployment of fiber optics in New York. We encourage Verizon to make appropriate investments in New York, and these minor rate increases will allow those investments to continue.”

But Verizon stopped building out FiOS around 2010-2012. Since that time, Verizon has diverted the majority of the construction budgets to the company’s wireless networks, but is still charging wired customers, and it uses Title II to do this. In fact, the Verizon New York’s state financial reports show that state utility customers have been paying the majority of all expenses for the other services, from the construction budgets for building the wireless networks or even the FiOS networks, to even the Corporate Operations expenses—all because they are Title II.

We filed multiple comments about this topic with the FCC, including in the original Internet-Title II proceeding.

Title II & Net Neutrality? Title II Is the Investment Mechanism; It Didn’t Harm Investments

As it relates to the current Net Neutrality fight—if the wires have been Title II for the last decade, (even when the FCC declared the broadband/Internet networks to be an “information” service, which was changed back to Title II under the last FCC administration) – and since using Title II acts as the investment mechanism to fund the construction of the wireless and wireline fiber networks by charging low income families, rural areas and everyone else using the wireline services — where are the investigations?

Worse, the cable service, the ISP service and other services use these networks and they should be paying ‘market prices’, but don’t. This is the true harm to investment; the utility networks should have been upgraded to fiber but the affiliate companies got advantages and were even able to overcharge local phone customers. Worse, the construction budgets were diverted to fund other projects.

All of this is on top of Verizon making claims that they needed to get rid of Title II while at the same time telling state regulators that Title II was vital for building the fiber networks to customers’ homes and offices and needed to be done as part of the state utility.

Title II Is Used in Every Verizon Fiber Optic Franchise

Even with all of these twists and turns, let’s just focus on a collection of quotes from some of Verizon’s cable franchises in Massachusetts, Pennsylvania, Maryland, Florida, New Jersey, District of Columbia and New York.

This Collection Proves Once and for All that Title II Is the Investment Mechanism for the FTTP Networks.

SYSTEM OPERATION. The parties recognize that Franchisee’s FTTP Network is being constructed and will be operated and maintained as an upgrade to and/or extension of its existing Telecommunications Facilities. The parties agree that the LFA cannot assert authority pursuant to this Agreement over Franchisee’s FTTP Network, except to the extent such facilities, if any, are used exclusively to provide Cable Service and are located in the Public Rights-of-Way.
WHEREAS, Franchisee is in the process of installing a Fiber to the Premises Telecommunications Network (“FTTP Network”) in the Franchise Area for the transmission of Non-Cable Services; and
WHEREAS, the FTTP Network will occupy the Public Rights-of-Way within the LFA, and Franchisee desires to use the FTTP Network once installed to provide Cable Services in the Franchise Area; and 2.2 LFA Does Not Regulate Telecommunications: The LFA’s regulatory authority under Title VI of the Communications Act and this Agreement is not applicable to the construction, installation, maintenance or operation of the Franchisee’s FTTP Network to the extent the FTTP Network is constructed, installed, maintained or operated for the purpose of upgrading and/or extending Verizon’s existing Telecommunications Facilities for the provision of Non-Cable Services.
1.8 Cable System or System: The Cable System shall not include Telecommunications Facilities or the tangible network facilities of a common carrier subject in whole or in part to Title II of the Communications Act
1.10 Communications Act: The Communications Act of 1934, as amended.
“Verizon NJ has been upgrading its telecommunications facilities in large portions of its telecommunications service territory so that cable television services may be provided over these facilities. This upgrade consists of deploying fiber optic facilities directly to the subscriber premises. The construction of Verizon NJ’s fiber-to-the-premises FTTP network (the FTTP network) is being performed under the authority of Title II of the Communications Act of 1934 and under the appropriate state telecommunications authority granted to Verizon NJ by the Board and under chapters 3 and 17 of the Department of Public Utilities Act of 1948. The FTTP network uses fiber optic cable and optical electronics to directly link homes to the Verizon NJ networks.
“Pursuant to the NJSA 45:5A-15, telecommunication service providers currently authorized to provide service in New Jersey do not require approval to upgrade their facilities for the provision of cable television service.
“As such any construction being performed in the public rights of way is being undertaken pursuant to Verizon NJ authority as a telecommunication service provider.”
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