Before the

Federal Communications Commission

Washington, D.C. 20554

 

In the Matter of

 

A National Broadband Plan for Our Future

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GN Docket No. 09-51

 

 

NOTICE OF INQUIRY

 

COMMENTS BY

NEW NETWORKS INSTITUTE & TELETRUTH

 

Bruce Kushnick, Executive Director, New Networks Institute

bruce@newnetworks.com

June 8th, 2009

 

America’s Broadband Strategy Should Be:

Get $300 billion dollars back from AT&T, Verizon and Qwest; monies charged to customers for fiber-optic upgrades of the Public Switched Telephone Networks (PSTN) that never occurred. Use these funds to create America’s new fiber-based infrastructure that is capable of 1 gigabit speeds and is ubiquitous --- rural, urban and suburban, rich and poor neighborhoods and communities --- and open to all competitors. Do not charge customers more by using government funding. (Note:$300 billion represents billions of dollars per state.)

 

The FCC needs to redo its entire data collection and process as it rewrote the history of broadband to suit political purposes, including lowering the speed of broadband to 200Kpbs in one direction. In 1992, broadband was 45mbps in both directions.

 

Create a second divestiture to open all networks. Separate the wireless companies from the incumbents.

 

Make customers whole: Are phone customers owed approximately $3,000.00 per household from AT&T, Verizon or Qwest for a fiber optic service paid for but never received?

 

New Networks Institute has submitted an ebook, “$300 Billion Broadband Scandal” into Comments to substantiate our claims. 

 

Comments

 

New Networks Institute was created in 1992 to explore the ‘new networks’ that were supposed to be deployed by now-AT&T, Verizon and Qwest.  With Teletruth, we have filed over 20 different comments and complaints with the FCC since 1994 about broadband, Internet, telecommunications, competition and the problems with the FCC’s data.

 

And, as we will show, our track record over the last decade should be taken into account as we predicted a decade ago, 1998,  the current state of affairs and it could have been avoided had our advice been taken seriously.

 

The FCC “seeks comment to inform the development of a national broadband plan for our country.  Its focus is to enable the build-out and utilization of high-speed broadband infrastructure.”  These comments should include funding a nationwide network, as well as discuss the definition of’ broadband.


We have supplied a reading room to prove our points, including a free ebook, which has been submitted as part of these comments.

 

America’s Broadband History: The Facts.

 

Think of America’s broadband information highway, like other highways --- A state and its citizens make a deal with a contractor to create a 21st century, upgraded, statewide highway system, removing the old roads with brand new infrastructure. The company takes the money and then delivers nothing more than a refurbished old road. Then the company is able to set up tolls, block cars from specific companies, and even hold municipalities hostage, all the while being paid monthly fees for upgrades that were never completed. Instead, the companies embark on upgrades that they will control, claiming these new highways are private property for personal use. Worse, the regulators are too cozy with the contractors; they fail to monitor or collect accurate data, or enforce basic laws.

 

1) America is 15th in the world in broadband, according to numerous international sources. The reason we are 15th is that AT&T, Verizon and Qwest failed to upgrade the Public Switched Telephone Networks, the state telecommunications and broadband utilities, and the regulators, both state and federal, failed to collect accurate data or hold the caretakers of America’s critical infrastructure, AT&T, Verizon and Qwest, accountable.

2) As of 2009, America has paid over $300 billion since the 1990’s for fiber optic upgrades of the Public Switched Telephone Networks that were never done. This is about $3000.00 per home and counting, though it varies by state. This money has been paid to the phone companies in the form of phone rate hikes and tax perks, as the companies promised to rewire America state by state, and each state created ‘deregulation’ to give the phone companies more profits to use for network upgrades. These profits and changes to state laws were never redone and the monies are still being collected. (Note: We calculate that overcharging for the missing networks is approximately $20 billion a year.)

3) By 2010, virtually ALL of America, 117 million homes, should have already been rewired by AT&T, Verizon and Qwest to be capable of 45mbps speeds in both directions; the definition of broadband in state laws in 1992. This was to be ubiquitous; rural, urban and suburban areas alike, rich and poor, and open to all competitors.   In many states, schools, libraries, government agencies and even hospitals should have been upgraded with fiber optics.

4) DSL was a ‘Bait and Switch’. DSL travels over the old copper wiring and was considered inferior in 1992. DSL was only deployed after it became obvious the Internet required more speed than dial up.

5) What does this mean to the average customer? In Hong Kong and other countries, customers can get 100Mbps, bi-directional services for the price of DSL in America, which about 30-50 times slower.  And these countries are now pursuing 1 gigabit speeds.  It also harmed the economy. According to the phone companies own analysis, over $7 trillion dollars ($500 billion annually) was supposed to have been gained had the phone companies built out the networks as promised.

6) What about AT&T’s U-Verse and Verizon’s FIOS? Combined, these companies have only 3+ million upgraded broadband-TV customers. But more importantly, these networks are “closed networks”, controlled by the phone companies. Customers paid for “open” networks, so customers could have choices. In fact, Verizon claims that FIOS is not part of the Public Switched Telephone Networks, the Utility, but private property, for personal use.

7) Massive Cost Shifting --- Over the last decade, AT&T and Verizon have been able to take monies that were supposed to be used for upgrading the networks to pay for other services, from DSL to wireless.

8) The mergers were harmful. The various mergers allowed for total consolidation of multiple revenue streams – Local, long distance, DSL, broadband, Internet service, cable and even wireless, and removed 13 different major, potential competitors, including AT&T and MCI. Also, while now-AT&T and Verizon both claimed they would compete ‘out of region’ for wireline services if the mergers went through, no Bell has ever directly competed with any vigor.

9) There is no serious competition. Broadband is a duopoly and phone service is still a telco-monopoly as cable companies only have 15% of the market, and competition using the wireline networks is down 60% since 2004. In fact, every state is now having major price increases, 80% in New Jersey, for example. Prices shouldn’t rise if there is true competition.

10) Examining a 25 year synopsis of broadband, including ISDN, we estimate that Verizon, AT&T and Qwest  underspent $58-$161 billion dollars on capital expenditures,  took from $100 billion to $371 billion in excess tax write offs (deprecation), and cut staff over 70% when compared with revenues. Revenues increased 220%.

11) The FCC’s “Advanced Network” (Broadband) reports (for Section 706 of the Telecom Act) have distorted the history of broadband in America, even changing the speed of broadband to 200Kbps for political reasons. The FCC also left out or removed thousands of critical documents in their previous analysis. This problem permeates all FCC data as the Agency has been influenced by telco-funded astroturf or co-opted groups, and pundits who claim to be representing the public or consumers, but are paid spokespeople for AT&T and Verizon.

12) The FCC’s previous decisions killed competition. Instead of bringing lower prices and broadband through competition, the FCC’s decisions have been biased towards the incumbents, causing regulatory harms to small and large competitors. The FCC helped to put over 7000 independent Internet Providers out of business by removing line sharing and failing to enforce competitive laws, and the FCC removed wholesale rates (UNE-p) closing AT&T and MCI’s ability to compete for local service, which put them up for sale.

13) The problem America faces is not “Internet access”. The problem is the wire and wireless plant; the infrastructure. All other issues are surface issues.  Competition would solve any ‘net neutrality’ issues as a customer would have choices if their provider was blocking, degrading or slowing down the customer’s connection.

 

Next Steps

We believe that Congress will not act to open any networks or fix the problems we just discussed as there are too many politicians with too many corporate-financial ties. Will the FCC actually ‘done the right thing’ to protect America’s interests, or even the interests of the United States?

  •  The FCC needs to re-educate itself on how America became 15th in broadband by collecting accurate, objective data, removing corporate influences in the Advisory committees, and redoing the processes by which it creates laws. It needs to get an accurate history in order to take the next step.
  • The FCC, working with the states, should attempt to get the $300 billion back for failure to deploy fiber optic broadband to the Public Switched Telephone Networks as committed and use the money to upgrade the networks to high speed, ubiquitous services – or refund it to customers. (NOTE: The total amount is a summary of the billions per state that have been collected.)
  • The FCC and the Department of Justice should step in and examine anti-trust violations, then work to create the second divestiture. Break up the companies and separate them from network controls so that ALL networks become competitive as envisioned by the Telecom Act of 1996 and restore ‘common carriage’ over broadband. Wireless services should become separate companies that compete with wireline services, not owned by the same companies.

Comment Additions

a) Broadband was 45mbps in both directions in 1992. It required “high definition video in both directions”, the same as the Telecom Act of 1996.  We filed with the FCC since 1998 to change their definition of broadband.

 

Proof of Speed: See the ebook for more on this topic.

B) The FCC Needs an Accurate History of Broadband. In 1999, we filed a complaint refuting the FCC’s Advanced Network report (for Section 706) as it has ignored or left out thousands of state documents – broadband was still a ‘telecommunications’ service and under state law the upgrades to provide broadband were both state-based as well as federal.

Here are just a few pages from what the FCC missed.

Highlights of Comments and Complaints:  We note that Broadband Scandal’s entire collection of data never made it into the FCC’s reports on broadband.

 

 

C)  The FCC’s Data Is Atrocious and Needs Immediate Fixing.

In 2007, we filed a complaint because the FCC’s data being used in virtually every docket had been corrupted. The FCC was giving information about current markets, using data from 1992, 1993, 1994, etc.

D) The Mathematics of Customer Overcharging for Broadband.

We’ve outlined how we derived the overcharging in Broadband Scandal, which was a estimate based on both a top-down approach, examining revenues, profits, depreciation, etc for the total company, as well as a bottom up approach, examining the costs by state. This work was upgraded in our 25th Anniversary Report. However, it is clear that this process would include both state and federal investigations as state laws were violated, not to mention federal laws  because ‘multiple states’ used the same fraudulent data; thus, the issues cross state lines. Also, the money is still being collected today as virtually all state laws were never reversed, even though the companies failed to upgrade the PSTN.

$300 Billion Broadband Scandal.
“Failed Fiber Optic Deployments by State”  has short summaries, testimony and complaints we filed in New Jersey, New York, Pennsylvania, Massachusetts, California, Illinois, Indiana, Wisconsin, Ohio, among others.
25th Anniversary Report and bibliography – Supplies an update to our overcharging model as well as supplies critical financial indicators, including revenues, profits, construction, depreciation, employees, and even the cost of phone service.

Track Record and Data


New Networks has one of the best track records on predicting the future. In our book, (and now ebook), “The Unauthorized Bio of the Baby Bells”, published in 1998, we created a list of issues that needed to be addressed immediately --- and they ALL ended up being a predictor of harm, from the failure of now-AT&T, Verizon and Qwest to properly upgrade their networks, the FCC’s failure to collect accurate data, which then helped to create faulty regulations, or the harms the mergers and market consolidation would have on competition. ALL of our predictions were tied to one conclusion – the path we were on would end up harming customers with less choice, higher prices and no national broadband plan.  – In short, we told you so.

 

Summary of Issues: The Telecom Riot Act of 1998
FREE EBOOK: The Unauthorized Bio of the Baby Bells, with Foreword by Dr. Bob Metcalfe.
Failed Fiber Optic State Deployments Reading Room:  Testimony, filings and reports on multiple states – NJ, PA, WI, IL, MA, CA, NY, and others.
$300 Billion Broadband Scandal
25th Anniversary Conference Online.  – Hear from experts about the last 25 years and what changes are needed as we move forward. --- Online video.
25th Anniversary Report and bibliography