Concerns and Next Steps for America’s Broadband Future.

 

Some Quotes from Our Digital Past and Future:

A) Establish a new workshop, “Follow the Broadband Money” to examine past and current ratepayer funding of AT&T, Verizon and Qwest’s broadband deployments.

B) Examine the issues surrounding the strip-mining of the Public Switch Telephone Networks by the deregulated monopoly’s ‘interstate information services’.

C) Create a competition workshop to examine whether the networks should be reopened, including Verizon and AT&T’s fiber optic services. Should there be a second Divestiture or structural separation?

D) Investigate the failure of the small business regulations (Regulatory Flexibility Act) to protect small businesses.

E) Clean up the FCC’s data used in the FCC’s rulemakings. Data from 1992, 1993 and 1997 for ‘current’ market analysis is unacceptable.

F) Fix the FCC‘s phone bill charges data, and truth-in-billing, including broadband bundles.

G) Remove the influence of astroturf, corporate funded-non-profits and think tanks that still permeate the entire FCC and workshop process.

 

A)  The FCC should establish a new workshop entitled “Follow the Broadband Money”.   To date, there has been no serious discussion that customers are funding Verizon, AT&T, and Qwest’s broadband deployments. Our research shows these companies have collected over $300 billion in excess phone charges, tax incentives, and depreciation perks for upgrades to the Public Switched Telephone Networks, (which were never completed) granted by the state commissions, and it continues today in rate increases throughout the US.  For example, New York state has had a 90% increase in local rates since 2004, much of it to help fund broadband. By 2009, 113 million homes should have been upgraded with 45mbps services in both directions. This why America is now 15th in broadband – because the companies never upgraded the networks as advertised.

 

Implications: As the FCC  examines ways to fund ubiquitous, open broadband, and before we give more money to the incumbents  or increase the Universal Service Fund, shouldn’t we first understand how ‘state-based-intrastate’ funding is being used to fund an ‘interstate information service’ and whether ratepayers are getting the benefits of being defacto investors?

See our Request: http://www.newnetworks.com/fccbroadbandworkshops.htm

 

B) The utility vs the deregulated monopoly – Today, Verizon claims FiOS is a competitor to Verizon’s utility service, yet the deregulated business is now strip-mining the Public Switched Telephone Networks (PSTN) and ‘cross-subsidizing’ the broadband/cable business – i.e., not upgrading the utility, but draining its assets.  In fact, Verizon’s FiOS removes the copper wire, thus, the utility property is harmed.

 

Implications: There’s been a major shift from upgrading the utility to now creating a separate, competitive company which does not have the obligations of the utility but gets its perks. The PSTN was open to competition and is supposed to be ubiquitous, wiring everyone.  If America is really building “infrastructure” and the utilities are ‘critical infrastructure’ to serve the state, shouldn’t the FCC investigate this shift?

 

The other implication: America’s infrastructure is now in the hands of companies that not only failed to deploy previously, but do not have the obligations to do the entire state, nor open the networks, even though they receive most of the utility perks. AT&T now controls 22 states and Verizon controls 10 states, as well as the GTE and Alltel territories. However, combined they only have 4.1 million upgraded TV homes. Verizon has said that FIOS will only go to 70% of their properties, thus many areas of Verizon’s territories won’t be upgraded, (even though customers are paying for it.).  AT&T’s U-verse is worse as it is an inferior, copper-based product.  This means that the infrastructure in AT&T’s 22 states is in jeopardy.  If these companies don’t build, who will build the infrastructure for the state?

 

And while many keep discussing wireless as ‘bypass’ to the phone companies, wireless can never compete on speeds that the infrastructure should deploy.

 

C) A Competition Workshop – The FCC has not had a serious discussion of competition.  Should Congress open up FIOS, U-Verse, or even the cable companies’ for all competitors including ISPs, CLECs, and video programmers – as was the intent of the Telecom Act? Should the FCC reverse previous decisions that block line sharing, (using the customer’s line for DSL) wholesale rates (UNE-P) or using the fiber-based networks which were closed to competition? Should there be a second divestiture, structural separation or other regulatory models to re-open the networks for competition?  

 

Today, there is no competition. Local service could not rise 90% if competition existed.

Competition drives innovation, choice and even lowers prices. It was competition and the Internet that drove the largest growth in telecom in American history, not to mention a dramatic boost in the economy,  and it was the small independent companies, not the incumbents, who brought America online. Competition lowered prices and gave choices to customers. Competition also reinforces natural net neutrality, as net neutrality is caused as a result of allowing vertical integration of multiple products by one company. If there is competition, a customer can simply leave if their current provider blocks, degrades or harms their service.

 

D) Failure of the small business regulations to protect small businesses. We just filed comments arguing that the previous FCC Administrations' failure to take the Regulatory Flexibility Act (RFA) (the laws protecting small businesses) obligations seriously since 1998, combined with an overwhelming disregard for accurate data,  helped to remove America's broadband, telecommunications, Internet, wireless and even media competition, costing the economy trillions and harming customer choice. We believe that the previous rules should be reopened with new rulemakings.  

See our Comments:  http://www.newnetworks.com/TeletruthRFA.htm

Implication: This ‘tool’ to be used to balance the incumbents’ power should be revamped to make it function properly and not be an afterthought using boilerplate materials.

 

E) Clean up the FCC’s Data – The FCC’s data used in hundreds of FCC rulemakings is from 1992, 1993, 1997,  and it is supposed to represent ‘current’ wireless, Internet, broadband and telecom markets. It has created bad policy decisions, such as closing the networks to competitors, or, denying small wireless companies access to the networks.

 

F) Fix the FCC‘s phone bill charges data, Truth-in-billing violations, including broadband packages.  The FCC’s data on phone bills is essentially made up. Through Teletruth’s phone bill surveys and phone bill auditing, it is clear that the FCC’s analysis has harmed low volume and even mid volume phone  and wireless customers, not to mention created bad policies --- Did you know AT&T’s basic long distance rate is $.42 a minute and that based on a ‘subscriber-analysis’, wireless customers can pay $3.00 a minute? – The FCC data claims that the average cost for a wireless one minute call is $.06.    Packages, including broadband plans, can ‘tie’ customers to local service and other services if they want ‘reasonable’ prices, though the majority of customers do not benefit from packages.  Packages also have ‘gimme’ prices, where the actual price can be 35% more money, or the price is only a promotion; the real final total cost is not revealed.

 

Implications. The FCC’ has an open docket on truth-in-billing, but the problem is far more severe. The FCC has left out low and medium volume users, which happen to be the majority of users, and it never examines the actual data, such as actual phone bills, or even the advertisements and web pages that customers will actually see. By not having accurate data, the FCC’s analysis has led to customers being gouged. Broadband services are tied directly to what is happening to phone packages.

 

G) Astroturf, corporate funded-non-profits and think tanks still permeate the entire workshop process.  In an era of ‘transparency’, we still have many groups who are funded by AT&T, Verizon et al, and who create reports, or are helping to create broadband policies, or lobby for what are essentially their funders’ policies.  This practice is so prevalent that, while in Washington, it might be business as usual, but to the outside observer it gives the corporations undue influence to the entire process.  As we discovered first hand as members of the FCC Consumer Advisory Committee, heavily corporate-funded ‘consumer groups’, working with the ‘industry’ players on the committees can close down discussions on topics, from broadband to truth-in-billing and the FCC has been previously blind to the issue, often using tainted data as if it were objective.

 

Advisory boards should be cleansed of all corporate-tied groups or individuals and the FCC should require ALL persons or organizations who it meets to disclose whether they receive monies from the companies that the FCC regulates. All reports, etc. that the FCC quotes should also have disclosure on the report’s financial backers.

 

Bruce Kushnick, Executive director, New Networks Institute bruce@newnetworks.com