Teletruth News: May 13th, 2009
New Networks Institute Releases Report: (63 pages)
25 Year Analysis of Key Financial
Indictors for the Bell Companies
- AT&T, Verizon and
Bibliography and Free Ebook:
Covers: Market consolidation, revenues, profits,
executive compensation, foreign investment and losses,
wireline and wireless competition, Internet competition,
broadband deployment, construction expenditures,
depreciation, employees, cost of local, long distance,
wireless service, 'access line' manipulation, 'very small
business' wireless spectrum issues, and 'vaporware' and
corporate influence over policy.
The name of this report should be: "How 25 years of
deregulation and massive consolidation with almost no
oversight harmed the US economy, America's world standing,
as well as America's telecom, broadband, Internet and cable
This report details specific key indicators outlining why
America is 15th in the world in broadband, why prices
continue to rise, why there is little or no competition for
most services and why, on our current path, America will not
fix the issues that have harmed competition and choice. In
short, we had better learn from the last 25 years as the
problems created are harming the country's economic growth,
our worldwide competitive edge, as well as phone and
From excessive executive pay and corporate profits, to a
failure to invest in critical infrastructure, the current
incumbents, AT&T, Verizon and Qwest, with the help of
laizze faire regulators, are clearly more concerned about
their shareholder wealth then as the caretakers of America's
essential Public Switched Telephone and Broadband
In short, the financial sector was not the only industry
where deregulation and a failure of oversight harmed the
public good in exchange for corporate greed.
Verizon and AT&T and Qwest: Some Data Bits. (As of
- Excessive Mergers have Eliminated Competition -- In
1984 through 1996, there were 12 potential competitors.
Legacy-AT&T and MCI were the 2 largest competitors.
By 2009 there are three companies that do not compete for
wireline service, long distance service and broadband.
- Revenues -- Grew 220% since 1984 to $235 billion,
split mostly by AT&T and Verizon.
- Executive Compensation -- From 2006 through 2008,
Verizon's top 5 executives received $194 million dollars.
In 2006, AT&T was bought by SBC and the top 6
executives made $168 million.
- Profits and CASH -- In 2008, Verizon and AT&T
had $74 billion in "cash", known as "EBITDA", Earnings
Before Interest, Taxes, Depreciation & Amortization.
- Employees: Job cuts are over 70% since 1984, when
compared to revenues for wireline phone services.
- Tax Payments in 2008 -- Verizon only paid 3% of the
total revenue on income taxes, while AT&T only 5%.
Broadband and Spending
- Broadband Funding -- Collected over $300 billion for
broadband yet failed to upgrade the Public Switched
Telephone Networks. The money is still being collected
today in current phone rates as excess profits.
- Broadband -- America lost almost $6.5 trillion
dollars in GDP growth for the failure to upgrade America.
- Construction -- Underspent $58-$161 billion dollars
on capital expenditures.
- Depreciation -- Took from $100 billion to $371
billion in excess tax write offs (deprecation).
- Overseas -- Collectively lost over $40 billion
dollars in overseas and other investments.
- Harmed Competition -- Today, only 6% of the incumbent
lines are competitive, down 61% since 2004 as a direct
consequence of bad FCC policies.
- Harmed ISPs and Choice -- Over 7000 independent
Internet Providers were harmed, many were put out of
business through bad deregulation or predatory customer
- 6+ Revenue Streams with No Serious Competition -- The
telcos split broadband and Internet Provisioning (ISP)
with the cablecos - a duopoly. The cablecos are cable
monopolies. Verizon and AT&T combined had 3 million
TV-upgraded homes. The phone companies are wireline
monopolies, as well as control the ancillary incomes from
directory assistance, long distance and other related
businesses. Cable only has 15% of local service. Wireless
only households are 15% and AT&T and Verizon control
over 80% of wireless service and have the majority in
- Wireless and all of the other Bell businesses have
been subsidized by raising local rates with little
- Merger Failures --- Merger after merger the Bell
companies lied to regulators, claiming that they would be
competing out of their own territories if the mergers
were approved. SBC was to be in 30 cities by 2002,
Verizon 24 in the same time period. They never competed
against each other in any meaningful way.
- Mergers Harmed Broadband -- AT&T's latest merger
required the company to have 100% broadband capable of at
least 200K in all states by 2007 and offer $10 DSL to new
users. Didn't happen. In 1999, AT&T had claimed they
would spend $6 billion on 'Project Pronto'. Stopped
spending post merger. Almost every AT&T state had
plans for broadband that were cancelled after each
merger, including SNET, Pacific Bell and Ameritech.
- Competition failure harmed customers with less choice
and higher prices.
- Local Service -- By 2008, Verizon, New York's local
phone service increased 524% since 1980.
- Long Distance -- In 2009, AT&T's basic long
distance rate one minute call cost $.42; higher than
- Long Distance -- A recent California phone bill study
found that because of plan fees and other charges, the
average subscriber paid $.55 a minute.
- Wireless -- A recent California phone bill study
found that because of plan fees and other charges, the
average subscriber paid $3.02 a minute.
- High volume customers with 2 or more lines averaged
$.29 a minute.
- Packages -- High volume customers save using
packages, representing approximately 1/3 of users. The
majority of customers are usually on expensive plans and
are paying more.
- Wireless -- Verizon & AT&T were able to bid
with a 'designated entity' on spectrum as "very small
businesses", saving $8 billion.
- Missing Equipment "Vaporware" -- In 1999, the FCC
released an audit of the Bell companies and found $18.6
billion in missing network equipment had been added to
rates. This was only ¼ of the required audit, thus
$80 billion dollars of missing equipment could have been
added to phone rates and as tax savings.
- FCC Data is Atrocious -- From the FCC data on
broadband, phone bills or data used in regulatory
proceedings pertaining to small business competition, the
FCC's bad data has led to bad US policy. For example, the
FCC's small business impact studies discuss the current
market harms to competition using data from 1992, 1993,
1994, 1997 -- 8 to 17 years old.
- Corporate Influence -- Through lobbying, campaign
contributions, astroturf groups, corporate-funded think
tanks, co-opted consumer groups, and even the
corporations' own staff, deception and undue influence
are now the working agenda in the US on both the state
and federal level.
Note: This report was prepared as part of presentation by
Institute at: "Has Divestiture Worked? A 25th
Anniversary Assessment of the Breakup of AT&T",
Sponsored by Open Infrastructure Alliance and the
Internet Society, New York Chapter. To see http://www.isoc-ny.org/?p=618
Bruce Kushnick, Executive Director, New Networks