fixingtelecom

Fixing Telecommunications

We just released the first two reports in a new series, “Fixing Telecommunications”. It is based on mostly public, but unexamined, information that exposes one of the largest financial accounting scandals in American history. It impacts all wireline and wireless phone, broadband, Internet and even cable TV/video services, and it continues today with impunity.

Verizon, AT&T, CenturyLink, and other large telephone companies have been able to manipulate their financial accounting to make the local phone networks and service look unprofitable and have used this ‘fact’ in many public policy and regulatory decisions that benefited the incumbent telecommunications utilities.

American history. It impacts all wireline and wireless phone, broadband, Internet and even cable TV/video services, and it continues today with impunity.

 

Verizon, AT&T, CenturyLink, and other large telephone companies have been able to manipulate their financial accounting to make the local phone networks and service look unprofitable and have used this ‘fact’ in many public policy and regulatory decisions that benefited the incumbent telecommunications utilities.

In NY State, Verizon used this excuse to raise rates multiple times, stopped deploying and upgrading the fiber optic-based wired networks fiber and even stopped maintaining the copper networks with the plan to shut off the copper and force customers onto wireless. This has left most cities with deployment gaps or no upgrades at all.

Worse, it also impacts the price for wireless services, as almost all mobile data, video or calls end up riding over a wire, known as ‘special access’. These services are mostly controlled by Verizon, and in their own territories, AT&T and Centurylink (they do not compete among themselves for this business in any significant way).

Adding insult to injury, the losses were caused by the other Verizon lines of business dumping expenses into the state utility.    Much of Verizon Wireless’s fiber wires to the cell towers were paid for by local phone customer rate increases.

Finally, this impacts every aspect of the FCC’s Internet Order, commonly known as Net Neutrality, which is now in court. The massive cross-subsidies between and among Verizon NY and Verizon’s other subsidies have allowed the company to control the networks and services over them, including blocking competition —which caused Net Neutrality concerns in the first place.

The FCC’s Big Freeze—15 Years of Regulatory Neglect:

While there are multiple questionable acts, at the core, the fact is that the losses were created, in part, by the FCC, which sets the rules about the incumbent phone companies’ accounting. Simply put, in 2001, the FCC “froze” the calculations of expenses that are used in every state, based on the year 2000 — and this freeze will continue until the year 2017.  It assigns the majority of all expenses to the local phone service category.  There have been no major audits or investigations by  FCC nor the states for 15 years. This phrase has appeared, in one form or another, since 2000: “until comprehensive reform could be achieved”…

 

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