August 12th, 2009


Teletruth Requests the FCC Create a New Broadband Workshop --- Investigate Current and Past Public Funding of Broadband, Including Overcharging Utility Customers.

To read the rest of these Comments:

To read our previous FCC broadband comments,(or download 2 free ebooks)


The FCC has been creating a series of workshops as part of the National Broadband Plan. We are requesting that the FCC create a new, investigative workshop dedicated to ---- Follow the Broadband Money.

In June, 2009 the State of New York Department of Public Service allowed Verizon to raise local utility phone rates, claiming that Verizon needed more money to pay for Verizon's fiber optic upgrades, which are being deployed for Verizon's FiOS. In fact, since 2004 Verizon has increased local phone rates with the State's permission, 90% in New York.

The State wrote:

"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."$File/pr09054.pdf

These increases were not minor and have been continuous since 2004. Also, the increases were not just for 'basic local service', but for almost all ancillary local services, from Call Waiting and inside wire maintenance, to even toll calls and packages. Ironically, those being most impacted by these increases are seniors, Lifeline customers, small businesses and others who rely primarily on the utility local service. Local service is supposed to be 'fair and reasonably' priced, yet, today, the utility local service is becoming the highest-cost service.

We have written a separate report on this topic and are going to be filing a complaint in New York state in the upcoming months.

It is obvious there is a short circuit in the regulatory fabric. Verizon and the State have made different claims for raising the rates. Besides funding fiber optics, Verizon claims there is competition, they are losing lines and that local service is not profitable. Based on free market economics, however, if there was competition, then local phone prices should continue to decline. Doesn't competition lower rates? In fact, local rates have been increasing throughout the US. New Jersey had an 80% increase while California has had a series of increases over the last few years on most services.

Why is raising local phone rates to pay for fiber optics a national broadband issue that needs investigation? And what is the actual status of competition?

The FCC is supposed to be creating a national broadband strategy, and yet, in no previous document, report, order, or opinion has the FCC actually examined a primary fact - Ratepayers of local service have been and continue to be the primary funders of broadband in New York and throughout America. It is not the shareholders; it is the utility customers. And because the FCC redefined broadband as an 'interstate information service', it has not examined the state alternative regulations that are the primary source of broadband investment in the US.

The new reality is --- Local service customers, which use the New York state local phone utility, are now being squeezed through increases in 'intrastate' rates and that money is now being siphoned to pay for the construction of FiOS, which we contend is illegal as it is cross-subsidizing a competitive 'interstate information service' and cable service.

Verizon's FiOS and AT&T's U-Verse are essentially dismantling the utility, and are instead shifting assets and services to a competitor, an interstate information service. This switchover removes the basic obligations the company had as a utility, such as making sure the products are offered throughout the entire state, not some portion of it.

Instead, both the FCC and State are allowing these companies to strip-mine the Public Switched Telephone Networks, including tearing out or disconnecting the utility copper wiring, and they now control where they will deploy and when, if at all. And to top it off, these companies get ratepayers to pay for these service deployments, which they may never use or even have available. It is not just raising phone rates, but the fact that these other branches of Verizon get to use the networks, the mailing lists, the advertising, and even the rights of way of the utility at little or no cost, which is anti-competitive.

If building infrastructure that is ubiquitous, open and competitive, affordable, and very fast are America's goals, then shouldn't we know exactly who is currently funding the networks and whether the customers are getting a raw deal?

Instead, we have a situation where many municipalities are considering or attempting workarounds from the very networks that are already in place. Instead, there are continuous price increases because real competition doesn't exist to lower the cost. And now, the companies have merged and vertically integrated Internet provisioning, broadband/DSL, and phone service. They can now hold America hostage as regulators attempt to come up with new 'financial incentives', even though no regulator has held AT&T or Verizon accountable for the monies they are already collecting. Yet, instead of pointing out that AT&T and Verizon are strip-mining the utility, many organizations are claiming we need to give more money to these companies; we need to increase the Universal Service Fund to help fund broadband. We need to give new tax breaks.

One of the stumbling blocks to this issue is the fact that broadband, until 2005, was a telecommunication service, and the actual wiring is part of the local service networks. The Internet was an 'interstate information service', as it is NOT the conduit but another, separate application that rides over the conduit. By tying the speed of the connection with the application and renaming it all an 'Interstate Information Service' without the obligations of the telecommunications service, this new paradigm is in direct conflict with the artifact of the utility. Using this distinction, the phone companies get to get rid of obligations and take ownership and control, but retain the utility benefits and perks.

In the end, local phone customers, especially seniors, end up funding the new networks, but get none of the benefits. Thus, the workshop we propose examines state and federal overlapping broadband network and funding issues, but also examines the chain of funding - from local phone customer through to how Verizon's divisions, including FIOS, takes advantage of the utility funding. --- Following the money trail.

$300 Billion and Counting. --- The Reason America is 15th in Broadband.

Ratepayer funding for broadband is not a new situation, though the FCC has continuously failed to examine this issue. In our recent Comments filed pertaining to the National Broadband plan, we have put an entire ebook into testimony, where we outline, in detail, how Verizon and AT&T and Qwest (and their previous incarnations) in almost every state, received changes in state regulation known as 'alternative regulations'.


To read the rest of these Comments: