It’s All Interconnected Release

New Report

“It’s All Interconnected.” – Based on Verizon New York’s Own Financial Data

Contact:

• Bruce Kushnick [email protected]
• Gerald Norlander, [email protected]
• David Bergmann, [email protected]

Read the Report: http://newnetworks.com/verizonfiostitle2/

Did you know that:

• The FiOS brand of cable TV, Internet and phone service rides over a Title II, common carriage, FTTP (Fiber-to-the-Premises), telecommunications service?
• Net Neutrality proponents want ‘broadband’ to be reclassified as ‘Title II’ – It already is ‘Title II’.
• Verizon was able to use this “classification” to charge Verizon New York residential and business basic, local, POTS, Plain Old Telephone Service, customers multiple rate increases starting in 2006.
• If Verizon’s services are using “Title II” — Net Neutrality is solved and the FCC needs to start proceedings to reopen the networks to direct competition, as well as investigate “special access”, “black hole revenues”,       and the wireline-wireless cross-subsidies.
• If POTs customers paid for a Title II network, is it part of the utility and should everyone who paid for it get the service, including New York State cities?

Documenting Verizon New York’s Charging of Low Income Customers for the Construction of FIOS — Which Rides over a Title II, Common Carriage, Telecommunications Service.

Public Utility Law Project has released a new report created by New Networks, with assistance by David Bergmann, and it features never before examined financial information about Verizon New York and the FiOS deployment in America.  This report and analysis is based almost entirely on Verizon NY’s own financial statements — including multiple financial books filed with the NY State Public Service Commission (NYPSC), the SEC, the FCC, the FiOS cable franchises, as well as ‘transcripts’ from Verizon executives to the investment community.

When comparing these financial books, New Networks has uncovered data and analysis that demands Net Neutrality,  moves America forward to get cities wired,  opens the networks for  real competition — and brings back the rights of communications customers that have been eroding over the last decade.

• Verizon NY has been Charging Regular Phone Customers for the Development and Deployment of FIOS. Starting in 2006, Verizon New York was granted multiple rate increases by the NYPSC of 84% on basic residential “POTS”, (Plain Old Telephone Service), as well as on all ancillary services, from Caller ID to Inside Wiring or non-listed numbers. Verizon NY’s business customers were also hit with major rate increases. These increases also hit low income families, small businesses and city services— all copper-based customers.

Unfortunately, Verizon NY’s FiOS  is only in 183 out of an estimated 900 cites and towns in New York State— 20%. Customers have paid for services they may never receive.

These increases were based on the State as well as Verizon claiming, in writing, that there were two factors: ‘massive deployment in fiber optics’ and major financial losses.

• Fiber Optic Issues: FiOS is Charged to POTS Customers and Travels Over a Title II, Common Carriage, Telecommunications Service. Tracking the ‘massive deployment in fiber optics’ revealed that the company was able to shift the expenses for the construction of the FTTP, Fiber-to-the-Premises, network into the regulated side of the business by declaring that this fiber optic network is a ‘Title II”, common carriage, telecommunications network, as defined by the Telecommunication Act of 1934 (amended in 1996).

FiOS is a brand name for a group of services that include cable TV, high-speed Internet access and phone service. It is not the wires. In reading the NYC and other Verizon state cable franchises we uncovered that Verizon has classified the entire fiber optic service as ‘telecommunications’, and that these other products all use this service. Verizon has told the world that FiOS is not telecommunications but a “cable service” (that is classified as “Title VI”), and the Internet and broadband service are “Title I”, (an “information” service), meaning it has no basic telecom obligations or regulations.

Our finding of facts, taken directly from Verizon NY’s financials and other documents changes the entire Internet, broadband, cable, phone and even wireless landscape.

• Verizon New York’s Multiple Financial Books Tells Different Stories. We found multiple sources of Verizon New York financial information, which included 1) SEC filed state-based annual and quarterly reports, (which are the reports to investors), 2) annual reports filed with the NYPSC, (which are the utility, ‘regulated’ books) and 3) annual information filed with the FCC.

When we compared Verizon’s NY PSC-filings with VNY’s SEC reports for the same year, 2009, we found that Verizon’s SEC books had an additional $2.7 billion dollars from the PSC books. We call this ‘black hole revenues’ as there was no indication of what this extra revenue represented — and the reports are silent on this matter.

NOTE: The FCC stopped publishing their data in 2007. The SEC-filed, state-based data stopped in 2010, and the PSC annual report data doesn’t include all of the financials.

• Construction Budgets Were Placed into the Regulated Side    The State-PSC utility books had an almost identical amount paid for construction budgets as the SEC books (which had the added ‘black hole revenues’) for the same years. This means that that the utility customers are paying almost all of the construction budgets — and the $2.7 billion paid none.

• ‘Black Hole Revenues’ could be Verizon Cable, FiOS and “Special Access” It appears that the Internet and other services are putting some, if not most of the expenses into the regulated side, while the revenues go into a different financial, non-regulated bucket.

• The Losses? Verizon Paid No Income Taxes since 2004; Verizon’s Affiliates have Run Amok. Over the last five years, 2009-2013, Verizon NY showed over $11 billion dollars of losses, about $2.1 billion a year, with a tax benefit to Verizon corporate of over $1 billion dollars.   And Verizon NY paid no income taxes since 2004. Other taxes of Verizon are pass-throughs that charge Verizon’s customers for their tax payments.

These losses are not from Verizon New York ‘losing’ lines. And the networks are not ‘uneconomical’ as the expenses incurred and the losses are being created through a shell game.

• Verizon Wireless — appears to be able to have their construction budgets for their wires to the cell towers included in the ‘wireline’ budgets. Moreover, Verizon Wireless uses wires and services known as ‘special access’, but Verizon Wireless pays a fraction of the costs as compared to other wireless competitors. This harms all wireless competitors — and customers.
• Verizon Services — are the corporate expenses, marketing and other resources charged to Verizon NY and it is billions of dollars annually for everything from using money to hire lobbyists, or executive pay to even foundation grant money.
• Special Access Services — These are ‘secret’ monopoly wires, sometimes called ‘backhaul’, that handle almost all wireless and broadband competitors’ traffic and we uncovered multiple financial buckets. In the ‘regulated’ books, the expenses for these services are disproportionately added to the regulated, local service area. There are also hidden areas that are not-regulated and are most likely part of the “black hole revenues”. By inflating special access, it raises the costs to all competitors and controls the speed of broadband. It’s like controlling the price of gasoline, as well as owning the roads.
• The FCC has never examined theses issues and their accounting never covered the ‘black hole revenues’— thus distorting the data over the last decade.

Sum Up the Losses: Verizon’s affiliates are not paying their fair share back to Verizon New York, are not paying what other competitors would pay, and are moving expenses into the state utility to create losses which are then used to raise rates claiming massive losses and avoiding paying income taxes. All of these transactions are causing the major losses and there have been no audits of these transactions by either the state commission or the FCC.

For more information, to read the report, White Papers, or the Executive Summary go to: http://newnetworks.com/verizonfiostitle2/

Read the story in Verge: http://www.theverge.com/2014/5/14/5716802/game-of-phones-how-verizon-is-playing-the-fcc-and-its-customers