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The Insidious Wheel of Misfortune

The Trump-FCC-AT&T-Et Al. Plan

By Bruce Kushnik 11/10/2017 03:10 am ET; Link to original article

Note: In Part I laid out how the FCC, which has oversight over most of the phone and cable companies’ business, has been captured by AT&T, Verizon et al. Chairman Pai is a former Verizon attorney; Commissioner Carr worked with Verizon, AT&T, and the wireless and phone associations as a lawyer for Wiley Rein, and Commissioner O’Reilly is a friend of the American Legislative Exchange Council (ALEC), which creates model legislation designed and funded, in large part, by Verizon and AT&T. Since the companies helped to position this FCC takeover, they have also helped to create a voting-block that gives this Gang of 3 the ability to control, not only the agenda, but also the outcome and make it biased towards the companies’ wishes and against the Public’s interests.

The “Wheel of Mis-Fortune” is Insidious and Harmful

We uncovered that the FCC et al. have created a series of interconnected proposed rules, regulations and actions. Unfortunately, we, the public, are now facing at least 10-20+ different cuts into the public interest, (depending on how you count). Killing off net neutrality is just one of the many planned harms. While none of this is new, it is now a concealed, heavily-funded and very well coordinated plan, aided by the ability of the companies to control the FCC’s votes.

Primary Goals: AT&T and Verizon plan to be wireless-only entertainment companies. To get there the plan is to:

  1. Shut off the retail to-the-home Wireline networks and force customers onto more expensive wireless networks to their homes.

  2. Privatize the majority of the publicly owned Wireline networks as “Business Data Services” so the Telecoms are free to charge whatever prices they wish for access by their competitors.

  3. Get rid of all regulator obligations and constraints, from Title II duties: from financial accounting, to net neutrality, customer privacy and many others.

  4. Use the FCC, not market forces, to push through this plan.

Each of these goals have specific FCC proceedings that are designed to move a slice of the agenda forward. The Telecom companies aim to get their way with little or no consideration of the customers, municipalities or the public good.

The Trump-FCC-AT&T Et Al. Wheel of Misfortune

Before we detail the current FCC proceedings, let’s do a summary and go around the Wheel of Mis-Fortune clockwise. The Telcos use (and the FCC allows them to use) manipulated accounting to make the Wireline networks "look" unprofitable and the Wireless networks to "look" much more profitable than they are. We will connect the dots to the actual FCC dockets in a moment.

  • At 1:00 on the Wheel — Make the Wires Appear Unprofitable: In order to ‘shut off the copper’, the FCC and companies have had to make the wired networks appear unprofitable, old and claim that the phone companies will, of course, replace these wires with fiber optic cables.
  • At 3:00 — Manipulate the Cost Accounting: The FCC, at the same time, has proceedings to get rid of the cost accounting rules and any obligations to supply financial data. These proceedings claim that keeping books are a burden and expensive.
  • At 4:00 — Rewrite the History of Broadband: The FCC also has to rewrite history so that any state commitments for broadband or Internet and any monies collected will not be counted in its annual reports to Congress, required by as Section 706. At the same time, it leaves out the broadband commitments made as part of each merger with most commitments never being fulfilled.
  • At 5:00 — Put Most Expenses into Wired Networks:
  • At 6:00 — Block Competitors and Municipalities from providing competing networks. Since AT&T and Verizon are not paying fair market prices for using the Wireline networks for backhaul, this fraud makes the Wireless networks appear more profitable than they are and the makes the Wireline networks look unprofitable.
  • At 7:00 — Use the Wired Capital Expenditure (Capx) Budgets for Wireless: All of these actions have allowed the companies’ unregulated entities, such as Verizon Wireless or AT&T Wireless, to fraudlently use the construction budgets of the public Wireline state utility networks to build out the Telecom’s private Wireless networks.
  • At 8:00 — No Upgrades or Maintenance: Quite simply, the Wireline construction budgets were diverted from the Wireline entities into the Wireless entities. The construction budgets were manipulated/diverted due to the FCC’s own accounting rules, therefore, the cities were not upgraded and the copper networks, even in rural areas, are not being maintained.
  • At 9:00 — Shut off the Copper: The FCC is claiming that the Wireline networks should be shut off and replaced with Wireless networks, and the the FCC is erasing all of the accounting rules to enable this to happen and to continue the fraudulent cross-subsidies. **Who is the FCC working for here? For AT&T, Verizon and Centurylink — not for the public interest.
  • At 11:00 — Create Separate "Business Data Services" (sometimes called "Special Access") in another proceeding which privatizes these publicly-owned utility wires, allowing them to be confiscated by private Telecom entities and not even count these stolen lines as Wirelines or even open for competitors’ use at reasonable rates.

The final icing on the cake of this Wheel of Mis-Fortune is the Telecom companies attempting to get rid of net neutrality and privacy, allowing them to track customers and control advertising, unfettered, as a new revenue source — and attempting to replace Wireline networks with 4G/5G so-called "Small Cells". This is a con because 5G does not exist yet and requires a fiber-optic cable to every transmitter, anyway. It would be simpler and much more energy-efficient to extend this fiber-optic cable to every home and then offer unlimited 1,000 Mbps service for $30-40 month, as communities already do in Cedar Falls, IA and Westminster, MD. 5G is just a vaporware poster-child a ‘new tech’ shiny bauble vaporware and is used as a decoy to remove the remaining obligations of the state utilities that control the wires.

The Current FCC Proceedings:

Let’s go through how this Wheel of Mis-Fortune lines up to the current proceedings, which we renamed a bit.

FCC Proceeding 1: Shut Off The Copper

The FCC claims that the copper networks are fading and that there is a ‘transition” to modern fiber networks.

“Wireline Deployment (PDF): Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment Report and Order, Declaratory Ruling, and Further Notice of Proposed Rulemaking – WC Docket No. 17-84 “transition from legacy copper networks to modern fiber networks. Every dollar spent to maintain the fading copper networks of yesterday by definition is a dollar that can’t be spent on building next-generation networks—networks that are critical to bridging the digital divide.”

FCC Proceeding 2: The FCC Rewrote the History of Broadband

The FCC has an obligation created by Section 706 of the Telecom Act to give a report on whether advanced network services (broadband) are being deployed in a timely fashion, and if not the FCC should take steps to get rid of barriers to increase investments. The FCC published its 13th advanced network, Section 706 report, in August, 2017.

“Inquiry Concerning Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, GN Docket No. 17-199.”

IRREGULATORS Analysis:

The FCC failed to examine 25+ years of data about state fiber commitments, which were to ‘replace the copper’.

We filed in the first Section 706 report and continued since 1998, pointing out that the FCC has never addressed the state-based broadband commitments or the money collected.

If we overlay the copper retirement issue we find that – Every state had some commitments to replace the copper wire with fiber – since 1992. The companies got over $½ trillion dollars to build out the fiber networks, which they never did.

The FCC has never addressed the broadband commitments made state-by-state, or the financial incentives given to the companies to build out their state infrastructure or to wire schools and libraries. The FCC has never examined that these ‘incentives’ were rate increases on local phone rates and ancillary services as well as tax breaks. And there have been multiple increases multiple times, including tax perks, subsidies, etc. that the FCC has not discussed. Customers have, in fact, been defacto investors and charged for networks they never received. Current copper-based pricing is based on this overcharging, which was never removed or reduced or refunded.

Thus, based on 25 years of data, the FCC can’t claim that giving financial incentives to these companies will do anything except end up as more profits to the companies and expenses to the public.

The FCC should be asking – Why weren’t these ‘copper’ networks upgraded if customers paid for the upgrades? How much money has been and continues to be diverted to cross-subsidize the companies’ wireless business?

FCC Proceeding 3: LOWER BROADBAND SPEEDS – Wireless Smartphones with Only 10Mbps Down, 1Mbps Up as the New US Broadband Standard?

CURRENT: The FCC released the “Twentieth Annual Report and Analysis of Competitive Market Conditions with Respect to Mobile Wireless”; FCC 17-126, WT Docket No. 17-69.

This report claims that because there is plenty of wireless competition, combined with the FCC’s Section 706 findings, the FCC wants to have wireless smartphones with only 10Mbps down, 1Mbps up as the new US broadband standard.

IRREGULATORS Analysis:

Why do this?

Well, first, it allows the FCC to claim that there’s plenty of broadband in America and second, it allows the FCC to push for ‘wireless-to-the-home’ as a substitute for a wire to the home service.

FCC Proceedings: 4-8

  • MANIPULATED ACCOUNTING
  • NEVER AUDIT THE BOOKS
  • REMOVE ACCOUNTING RULES

The FCC has already started to dismantle the remaining cost accounting regulations and there are currently at least five different proceedings to kill off any audit trail or any claims that there are cross-subsidies.

In February, 2017 a curious thing happened; the FCC decided to go ‘weed-whacking’ the cost accounting rules as one of its first acts.

"This Report and Order streamlines and eliminates outdated accounting rules no longer needed to fulfill the Commission’s statutory or regulatory duties. These reforms will reduce the costly burdens of outdated regulatory requirements".

What this says is – We, the FCC, have decided to get rid of any requirements for financial data from the telcos and they no longer have to keep financial books because they are outdated and costly burdens.

IRREGULATORS Analysis:

The Telco Books are Cooked based on the FCC’s Accounting Rules that Have Run Amok. The FCC is attempting to hide billions in cross-subsidies that were caused by the FCC’s accounting rules. Too complicated to go into here, at the core, the rules used to allocate expenses to different lines of business were “frozen” to reflect the year 2000—17 years ago. (We dubbed it the “Big Freeze”.) In 2017, it now dumps the majority of all expenses, including construction, into Local Service, making the wired networks appear unprofitable.

  • April 17th, 2017, the IRREGULATORS filed comments with the FCC calling for the Agency to do audits and investigations of the FCC’s “Big Freeze”.

  • May 15th, 2017 the FCC denied our call for audits of the FCC’s accounting rules and granted itself an extension through 2018 to continue the ‘freeze’.

FCC Proceeding 9:

  • PRIVATIZE BUSINESS DATA SERVICES (Also called “SPECIAL ACCESS”)
  • BLOCK COMPETITORS: RAISE RATES

The state utilities are being dismantled so that the companies can ‘privatize’ the publicly funded “Business Data Services”, (BDS) which are copper and fiber wires used for everything from ATM machines to the wires to competitors or the wires to the cell sites.

IRREGULATORS Analysis:

This FCC Decision Is Being Appealed.

The FCC’s accounting rules not only made Local Service unprofitable, but it also made other lines of business very profitable. In 2015, Verizon NY had $1.3 billion in Local Service revenues but paid over $1 billion in construction expenses, while Business Data Services (Access) had revenue of $2.5 billion but only paid less than ½ of what Local Service paid, less than $1/2 billion. This is caused by the FCC’s deformed accounting rules. Local Service, the copper-based lines, are not being upgraded—Where’s all the construction expenses going?

The FCC’s Order allows for price increases and blocking competitors from certain BDS services. This is being appealed:

Amicus Brief to Overturn and Remand FCC’s Business Data Services Order. Public Knowledge, Consumer Federation of America, and New Networks Institute filed an amicus brief in the U.S. Court of Appeals for the 8th Circuit requesting the Court to overturn and remand the Federal Communications Commission’s recent Business Data Services deregulation Order.

FCC Proceedings 10-12

  • REMOVE THE RIGHTS OT MUNICIPALITIES – POLES.
  • 5G SMALL CELL REPLACEMENT OF THE WIRE
  • LIMIT LIFELINE AND HARM RURAL AREAS

There are multiple proceedings at the FCC currently relating to pole attachments and 5G to ‘streamline’ wireless deployment, while at the same time, the FCC is limiting Lifeline, especially for use by competitors.

  • Replacement Utility Poles (PDF) Replacement Utility Poles Report and Order, WT Docket No. 17-79 “eliminating the requirement for historic preservation review where utility poles are replaced with substantially identical poles that can support antennas or other wireless communications equipment. This would eliminate unnecessary red tape and accelerate the buildout of wireless networks throughout our nation.”

  • Lifeline Reform (PDF) Bridging the Digital Divide for Low-Income Consumers Fourth Report and Order, Order on Reconsideration, Memorandum Opinion and Order, Notice of Proposed Rulemaking, and Notice of Inquiry – WC Docket Numbers 17-287, 11-42, and 09-197

  • 5G Deployment: April 20, 2017 (PDF)–Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment WT Docket No. 17-79 The Federal Communications Commission today opened a proceeding to identify and address unnecessary regulatory barriers to wireless infrastructure deployment. The Commission’s goal is to promote the rapid deployment of advanced wireless broadband service to all Americans.

FCC Proceedings 13+:

Net Neutrality, Privacy, Spectrum, Interconnection, etc., are also Active.

If there was actual competition, then if some company blocks, degrades, filters or harms your service—you could just leave. In 2001, there were 9,335 small independent wireline ISPs that handled the majority of Internet services in the US. After decisions by the Republican-based FCC under Michael Powell, (now the head of the cable association, NCTA), circa 2001-2005, and a lack of enforcement of the laws, about 7,000 ISPs were put out of business and so today we call the cable and phone companies “ISPs” even though they took over the business with the help of the government, the FCC.

Net neutrality started after the residential competitors were mostly killed off and the FCC wanted the monopolies to play nice – but it did no reopen the networks to competition so that customers could chose their wireline phone, broadband, Internet or cable provider, based on the utility wires coming into the home or office.

There are also small WISPs, wireless ISPs, who handle the more rural areas where the incumbents failed to deliver upgrades for broadband.

Unfortunately, there are currently other proceedings to kill off/harm the rest of the competitors and harm the WISPs, pertaining to ‘spectrum’ and ‘interconnection’.

Conclusion:

All wheels have spokes or components to make sure that the wheel is balanced and is a functioning circle. What happens when you put a stick through or remove some of the spokes of a wheel on, say, a bicycle?