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New Networks Institute Files to Halt Proposed Verizon-NY Settlement

NNI and the IRREGULATORS Call for a Continuation of the Investigation

April 27, 2018 by Bruce Kushnick; Original article here.

What’s At Stake

  • Billions in Cross-Subsidies: from the regulated State Wireline Telecom Utility to unregulated private Wireless companies
  • Rampant customer overcharging
  • Failure to upgrade cities’ Wireline infrastructure from copper to fiber optics
  • Decades of questionable tax losses

Governor Cuomo is implicated in eliminating these investigations. Learn More about this proposed settlement or Read Our Filing.

Summary

On March 2, 2018, a settlement was proposed between Verizon New York (Verizon-NY), the state-telecommunications utility, and the NY Department of Public Service, (NYPSC), joined by Communications of America, (“CWA”), and Public Utility Law Project), (“PULP”) to end an investigation that started in 2016, but was part of a series of proceedings over the last 5 years at the New York State Public Services Commission (NYPSC). This investigation consisted of two parts:

Part 1: Verizon has left NY state’s copper-based Wireline state utility networks to deteriorate and there has been a lack of upgrades to broadband or even maintenance of these existing wires.

Part 2: There has been massive financial shell game between the regulated Verizon-NY and the unregulated Verizon subsidiaries, especially Verizon Wireless.

The settlement includes some basic fixes to the neglected infrastructure for Part 1, but Part 2 has been eliminated from this proposed settlement.

Over the last 8 years New Networks Institute and the IRREGULATORS have uncovered a massive financial accounting shell game where billions of dollars have been charged to local phone customers, making the state utility networks a cash cow to fund the other unregulated Verizon businesses, including the build-out of the Verizon Wireless network. These cross-subsidies cost customers thousands of dollars extra and diverted billions in construction budgets to roll out the Verizon Wireless networks instead of upgrading cities’ Wireline infrastructure, among other harms.

These issues need to not only be investigated but the cross-subsidies need to immediately end.

The proposed settlement

  • Fails to even acknowledge the years of investigations by the State
  • Address any of the primary problems

In addition, Governor Cuomo’s fingerprints are all over the elimination of the investigations to help his broadband plan and to give other gifts to his corporate friends. Tucked away in the NY State budget was some Telecom-written wireless legislation that aids in the removal of city regulations and any examination of what the phone companies want to do for a non-existent wireless service, so-called “5G”.

Why is this Critical Now?

Most people do not understand that there is still state telecommunications utility, like water or gas or electricity and most people believe that the utility is just the aging copper wires.  They have been misinformed.

Fiber-to-the-Premises, (“FTTP”) for FiOS, and the wires used for the cell sites for Verizon Wireless, as well the Business Data Services , are ALL part of the state utility infrastructure and have been paid for mainly by Wireline customers.

  1. Verizon et al. have been dismantling the state utilities slowly for the last decade with the plan to remove any remaining public utility regulations or obligations and to hand over the State Telecom Wireline infrastructure to Verizon Wireless, making this infrastructure private property (which will block and harm competitors)

  2. The construction expenses for new infrastructure will remain mostly in the State Telecom Utility, but the perks of being a utility will be available to Verizon Wireless. At the same time, the pricing for service will move to the Wireless dollars-per-gigabyte plan, in order to make more money.

  3. This manipulation constitutes fraud. As we exposed, using manipulated accounting, Verizon et al. have made local service ‘appear’ unprofitable, but this has been artificial. The state utility now pays the majority of expenses, including construction, or “corporate operations” expense for all of the subsidiaries using the wires. And this manipulation means that they had major losses and major tax benefits, got the State to raise rates multiple times, and yet Verizon says that they can’t afford to upgrade rural areas or finish or even maintain cities. .

  4. Loss of Control Over Your Services. If you use your cell phone, if it is from Verizon, it goes to a cell site then to a Verizon wire, most of which are part of the State Telecom Utility. At home, Verizon’s plan is that your ‘high-speed’ cable TV will also become Wireless. But, ironically, Wireless requires a fiber optic wire, which would also be part of the State Telecom Utility — which remains conveniently unidentified in this scheme.

  5. Further Loss of Competition. Competitors who use these network wires will pay through the nose or not be allowed access. Net Neutrality, privacy, and all other aspects of communications are also in the cross-hairs. Getting rid of Net Neutrality allows Verizon to make the company’s other subsidiaries the priority, and getting rid of privacy allows you to be tracked and your information to be sold — similar to the recent Facebook debacle.

  6. This Is a Nationwide Problem: This is not just a Verizon-NY problem. Verizon, AT&T and CenturyLink holding companies control the state incumbent utilities, and they have used the same accounting and business practices. Verizon-NY just happens to be a fully documented model of the issues.

  7. The FCC has been captured and is helping Verizon, AT&T and CenturyLink in every possible way with 15–25 interlocking proceedings, like Net Neutrality, privacy, or ‘shutting off the copper’ and preempting state laws to give the companies complete control.

  8. This is the End Game. There are too many moving parts to explain here, but once the State Telecom Utility is confiscated in each state, one company per state would then control not only the infrastructure, but the other critical services using this infrastructure. These monopoly companies get to control the price of all services, including Wireless, and broadband. They can control and manipulate the speed to maximize profit, and they control who gets upgraded.

Read Our Filing. We’re calling for a halt to this Verizon NY gift and continued and expanded investigations because it exposes all of the financial flows of money and the cross-subsidies between Verizon New York and the affiliates. If we don’t do it, all of these next-step bad public policy actions will get worse.

Read a Summary of our Report: “Verizon New York’s 2016 Financial Annual Report: “Follow the Money: Financial Analysis and Implications”.

Need More Details? CLICK for a two-page Fact Sheet to see a few more details of this manipulated accounting. Here’s a few:

  • Verizon-NY Didn’t Pay Most Taxes: Since 2010–2016, Verizon NY lost $15.7 billion and didn’t pay most taxes; instead Verizon had tax benefits of $7.2 billion.
  • The Utility Illegally Funded the Wireless Networks. From 2010 to 2012, alone, Verizon NY paid about $2.8 billion to build out the fiber optic wires used by Verizon Wireless — and that money was charged to local phone customers.
  • Local phone customers paid over $1000.00 extra, per line, in rate increases since 2005. Worse, local phone customers have been paying around $500 extra a year; the actual costs to offer the copper-based services should have been in steep decline, and prices should have followed.
  • Low income families, seniors, small businesses — rural areas — all paid thousands of dollars extra.
  • There is no cable competition and the Verizon cut a deal with the cable companies to bundle wireless and/or let them rent the wireless networks.

CLICK TO PLEASE FILE “LATE” COMMENTS TO ENDORSE OUR PLAN:

NOTE: There was a comments period at the New York State Public Service Commission (NYPSC) which ended April 16th, 2018 and you (and everyone else) missed it. Thousands of people, companies, cities and politicians participated and testified in the previous related proceedings, but for this decision, NY State failed to properly notify these people and organizations — anyone — about this proceeding.

WE REQUEST:

  • We request an extension of the current comment period until July 15th, 2018 to examine the Verizon NY 2017 Financial Annual Report, published May 31, 2018.
  • We are calling for a halt to the proposed settlement between Verizon, NY, the NYPSC and parties, which has eliminated all mention of the investigation of the financial cross-subsidies between Verizon NY and Verizon’s subsidiaries
  • We are calling for the NYPSC to continue to investigate the billions of dollars in cross-subsidies between Verizon NY and Verizon Wireless and the other Verizon subsidiaries — then fix this ongoing financial shell game.

About Us: The IRREGULATORS is an independent consortium of senior telecom experts, analysts, forensic auditors, and lawyers who are former senior staffers from the FCC, state advocate and Attorneys General Office experts and lawyers, and former Telecom consultants. Members of the group have been working together, in different configurations, since 1999.

Click and visit our library of data, analysis, filings, etc. This is mostly dedicated to Verizon NY and the FCC’s current policies.