By Bruce Kushnick, July 19,2018; Original article here.
Fiber Optics to Underserved Areas; Repairs of the State Utility Networks
New Networks Institute (NNI) & the IRREGULATORS just helped to get 32,000 fiber optic lines installed by Verizon-New York in underserved areas as well as have the state utility be required to do long needed repairs of the copper networks that are still in use. The State claims that there are still 2.14 million ‘voice-only’ access lines in service. We estimate that this settlement is valued at $300 million to $1/2 billion in additional spending by Verizon in New York State over time.
Note: This claim of the number of copper-based access lines is low for many solid reasons.
In state after state, Verizon decided to simply use the State Telecom Utility companies as a cash cow to fund its other subsidiary companies and other lines of business and let the copper networks deteriorate — while charging customers billions for upgraded fiber networks that they never got. While Verizon started to do ‘FiOS’ fiber-to-the-home, they stopped in 2010. Verizon transferred the funds to construct fiber optic lines from the the State Telecom Utility companies to their private, Wireless subsidiaries, in order to build cell towers for the 4G/LTE Wireless network. All of these cross-subsidies resulted in massive artificial losses for State Telecom Utility companies, resulting in more landline rate increases and an excuse to ‘shut off the copper’.
As described by long time telecom writer Karl Bode about the settlement:
“Verizon Forced to Repair Broadband Infrastructure It Has Literally Let Fall Apart. A new settlement requires Verizon to replace bad cable, defective equipment, and faulty back-up batteries — and to take down 64,000 double telephone poles or pole stumps.”
Our research and calls for an investigation started in 2010, and our reports, filings and analytical approach helped to initiate and was used in the investigation. We are mentioned in the decision (see below) and will be taking next steps on this as we filed to block this settlement agreement; it left out billions in cross-subsidies and customer overcharging.
- Summary article about our involvement with this investigation and settlement.
- Our filings and work pertaining to Verizon NY’s financials & business practices.
However, this is not simply about fixing the copper-based infrastructure or waving around some fiber deployments. As discussed in a previous article, the FCC (which is controlled by Verizon and AT&T) has a current plan is to dismantle the state utilities, shutting off the copper and handing over the fiber optic infrastructure to the private Wireless companies, — stealing public property for private use — because it makes these Telecom firms shed regulation and make more profits.
This deliberate deterioration of the State Telecommunications Utility infrastructure and cross-subsidy scheme is happening in every state; New York just happens to require financial annual reports from Verizon. All other states’ utility networks, including those controlled by AT&T and CenturyLink, from AT&T California, CenturyLink Colorado, or Verizon Massachusetts, need to be investigated, now.
Also, we congratulate the Communications Workers of America (CWA) District 1, and PULP, Public Utility Law Project, for their dogged persistence in pushing this settlement through and for putting our research and analysis to good use.
First, here is the NY Public Service Commission’s Press Release, July 12th, 2018
“PSC Approves Verizon Service Quality Improvement Plan — Telecommunications Company Agrees to Expand Broadband Service to 32,000 Customers, Helping to Fulfill Governor Cuomo’s Goal to Expand Broadband Service in NY; Make Much-Needed Repairs to Existing Copper Service; Remove Unused Telephone Poles to Improve Safety.”
EXCERPTS FROM THE SETTLEMENT
Here is a discussion of New Networks Institute & the IRREGULATORS’ position as told by the NY State PSC. (Link to Verizon NY Joint Settlement Document).
“A Notice Soliciting Public Comments on the Joint Proposal (JP) was issued on March 22, 2018. Twenty-one public comments have been filed in the Department’s Document and Matter Management System in relation to this proceeding.
The most extensive comments were filed on behalf of an organization called New Networks Institute/IRREGULATORS. New Networks has alleged generally that Verizon has intentionally allowed its copper-based utility networks to deteriorate. New Networks also asserts that, by taking advantage of outdated Federal Communications Commission cost accounting rules, Verizon has, beginning in 2012, diverted billions of dollars from its state-regulated Wireline businesses and used those funds to improperly cross-subsidize Verizon’s wireless affiliate businesses.
Opposing the settlement — because its terms do not address Verizon’s financial practices — , New Networks argues that proceeding was supposed to involve an investigation into Verizon’s claimed financial losses. New Networks asserts that, instead of investigating Verizon’s financial abuses, the settlement instead covers up the most egregious issues that directly affect all Verizon customers.
New Networks asserts that, by siphoning resources from its Wireline businesses in order to subsidize its unregulated wireless businesses, Verizon has harmed Wireline customers on a massive scale and in every state, by allowing wireline service quality to deteriorate, by frustrating the more widespread deployment of broadband, and in multiple other ways. New Networks also argues that, because Verizon covers about 9 million households and businesses, the limited broadband fiber deployments to be performed by Verizon under the terms of the settlement are insignificant.
By imposing only modest obligations on Verizon, and by leaving out the more critical investigation of the wireless cross-subsidies, New Networks argues that the terms of the settlement fail to accomplish the purposes of this proceeding. Instead of adopting the terms of the settlement, New Networks urges the Commission to continue investigating Verizon’s financial practices, and asks that Verizon be required to reimburse its wireline customers for the monies Verizon has diverted to its wireless affiliates.
Twenty other commenters urged the Commission to require Verizon to adequately maintain existing telephone land lines,, pay phones and related infrastructure because they are more reliable in an emergency than cell phones.
Commenters complained that, rather than maintain its copper-based systems in response to customer complaints about bad service, Verizon has instead knowingly failed to maintain land line service in order to force customers to switch to more expensive wireless service. They allege that Verizon has used bully ing tactics to aggressively sell its fiber-based service to customers that prefer traditional service. These commenters argue that Verizon’s shift away from copper has more to do with preserving bloated corporate profits than ensuring quality telephone service. They urge the Commission to require Verizon to continue maintaining the more reliable copper-based phone systems.
Unfortunately . . .
The Commission declines to follow New Networks Institute’s recommendations to reject the settlement, continue investigating Verizon’s financial practices, and require that wireline customers be reimbursed for the alleged improper cross-subsidization of Verizon’s wireless affiliates. The Commission’s primary objectives in this proceeding were to investigate and evaluate the quality of service Verizon is providing to its customers (Core and non-Core).
More particularly, this proceeding was commenced when changing circumstances called into question the Commission’s premise for continuing Verizon’s service quality focus on Core customers. The Commission was concerned by Verizon’s announced plans to stop expanding its fiber network beyond areas currently served. The Commission also pointed to data indicating fewer customers were leaving Verizon’s networks.
Given these indications, and the fact that more than 2 million of Verizon’s current customers remain reliant on an aging copper network, the Commission decided to examine whether changes to Verizon’s service quality oversight are necessary. The Commission recognized that this investigation would inherently include an examination as to the state of the copper system and whether Verizon’s investment in its network has been sufficient to provide adequate levels of service to consumers on regulated services. But, the Commission did not state any intention to revisit rate-of-return regulation. The Commission did recognize an expectation that the Company will continue to invest in its New York regulated operations as the Public Service Law unequivocally requires Verizon to provide adequate service.
The Commission also made it clear that it would take the necessary action under the Public Service Law to address shortcomings if the market fails to provide Verizon an appropriate incentive to meet its statutory obligations. That said, the Commission has broad authority under the Public Service Law to initiate further investigations if the circumstances so warrant.
The Commission focus has long been on ensuring compliance with minimum standards of service quality for customers lacking competitive choice. The Commission has previously investigated claims that Verizon has not been adequately investing in its copper network.
In that context, the Commission has acknowledged that, in response to technological advances, the telecommunications landscape has changed dramatically. The Commission has also recognized that, in evaluating Verizon’s performance, it must consider the extent to which investment in the legacy copper network would be cost effective when that network is becoming competitively and technologically obsolete. The terms of the settlement will implement specific improvements in Verizon’s system that will directly improve the service quality deficiencies that led to the commencement of this proceeding.
The Commission has long recognized the benefits and resiliency of the fiber network over the older vintage copper network and we note here that the settlement will further that goal. Finally, in the Commission’s Initiating Order, we raised the question of whether “Verizon’s service quality processes and programs pertaining to all the Company’s regulated customers” are sufficient “to determine if modification of Verizon’s revised SQIP is warranted.”
CONCLUSION
We believe that the State should have been examining the cross-subsidies between the wireless and wireline networks, that Verizon should not be given government subsidies via the Cuomo broadband plan, that Cuomo is most likely responsible for killing off these other investigations — and that further steps are needed to make New Yorkers and America whole.
In addition, this Settlement and the Verizon New York 2017 Annual Report, published May 31st, 2018, directly contradict many of the current FCC proceedings and plans and exposes various flaws in the FCC’s analyses that are creating harmful public policy.
Verizon-New York is a State Telecommunications Utility. The FCC has ignored the facts that the that State Telecommunications Utilities exist or that maintaining the copper networks is an important part of the public interest, especially in areas where there is proven to be no competition or where wireless substitution is inferior to a wired service.
This Settlement is a good first step to the next series of necessary legal and regulatory challenges that need to happen on the state and federal level.