Podcast: Why IRREGULATORS v FCC is Critical

Adapted from an article by Bruce Kushnick, Oct 8, 2019 | Original Medium article here.


Link to the Podcast audio files — hear directly from the experts and lawyers behind Case 19-1085: IRREGULATORS v FCC — a critcally important case about FCC accounting negligience that is proceeding in the DC Circuit Court of Appeals.

On October 3rd, 2019, the IRREGULATORS discussed why Case 1085, IRREGULATORS v FCC, is critical for America’s communications future:

  • Solving Net Neutrality and the Digital Divide,
  • Lowering Intrastate Telecommunications prices
  • Encouraging real competition in Broadband

NOTE: The IRREGULATORS response to the FCC is due October 10th, 2019.

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, as well as former telco consultants. Members of the group have been working together, in different configurations, since 1999.

In the pocasts, the IRREGULATORS discuss that the current 4G + 5G Wireless Densification scheme is a bait-and-switch. Once the accounting is set straight, the roll-out of densified 4G + 5G so-called "Small Cells" would not be profitable. The case also shows that Big Telecom ‘s overhyped story about "Wining the Race to 5G" is misguided and will do America more harm than good.

  • Link to to Case 1085 summary
  • Link to IRREGULATORS v FCC Briefs and other Case Materials
  • Link to profiles of the IRREGULATORS

Listen to these experts:

  • Mark Cooper, Director of Research, Consumer Federation of America: An overview of the case.
  • W. Scott McCollough, Esq, counsel: The reasons we took the case, the potential legal outcomes, the impacts on the states, as well as Net Neutrality and 5G Wireless.
  • Bruce Kushnick, Executive Director, New Networks Institute: The fiber optic history of broadband and internet in America and the mergers that created AT&T, Verizon and CenturyLink
  • Chuck Sherwood: The impacts on municipalities.

CASE 19-1085: IRREGULATORS v FCC is critical because it exposes a massive financial cross-subsidy scheme that has stretched over nearly two decades. This scheme is costing America’s communications users an estimated $50–60 billion in overcharging annually. We uncovered that this illegal cross-subsidy scheme is based on a manipulation of the FCC’s cost accounting rules.

CASE STATUS: On April 15, 2019, the IRREGULATORS filed with the DC Circuit to appeal an FCC decision that continues the harms of the FCC accounting rules, while ignoring basic facts that we filed in FCC proceedings, over the last five years. On July 22, 2019, the IRREGULATORS filed its complaint (our ‘standing’ was unchallenged), and the FCC responded on Sept 12, 2019.

WHAT WE FOUND: State-based Overcharging: Over five years ago, the IRREGULATORS found evidence of massive financial cross-subsidies involving Verizon’s regulated business — Verizon-New York (Verizon-NY), the State-based Public Telecommunications Utility (SPTU) — and Verizon’s unregulated businesses, which includes Verizon wireless, Broadband, Business Data Services and even FiOS, its Fiber-optics to the Home (FTTH) service.

SETTLEMENT in NY: Using our research and the published Verizon-NY Annual Reports, an investigation started and a settlement against Verizon NY was executed in July 2018. At an estimated cost between $300–$500 million, the settlement requires Verizon-NY to install fiber optics to rural areas and fix its deteriorating SPTU public-funded utility infrastructure (the copper landlines and switches).

FCC FEDERAL RULES ARE TO BLAME: We also uncovered that the FCC’s accounting rules are still in use by the States and have been manipulated by the Telecoms — impacting every AT&T, Verizon and Centurylink state Telecom utility and implicating every FCC Order throughout 2017-2019, that is based on this corrupted accounting.

OUT OF CONTROL: This current FCC has been ‘weed-whacking’ the rules and has no plans to stop the $Billions per-state in cross-subsidies from Big Telecom’s Regulated Businesses to its Unregulated businesses, which is a direct violations of Section 254(k) of the 1996 Telecommunications Act (1996-TCA), which states:

47 U.S.C § 254(k): Subsidy of competitive services prohibited

"A telecommunications carrier may not use services that are not competitive to subsidize services that are subject to competition. The Commission, with respect to interstate services, and the States, with respect to intrastate services, shall establish any necessary cost allocation rules, accounting safeguards, and guidelines to ensure that services included in the definition of universal service bear no more than a reasonable share of the joint and common costs of facilities used to provide those services."

Big Telecom and the FCC have been able to hide and obfuscate this accounting scandal because it is so complicated and detailed that most Telecom experts and lawyers — not to mention the State Public Utilty Commisssions or the public — have not followed this carefully enough.

SOLVING the Digital Divide: finally getting cities upgraded to fiber-optics and bringing in competition to lower prices, requires exposing and removing the cross-subsidies to restart competition and give consumers actual choice. This new found money, “liberated” by fixing these deformed accounting rules — compensation of past harms as well as proper future allocations — can be used to help pay for a much better Telecom/Broadband solution for America.