Verizon Charged Local Customers BILLIONS for Fiber Optics They Never Delivered

Blockbuster New Report Exposes “Largest Accounting Scandal in American History”

By Jill McManus

Verizon has failed to deliver promised fiber optic connectivity to New York City despite charging local customers billions for the service, according to a new report from the Irregulators, http://irregulators.org/ an independent telecom watchdog consortium.

According to the report, a 2008 agreement between the City and Verizon New York promised a fiber optic cable connection to every residential home or apartment by 2014. Verizon was able to saddle local phone customers with massive rate increases to finance the initiative because the upgrades fell under Title II infrastructure improvements to replace existing legacy copper lines. To this day, Verizon New York has never completed the work: Instead, they’ve pushed to allow wireless as a replacement for their fiber optic commitment.

Recently, New Yorkers have been surprised to find gigantic, 32-foot tall Link5G wireless cell towershttps://www.nytimes.com/2022/11/05/nyregion/nyc-5g-towers.html suddenly appearing on their sidewalks, with no warning and without their consent. So now, in addition to the street-pole-affixed “small cells” and rooftop antenna arrays, monstrous Link5G cell towers and pole tops are being installed, creating a blight of radiation-emitting clutter. A one local said, “They look like lollipops from the war gods.” The City intends to install 4,000 of these ghastly eyesores, and up to 7,500 in coming years, in place of the promised fiber optic cables.

There’s a lot of well-meaning talk about “closing the digital divide” in relation to the towers: Most of them are sited in what have been deemed “equity areas”– some in those districts have questioned the methods of evaluation, and the public has not been shown documentation of how the needs survey was done. We also hear constant hype about the “magic” of 5G connectivity–but we know that 5G is a security risk that can be easily hacked,https://spectrum.ieee.org/5g-virtualization-increased-hackability and that fiber optic cable transmits more data, is faster, more private, and lasts longer than wireless equipment that needs constant updating. So – where’s our promised fiber?

Bruce Kushnick has dug deeply to uncover the answer. Kushnick has been a telecom analyst for over 40 years, and is currently Managing Director of the Irregulators,http://irregulators.org/ a consortium of experts, analysts and lawyers who have been studying Verizon New York’s financial books over the last decade. In 1992, he formed the New Networks Institute, where his group helped develop new services such as the three-digit information calls like 511. In 2002, Kushnick was one of the founders of Teletruth, a group that was on the FCC’s Consumer Advisory Committee, andworked with Congressman Jerrold Nadler on “The Broadband Bill of Rights.”

A voluble, vigorous man with amazingly accurate foresight—as well as a piano player with a zeal for creating and recording passionate and wry blues songs about social justice and the lack thereof—Kushnick has published three books about the telecom industry. His insider information has been influential, among other matters, in helping the Connect NY Coalition get a settlement from Verizon that brought over 30,000 lines of fiber optic cable to rural areas in upstate NY. The Irregulators submitted important written testimony last month for the NY City Council’s Technology Committee hearing on the proposed proliferation of wireless cell towers – presenting proof that Verizon never completed the NYC deployments,and moved funds already paid for it to their wireless buildout.A Closer Look at the Digital Divide

This month Kushnick is publishing two new books, both based on the decades of research but focusing on how Verizon, using fraudulent FCC accounting methods, pulled off what Kushnick calls the “largest accounting scandal in American history.” Kushnick writes: “It was the acts of AT&T, Verizon and CenturyLink (now Lumen) – the three holding companies, the progeny of the original AT&T, that created the Digital Divide.”

The first book is “Diss-connected: How America’s Big Telecoms Stole Billions from the Public and Created the Digital Divide,” written with Dave Rosen and designed as a quick read. The second, “Violations & Egregrious Acts: A Trillion Dollar Broadband Scandal,” is an in-depth study. They are available in paperback at Amazon https://www.amazon.com/-/es/Mr-Bruce-Kushnick/dp/B0BB5RRPCV and soon as e-books online.

The revelations in these books are a clear call to action.

Drawing on Verizon’s Annual Report for 2022 (out in May 2023), as well as on previous reports and hundreds of hours of Irregulators sleuthing, Kushnick exposes Verizon’s shifty accounting practices that have enabled the divide to exist and widen. While New York seems to be the only state that requires public posting of the utility’s annual report, the sleight-of-hand methods used by Verizon in New York have also been applied in most other states, but have been shrouded from the public. Until now.

Since at least 2012, Kushnick found, Verizon has been putting constructions costs under “Title II,” the designation for common carrier for a regulated public utility, a status granted to them by the NY Public service Commission in 2005 for the promise of fiber to the premises (FTTP), along with a rate increase. They raised local service rates frequently and added fees, while listing such things as lobbyists, lawyers, and even corporate jets in the local service expenses column. This made it appear that local lines were a losing proposition (although they cleverly did not publicly ask for subsidies), while letting the legacy copper lines that customers were paying for disintegrate instead of maintaining them, dismantling the state’s infrastructure.1 This has led to the ongoing bilking of American consumers, who are paying 5-20 times what people overseas pay for communications. For example: in America, the wired “Triple Play” bundle costs $220 a month on average, while overseas the average is $35.

Kushnick maintains that the digital divide that already existed in our unequal society was magnified by design. FiOS, the brand name of Verizon New York’s wired cable and broadband service, was announced in 2005 as a fiber optic wire to the home that could compete with cable. But in 2007 Verizon decided it would focus on wireless, and by 2010 Verizon announced it had finished its FiOS deployments. The company decided it could make more profits by doing wireless instead of running a wire – even though “wireless”actually requires a wire (fiber for backhaul) and is vastly inferior to fiber. And so, by a duplicitous cross-subsidy scheme, they quietly moved the funds from Verizon New York, the public utility, to their affiliated, unregulated private wireless company, where they could charge what they want. The fiber they did install was mostly to the cell towers to provide the backhaul needed for wireless, and bypassed local dwellings. Because these bookkeeping actions made local service appear unprofitable, Verizon has been granted continuous rate increases. Kushnick estimates from figures he’s gathered, that from 2005 to 2022, they overcharged on average about $3,100/yr. per line with one added feature. Verizon’s profit margin for its wireless service is 50%.

Between 2005 and 2015, Kushnick says, Verizon overcharged a total of $7-8.6 billion – but who’s counting? The New York Public Service Commission never did an audit of the books, or any examination of customer funding: The true amount will only be established by a full audit.

Since Verizon controls most of the communications access lines and equipment where it operates, it has been able, like major companies in other areas, to squeeze out start-ups by raising rates for use of their lines. As cable came to the forefront, Verizon made deals with cable companies to divide up the market in a way that doesn’t cut into their profits. For instance, the cable company Spectrum is reselling wireless service from Verizon, as is Charter (the owner of Spectrum), Comcast and Cox under their own names. FiOS advertises rates of only $25/mo., which sound low until you read the small print about the contract and extras you must buy to qualify. To Kushnick this is “another bait and switch.”

Kushnick’s Recommendations

Kushnick calls on New York City to demand an immediate investigation into Verizon and a halt to the cross-subsidies. This would include halting the construction budgets going to wireless, as well as all the corporate expenses that should never have been charged. Consumers, still paying for a fiber network they haven’t received, have unwittingly been made into investors in the wireless network. They should be reimbursed for overcharges they have been paying –roughly $30/mo.for years. This action must also extend to the cable companies: Because of being non-competitive, they’ve been able to add made-up fees, like cost recovery, or a sports or broadcast fee –these should be removed, not “added” to the total price as suggested by the FCC.

Efforts must be taken to:

Accurately map the Verizon fiber already laid, that’s being kept “dark” to enable control of the “last mile” service by wireless, and put it into service.

Complete the installation of fiber to all premises ASAP.

Replace the FCC accounting method with independent, more transparent accounting rules, such as GAAP(Generally Accepted Accounting Principles).

But it probably won’t matter, Kushnick concludes, because neither regulator – the NYS Public Service Commission nor the FCC – has bothered to audit Verizon’s books for over twenty years!

There also needs to be an accounting regarding the settlement of the city’s lawsuit against Verizon for failing to complete its franchise requirement. The settlement involved connecting fiber to another half a million homes by July 16, 2023. Here it is July, and as of this writing we haven’t heard a thing about it. What happened to that money? Is it being spent for that purpose?

These giant telecom companies are once again in line for major new federal subsidies under Biden’s programs – should they be the ones to receive them? Based on their track record, Kushnick says “no way”—although he would put it less mildly!

And consider this: the signals from the “free Wi-fi” 5G offered from the intrusive Link5G towers don’t reach beyond about 500 ft. and are largely blocked from nearby residences by objects like walls and trees. Maps that Verizon provides indicate that some 70-80% of areas getting the upgrade to 5G still won’t get 5G service. One wonders how many in “equity districts” can pay for monthly 5G service contracts? Many experts have told the U.S. General Accounting Office (GAO) that the wireless buildout will, in fact, exacerbate the situation.

To Kushnick it’s clear the “digital divide” will never be closed with this wireless plan, or by giving more new subsidies for wireless to these already too-powerful telecom companies. But if his recommendations are acted upon by New York City and New York State, perhaps wired broadband to the premises, at affordable rates, could become a reality.

According to Kushnick, “There’s one other avenue that must be examined: Break up AT&T, break up Verizon. In the end, the question New Yorkers need to ask is whether New York should separate Verizon from their control over the wires, and use the newfound funds—which could have paid for FTTP a long time ago—to build out a new open, enhanced public utility that allows municipalities to help build and control their own city?”

Maybe Kushnick is a bit of a dreamer in these times. But he must know the story of Chattanooga, TN and the success of its world-renowned municipal fiber plan, which is now the envy of cities around the world. Could New York act on that vision?

Stay tuned to WestView News for updates.

Note: 1The legacy copper landlines that Verizon is allowing to molder are the only reliable lines in a storm or disaster because they are buried underground and carry enough charge from the companies for a call to reach headquarters, unlike fiber or cable’s Voice Over Internet Protocol (VOIP), or wireless. In rural areas, landlines have been a necessity but are being replaced by cable and new competition from direct-to-home satellite (wireless) services, known to be unreliable, and our skies are filling with future debris.