Testimony in front of the New York City Council's Broadband Advisory Committee,

May 22nd, 2007



To see the speech on U-Tube:

My name is Bruce Kushnick, chairman of Teletruth, an independent, nationwide customer alliance focusing on telecom and broadband issues, and executive director of New Networks Institute, a market research and analysis company. I’ve was born in Brooklyn and have lived here most of my life.

Teletruth believes affordable broadband and Internet services are essential for New York City’s economic growth. I assume everyone else in this room would agree. And how do we make ubiquitous broadband affordable? I'd like to focus on this. --- We believe New York City should get back the estimated $5-6 billion from Verizon, $10-12 billion statewide.

New York City was Number One when the Internet hit and now America is 15th in the world in broadband and we sit here wondering why?

Verizon has overcharged customers in multiple ways, as well as failed to deploy fiber- based broadband after receiving massive financial incentives. Through bad deregulatory policies, the PSTN, that’s the Public Switched Telephone Networks --- the utility --- which is supposed to make sure that deployment of telecom services are competitive, ubiquitous and affordable, has been hijacked by Verizon (and AT&T).

This has caused net neutrality issues, cable franchising issues, and the Digital Divide, not to mention overcharging customers and direct economic harms to New York City --- and Brooklyn.

Verizon and AT&T claim they ‘own the pipes’, even though they are still receiving the benefits of a utility. We believe – Get back the money back and remove the perks.

In our original presentation to the NY City Council in 2002 we made many of these points and there has been no investigation of our claims. It is 5 years later and nothing has changed. Maybe it is time to take action. See: http://www.newnetworks.com/NYCspeechfin.htm

Let’s go through the facts: Direct from the sources:

Commitments and Promises:

1) Verizon claimed in 1993 it would be rolling out ‘fiber to the curb’ - NYNEX 1993 Annual Report. http://www.newnetworks.com/nynexfibercurb1993.htm

2) Verizon claimed it would have 1.5-2 million lines installed by 1996 - NYNEX 1993 Annual Report http://www.newnetworks.com/nynex2millionlines1993.htm

3) Verizon also snowed the Public and the public service commissions. Here is the PSC “Staff Report Assessing Network Modernization Needs”, based on a NYNEX report ”Vision of the Future” 1992. http://www.newnetworks.com/nypscfiberreport1992.htm

4) NYNEX’s was supposed to have about 16% of the state finished by 2000. http://www.newnetworks.com/nypscfibernumbers.htm

5) Verizon’s other promises: Maryland The PSC report shows that Maryland was supposed to have 100% fiber to the home completed by 2010 http://www.newnetworks.com/nypscmarylandfiber.htm

6) Verizon’s other promises: New Jersey: The PSC report shows that NJ should have 100% fiber to the home “Broadband” completed by 2010 http://www.newnetworks.com/njoppotunityfromnypsc.htm

7) 45mbps: The definition used in the NJ state report clearly shows that “Broadband” was 45mbps, capable of high definition video in both directions. – 1993 NJBPU Par 1 http://www.newnetworks.com/nj45mbpspar1.htm

8) Bell Atlantic claimed it would have 8.75 million homes wired by 2000, and its plan was to go to each state to get “incentives to invest in new technologies”;-- 1993 Bell Atlantic Annual Report. http://www.newnetworks.com/bellatlantic1993fiberplans.htm


8a) In 1996, Bell Atlantic announced 12 million homes by 2000, including Philadelphia and Pittsburgh. http://newscenter.verizon.com/press-releases/bell-atlantic/1996/page.jsp?itemID=29607541

8b) In Massachusetts, Verizon promised in 1994 to have have 330,000 households wired imediately, the entire NYNEX territory by 2010. http://www.newnetworks.com/Massachusettsdeceptivefiber.htm

8c) By 2000, Pacific Bell had made committments to rewire 5.5 million homes in California. http://www.newnetworks.com/cabroadbandpacbell.htm

8d) Pac Bell closure: According to the San Diego Tribune, by 1997, after the merger of Pac Bell and SBC, all of the plans were closed down. http://www.newnetworks.com/californiabroadband.html

8e) Ameritech claimed it would have 6 million homes rewired by 2000. Outcome: Instead it rolled out vanilla cable competition, then SBC sold off the properties in a fire-sale to WOW. http://www.newnetworks.com/ameritech1994annualreport.htm

Outcomes: Massive increases to local rates, long distance rates, added questionable charges.

9) Aunt Ethel’s phone bill: 1980-2006 reveals an increase of 426% since the break up of AT&T and deregulatory policies--- source: Brooklyn Verizon phone bills. http://www.niemanwatchdog.org/index.cfm?fuseaction=ask_this.view&askthisid=00233

10) AT&T and MCI harvesting Customers – AT&T and MCI are now raising rates and attempting to have customers discontinue services. http://www.newnetworks.com/attmciharvesting.htm

11) Dirty Little Secrets: Virtually every charge on the phone bill has had unwarranted increases. http://www.newnetworks.com/dirtyphonebill.htm

Get the Money Back:

12) $2.4 billion in Missing Equipment has been added to rates: State PSC report: ‘Review of FCC’s Audit of Continuing property records” 2001. http://www.teletruth.org/docs/NYplantdoc10309.pdf

13) The Report found $634 million in missing equipment and that was only ¼ of the potential audits that should have taken place. --- The NY AG’s office never got back to us. http://www.newnetworks.com/nypscaudit.htm

14) Cross –Subsidization: A report by NASCUA (National Association of State Utility Consumer Advocates) found billions being ‘cross-subsidized: I.e., the phone company is charging local rates to fund DSL, wireless and long distance services, and even FiOS. http://www.nasuca.org/newsroom/NASUCA%20Separations%20Comments%20PR.pdf

15) Cross-subsidization, NYC: The phone bill insert is only one of hundreds of items that customers are paying for while Verizon gets a free ride. The 411 networks, free rights of way and other ‘utility’ perks should be removed. --- How much money is lost? http://www.newnetworks.com/verizoninsert.htm

16) $2.3 Billion tax deduction for fiber deployments. New York Tel took a $2.3 billion tax deduction for fiber upgrades 1995 Annual Report. Verizon took a $3.5 billion dollar deduction for poles and other items. http://www.teletruth.org/docs/NYNEXDepreciation.doc

17) Ca. PUC found $1.94 billion in added fees during an audit for cross-subsidization of executive compensation, merger expenses, legal fees. – DO THIS AUDIT. http://www.cpuc.ca.gov/PUBLISHED/COMMENT_DECISION/29330.htm#P948_207131

18) Audit the phone bills: The District of Columbia’ audit of telecom expenditures found $10.4 million in overcharging--- Audit NYC's bills http://www.newnetworks.com/DCAuditRefundEstimate.htm

19) FCC Data wrong on broadband and phone bills: We have filed multiple complaints against the FCC’s data. 200Kpbs is NOT the 45mbps standard of broadband as told in 1992 or missing 1/3 of the US hit with major phone bill increases went unnoticed. http://www.newnetworks.com/Teletruthdataqualityfilings.htm

Impacts on Net Neutrality, Digital Divide, Cable Franchise Utility vs Deregulated monopoly.

1) Failure to deploy: Cable prices should have declined. America spent $82 billion because the phone companies failed to deploy a competitive broadband service. NYC: $3.5 billion

2) Economic Harms to Growth: The Bell companies claim that there would be a $500 billion increase to economic growth from broadband--- Thus, $5 trillion dollars was lost because Verizon-ATT failed to deploy.--- Over $215 billion for New York City.

3) Cable franchising: The phone utility had obligations toupgrade ALL parts of the state, and was ‘open’ to competition. FiOS is a closed network and wants to pick and choose.

4) Net Neutrality: There’s no problem; Return the utility to ‘common’ carriage. http://pulverblog.pulver.com/archives/003680.html

5) If the companies want to ‘own’ the networks, take away all utility perks and do the wiring or wifi-ing ourselves.

6) What is the actual cost of local service? What utility perks does Verizon enjoy? How much extra money did Verizon garner from deregulatory policies to promote broadband?

Conclusion: Get the money back and use it to give New York City the premier affordable networks for ALL customers.