Teletruth News Alert -- January 8th, 2008

(NOTE: (see below) New Networks Institute will be releasing "25th Anniversary Report of Key Financial Indicators of AT&T, Verizon and Qwest" later this month.)

AT&T and Verizon Are Manipulating "Access Line" Losses. U-verse and FiOS are NOT included as "access" lines. Verizon's largest competitor is -- Verizon.

FCC data on Verizon and AT&T phone lines shows major phone line increases, not decreases. Companies are manipulating the data to get deregulation to raise rates and tax relief.

AT&T and Verizon have been complaining that they are losing 'access lines' because of competition and should therefore be 'deregulated'. This has allowed them to continue to raise phone rates over the last decade, and in some states, like New Jersey, they are claiming that they are competitive and should not have to pay telecom related taxes or even property taxes.

Read this article from New Jersey

http://www.nj.com/news/index.ssf/2008/11/verizon_plans_to_halt_certain.html

We have uncovered a serious manipulation of the data to essentially game the regulatory system and get major financial favors - even keeping their networks closed to competition.

What's going on?

1) Verizon and AT&T are not counting FiOS or U-verse, their new fiber-based products, as 'access lines', even though they are replacing the customers'

existing line or even using the line, as is the case with U-verse.

2) Verizon and AT&T are 'double-counting' FIOS and U-verse as both a loss to access lines, instead of as a gain to the access line count.

3) Verizon and AT&T are leaving out virtually all 'broadband' connections in their line accounting.

4) Verizon, AT&T and Qwest are not counting an additional two hundred million lines which would show major growth.

There are a host of other tricks, such as including the "competitive lines" the company lost, or DSL replacement of a second line.

The Math

1) Verizon and AT&T are not counting FiOS or U-verse, their new fiber-based products in their access line counts.

The stats: In the Verizon, 3rd Quarter report, 2008, Verizon claimed they had 37 access lines, and 41 million lines in 2007 - a drop of 3.5 million lines.

However, Verizon also added 1.6 million FiOS TV customers and 2.2 million FiOS Internet customers as of the 3rd quarter 2008 - a total of 3.8 million lines.

When Verizon goes to a home they pull out or disconnect the customer's existing copper 'access' line and replace it with a upgraded fiber wire.

Yet, they are not counting these 3.8 million additions in the access line numbers. AT&T is still using the wire, but still changing the line count.

Exhibit

Verizon's Access Lines vs the Additions of FiOS

(000) Source, Verizon.

9/30/07

9/30/08

Adding FiOS

Actual

Access lines

40,719

37,072

40,872

44,672

change

-8.96%

0.38%

9.71%

Lines Lost

3,647

2) Verizon is 'double-counting'.

Verizon is showing a drop of lines caused by the replacing of the wire of

3,647 million lines. At the same time, 3.8 million FiOS lines should have been added to the Verizon line count, not subtracted. Thus, not counting 7.6 million additional lines.

If they just added the 3.8 million lines then Verizon would have had a modest increase of .38%, instead they show a decline of 9%. However, if they accounted for both the failure to show FiOS as an addition, and not a loss of lines, the company's statistics are off by 7.6 million. Suddenly, the company's numbers show a 9.71% increase from 2007 to 2008.

3) Verizon and AT&T are leaving out virtually all broadband connections.

To add insult to injury, Verizon also had 8.5 million 'broadband connections', AT&T claims 14.8 million 'broadband connections' and 3 million 'video connections'. Based on the data supplied by the SEC-based annual and quarterly reports, there is know way of knowing how many actual services replaced the traditional access lines and were not counted.

4) FCC DATA: Total Lines Verses the Bells Access lines --- Almost 200 Million Lines Missing in Bell Count.

The Bells' stated number of lines in their press releases and annual reports shows the lines went from 114 million in 1984 to 188 million in 2000, then down to 140 million by 2006. If we use the peak of 188 million lines in 2000, according to AT&T, Verizon and Qwest, there's been a 25% decrease in lines. (We use 2006 in this example because the FCC does not publish later data for total lines.)

However, the FCC required the Bells to send in data about ALL phone lines, not what they Bells called "switched access" lines.

Exhibit

Bell Lines Vs FCC Bell "Total Lines",1984-2006

(In the millions)

1984

1990

1995

2000

2005

2006

From 2000

overall

Bell Lines

114

135

158

188

148

140

-25.4%

23%

"Total"

118

130

166

245

312

337

37.7%

187%

Difference

197

"Total Lines" tells a different story and it includes almost 200 million lines the Bell companies have refused to discuss in their current discussion of actual installed lines. Many of these lines are 'special access' or 'non-switched' lines or digital lines. A special access line can be an alarm circuit, for example.

According to the FCC's "Statistics of Common Carriers" for the years 2005 and 2006, the Bell's "Total" lines went from 118 million in 1984 to 337 million in 2006, a steady year by year increase. From 2000, these data points show the number of lines increasing almost 38%. Overall, while the Bells rise and fall numbers gives the total increase at 23%, the FCC's Total line numbers reveals a 187% increase.

Why would a company distort line counts? It may be that they want more 'deregulation' benefits, not to mention tax breaks, or larger parts of the proposed stimulus package. If they are perceived as being put up by 'competition', then the regulators might be more obliging.

We note that in our full analysis of line counts we agree that there has been some loss to competition from the cable companies or wireless services.

However, even when someone 'cuts the cord' for a wireless service, AT&T and Verizon own most of the marketplace and have the largest market share in their own territories.

All the information has been taken from Bell annual and quarterly reports and FCC data.

25th Anniversary Report to be Released this Month.

1/1/09 is the official 25th anniversary of the break up or AT&T. Known as "divestiture", 25 years ago AT&T was divided into seven regional companies, commonly known as the Regional Bell Operating Companies. AT&T and MCI were competing and there were a host of other independent phone companies, such as GTE.

By 2009, Humpty Dumpty has been put back together again in the form of three non-competing companies - AT&T, Verizon and Qwest - that control critical infrastructure; the Public Switched Telephone Networks (PSTN).

As America sits and discusses how to create a stimulus package for broadband and the Internet, it is clear that most proposals simply want to repeat history and are not addressing the primary issues of who should control and build critical infrastructure, much less pay for it.

This study gives key financial indicators in a 25 year analysis including revenues, employees, number of lines, construction expenditures, depreciation, profits, broadband deployment, FCC data capabilities, and the price of local, long distance and wireless service.

For More Information:

Bruce Kushnick,

Chairman, Teletruth http://www.teletruth.org

Executive Director, New Networks Institute http://www.newnetworks.com