FOR IMMEDIATE RELEASE --- October 21st, 2004

Bruce Kushnick, Teletruth
718-238-7191 Bruce@teletruth.org

Kate Lynch, National Internet Alliance, Bway.net
212-982-9800, info@nationalinternetalliance.net

To read the filings:
http://www.teletruth.org/BadDataMakesBadLaws.html

Teletruth and the National Internet Alliance (NIA) filed three Data Quality Act challenges and a Regulatory Flexibility Act challenge at the FCC as part of our Triennial Review comments.

These challenges claim that the FCC's data on broadband and competition is so seriously flawed that it has given the American public a distorted view of broadband deployment and has harmed competition, competitors, customers, the economy, and the public interest. Worse, this flawed data is being used to create flawed public policies and regulations.

Here are highlights of what we filed in the documents and why they are important.

• Claim 1) The FCC has harmed the entire Internet Service Provider (ISP) market by supplying erroneous, ancient data about the industry, and has eliminated them from the entire process of rulemaking. The FCC has violated both the Regulatory Flexibility Act and the Data Quality Act. These actions and others have caused an estimated 6000 ISPs to go out of business, and has blocked these companies from competing in broadband, thus restricting choice for customers and innovation for the country.
• Claim 2) The FCC's broadband (section 706) reports have given a distorted picture of fiber-optic deployment in the US and harmed the economy. It has left out thousand upon thousands of documents that demonstrate the phone companies had committed over a decade ago to fiber-optic based broadband deployments to homes, as well as wiring schools and libraries over a decade ago. None of the promised networks have been built, and the US lost $500 billion annually from these missing networks.
• Claim 3) The FCC has ignored the role of customers as defacto investors in these missing fiber-optic broadband networks. Teletruth estimates that $120 billion was collected for advanced networks by the Bell companies that customers have yet to receive. Now the FCC is giving exclusive rights to monopolies for these same customer-funded networks.
• Claim 4) The FCC has not properly examined the actual cost of local phone service in the US -- which is the basis for the rates charged to competitors (UNE-p). We contend that the FCC has not examined "cross-subsidization" --- i.e.; where customers pay unjustified local phone rates which are funding other phone company products, such as long distance, DSL and even wireless. Also, with the major expenses, such as staff and construction being slashed, why haven't local phone rates dropped?
• Claim 5). Currently there are numerous new proposed rules, including the Triennial Review, "unbundling" and raising competitor rates, cable forbearance, removal of line sharing, etc. that harms customers and competitors alike --- and all justified by erroneous data. In fact, the FCC is failing to follow the basic tenets of the Telecommunications Act of 1996 --- to bring competition, not stifle it.

Commissioner Michael Copps said of the current Triennial Reviews' proposed order in his dissent: "The current Commission is on track to butcher the pro-competitive vision of the 1996 Act. And it is sticking consumers with higher telephone rates and fewer choices. The people who pay America’s phone bills deserve better." We agree.

Bruce Kushnick, Chairman of Teletruth states: "The FCC’s Powell-Bush legacy will prove to be the destruction of competition in wireline phone and broadband services, and having directly helped to create the economic recession in the United states. It also has directly harmed every small telecom provider, as well as their clients. And with the series of proposed wrong-headed decisions pertaining to the Triennial Review, it will now finalize the process by eliminating all but the monopolies who own the wires."

"It is one of the main reasons America is now ranked 15th and falling in the world for broadband. It is the reason there will be fewer choices for broadband and phone competition. We believe that the FCC action --or lack thereof -- helped cause the telecom crash that crippled the economy," adds Kushnick.

Kate Lynch, President of the National Internet Alliance, and CEO of Bway.net, a NY based ISP states: "The FCC has never cared about Internet Providers. The FCC claims that they do not regulate ISPs and that their decisions only 'indirectly impact' us. However, putting 6000 companies out of business has been this FCC's legacy. They have shut ISPs out of broadband by blocking ISP access to cable services, they have gotten rid of line sharing, which is one way ISPs can offer DSL through a competitor, they have blocked ISPs from using Bell wholesale DSL by allowing predatory pricing, and they haven't enforced the laws on the books. And now, these new rules will block competitors from using customer-funded fiber-based networks. It's a true slap in the face of competition."

Background and More Details about the Filings:

Since 1998, Teletruth and its members, including New Networks Institute, have filed over 14 comments, petitions and complaints pertaining to the Bells’ failed fiber optic broadband deployment, the lack of competitive enforcement of primary laws that impacted small telecom businesses, including ISP and CLEC issues, not to mention, the harms the FCC’s decisions have had and continue to have on every phone and broadband customer in the United States.

Teletruth is an independent, customer alliance and a member of the FCC Consumer Advisory Committee. For more information contact, Bruce Kushnick, Teletruth, 718-238-7191 Bruce@teletruth.org or see: http://www.teletruth.org

For a Teletruth annotated bibliography, including links to our previous filings and other documentation on broadband and ISP issues, see:
http://www.newnetworks.com/Collected%20Broadband%20Information.htm

National Internet Alliance is newly formed organization, specifically created by Internet Providers and state organizations. NIA supports Internet competition and consumer choice on all platforms and all manners of transmission, whether cable, dsl, satellite, wireless or any other means of data transmission. We support wholesale, retail, and facilities based competition. For more information contact Kate Lynch, National Internet Alliance, Bway.net, 212-982-9800, info@nationalinternetalliance.net or see: http://www.nationalinternetalliance.org

More Details on the Individual Filings:

1) Data Quality Act: 8 Year-old Data and the Internet Service Provider Market: http://www.teletruth.org/docs/TeletruthNIAISPnumbersDataQualityAct.pdf

Imagine reading a newspaper that quoted data from 1997 as being "the most current".Even a high-school journalist would get a failing grade.

In our 2002 Triennial Review comments, we pointed out to the FCC that using data from 1997 was too old to be able to make any kind of rational decision about the harm their laws would cause independent Internet Service Providers. Other data from the Small Business Administration’s Office of Advocacy was available at the time, showing 7000 ISPs. The FCC ignored it.

However, in August 2004, the FCC's current Triennial Review has the same data from 1997 -- now 8 years old. We believe the use of old and erroneous data violates the Data Quality Act, under which data from government agencies are required to be accurate and reliable. In the other filings we show that the FCC has eliminated the ISPs from the history of broadband as well as almost all rulemakings -- more unreliable and biased data resulting in bad analysis and bad laws.

We're asking the FCC to answer: 

• How many Internet Service Providers were there from 1997 through 2004 and how many companies did the FCC’s policies help to put out of business?

• Why didn’t the FCC change its analysis to update 8 year old data in its Triennial Review and how has it impacted every law the FCC has written or will consider?

2) Data Quality Act 2: Complaint About the FCC's Broadband (Section 706) Report Infrastructure Held Hostage. -- Customers as Defacto Investors. http://www.teletruth.org/docs/TeletruthNIA706Dataqualityact.pdf

By the mid-1990s, in exchange for massive financial incentives known as "alternate regulations" or "price caps", the Bell companies promised to deploy fiber to homes and offices, schools and libraries. By 2000, virtually half of the US should have been rewired with fiber optic services. For example, by 2004, Verizon, Pennsylvania was supposed to have rewired half of all urban, suburban and rural areas with services of 45mbps in both directions. This state agreement extends through 2015. However by 2003, customers in PA paid an estimated $4 billion dollars -- over $1,000 dollars a household, for services they never received.

And this same bait-and-switch was promulgated in the majority of states, yet the FCC neglected to include information on any of these deployments in their broadband reports, nor have they examined the customer as a defacto investor for these network services.

The FCC, for political reasons, also redefined ‘broadband’ as 200kbps in both directions, while a decade ago, the state alternate regulations called for 45mbps or higher in both directions. This decision to not hold the phone companies accountable to higher speeds and the fiber-optic deployments helped to put US innovation, jobs and the economy on hold.

Bad Decision from Bad Data: Last week the FCC ruled that the same companies that were responsible for the failed deployment will now receive exclusive use of any new fiber-optic networks they deploy, as well as other perks. They will also be allowed to raise wholesale rates and/or eliminate competitor access. The result will be less competition for all services, and therefore higher prices and less choice.

3)  Regulatory Flexibility Act and Data Quality Act: Part of "Unbundling" (Section 251) Comments. What Does Local Service Really Cost? No One Knows But Prices Keep Rising. http://www.teletruth.org/docs/TeletruthNIACommentspdf.pdf

Our comments to the FCC include the previous items mentioned as well as a Regulatory Flexibility Act challenge for ISPs, and the following material.

Regulatory Flexibility Act Challenge: It is now clear that the entire Internet Service Provider industry has been erased from the FCC’s decision making process, both in terms of missing or unusable data as well as a lack of inclusion in policy making. The Regulatory Flexibility Act requires a government agency to include and do outreach to small businesses, none of which was done in any of the FCC’s current proceedings. We are requesting the FCC redo the Triennial Review and all data referring to ISPs.

Data Quality Issues Surrounding Unbundling: The Bells have continually cried that they are "losing money" from competition and yet the data tells a different tale.

1. The Bells' "access line equivalents" are rising, not falling, and the FCC numbers on competition are inflated and doesn’t match Bell Annual Reports.
2. The Bells are now allowed to offer long distance and Internet services and large percentage of funding from these services seems to come directly from local rate payers through illegal cross-subsidization.
3. Major savings are accruing from cuts in new construction, which are down 50% since 2000, while employees-per-line is down 65% since 1984. Despite this, local prices keep rising, not falling.
4. The FCC never fully investigated the Bell Continuing Property Record audits. Only 1/4 of the audits were completed, yet they found $19 billion of 'missing' equipment. The cost of equipment is the starting point for the justification of ALL phone rates. Therefore we can assume that all phone rates are significantly inflated.
5. There has been no cost justification to support raises in various non-service items such as the FCC Subscriber Line Charge, which despite consumer confusion is actually direct revenue to the local phone companies, not an FCC tax. It was raised from $3.50 to $6.50 without cost support and the FCC has plans to raise this to $10.00, not counting tax -- again, with no cost support.

Next Bad Decision: The FCC is now planning on raising rates to competitors or eliminating some competition all together. This data shows that the FCC hasn't done its homework nor has accurate data to support their conclusions.