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The Tell-The-Truth Broadband Challenge to Verizon vs "The Verizon 100
Megabit Challenge" Like a broken record on an old record player, Verizon is once again trying to convince customers, regulators, reporters, and anyone else who will listen that they will be delivering fiber-optic based broadband services to customers...very soon. Note: Bell Atlantic and NYNEX, two of the seven original Bells, merged into Bell Atlantic, then added GTE to form Verizon. The promise of 'broadband" has been going on for decades, starting with ISDN in the 1980's, the still-born poster-child for failed broadband deployments. It has become known as "It Still Does Nothing". However, when it comes to the fiber-based broadband roll outs, the history is closer to a classic "bait-and-switch", where, in many states, Verizon not only promised to rewire entire state's infrastructure with fiber, not to mention connect homes and offices, but also collected money from customers for services they will never receive. These promises start in the early 1990's when Verizon received massive financial incentives through changes in state law to get more profits, profits that was supposed to be used for new construction. Instead, these profits went to pay for Verizon's wireless licenses, excessive executive compensation and overseas losses. We estimate that nationwide, through tax cuts and overcharging, customers have paid an estimated $70 billion dollars for non-existent broadband services. In Pennsylvania alone, we estimate that Verizon already collected $785 per household for services customers never received. However, Verizon is once again making statements about fiber-optic based deployments that history shows will most likely never be built. The Hype: "The Verizon 100 Megabit Challenge" In recent news articles and press releases, Verizon has been talking about bringing fiber optics to customers' homes. For example, in a recent Barron's article, (Barron's, March 24, 2003) "Verizon plans to start replacing its copper wires with fiber-optic lines that reach all the way to a customer's door -- in the beginning of next year (2004)." And according to the hype, the speed of these fiber-based services will be at a blistering 100 megabits per second. "I talk about it with my engineers as `The 100 Megabit Challenge,' " says Greg Evans, the vice president in charge of Verizon's access technologies. "It puts this almost infinite capacity out there." These new services would obtain speeds 100-500 times faster than most current DSL services, which goes over the old copper wiring. The rewiring is needed because the 100-year-old copper wiring has serious limitations in speed as well as distance. In another article in TelephonyOnline, Verizon is quoted as saying it will have a major broadband initiative "designed to make 10 million more access lines DSL-capable by the end of the year and to deploy fiber to the home starting in 2004." ("Verizon pledges massive DSL investment" TelephonyOnline.com March 19, 2003). http://www.mailcubed.com/click.asp?x=5f20.13e7.1224192 As with all of its other broadband promises, Verizon is making these statements to get rid of regulations so it can make even more profits. In this case, the company and the other Bells are trying to get rid of regulations, commonly known as "UNE-P" services that require that the company opens its networks to competitors at reasonable rates. Recently, the FCC ruled that they would not get rid of the Bells' obligation to wholesale their networks to competitors. Verizon and the other Bells have stated that they will sue the FCC over the decision. Ironically, the Bells' resale obligations is a condition in place in exchange for them entering the long distance markets--- something the Bells wanted from the Telecom Act of 1996. However, the underlying theme of these recent articles is that the Bells need to get rid of UNE-P because it takes away profits that are needed to build these fiber-based networks. The Tell-The-Truth Challenge to Verizon. Let's look at the facts. First, the current DSL service over the 100-year-old copper networks is an inferior product to what was promised in most states in the early 1990's. According to a 1991 Verizon New York (then New York Telephone) report, DSL was only a temporary solution. "Both HDSL and ADSL are viewed by New York Telephone as potential interim technologies that will enable some customer needs for high bandwidth to be met economically before fiber optics can be widely deployed in the loop network." Instead, what was promised was a new digital Very-High-Speed future based on fiber optics. For example, in Bell Atlantic's 1993 Annual Report, the company stated it would spend $11 billion and have 9 million households wired by 2000. "First, we announced our intention to lead the country in the deployment of the information highway...We will spend $11 billion over the next five years to rapidly build full-service networks capable of providing these (interactive, multi-media communications, entertainment and information) services within the Bell Atlantic Region. The 1993 Annual Report from NYNEX states that it will have 1.5 to 2 million homes wired by 1996. "We're prepared to install between 1.5 and 2 million fiber-optic lines through 1996 to begin building our portion of the Information Superhighway." It needs to be remembered that most of these statements were essentially fraudulent because the phone company was making commitments based on technology it couldn't build at the prices it was quoting. While the parent company was making these grandiose statements, it was the promises made on the state level about broadband where the cash would come. Through 'deregulation', i.e., the removal of regulations on the company's profits in exchange for the promises to rewire the state, the company would have more cash to pay for these new networks. Sometimes called "price caps", sometimes called "Alternate Regulations", whatever name you put to it, the effect would cost customers money in the form of higher rates. Let's look at some of these states' broadband deployments. New Jersey Pennsylvania, Maryland, New York, Massachusetts, Rhode Island, In the state of Pennsylvania, Verizon
is being held accountable for its commitment made in
1994 to have 50% of the state rewired with
fiber-optics by 2004 to the homes and offices in
both rural and urban areas, capable of 45mps in both
directions. We estimate that Verizon already collected
over $2 billion in excess profits -- about $785
per household for services the customer will never
deliver. In the state of Massachusetts, Verizon was supposed to have 330,000 lines rewired with fiber optics by the year 1995. Rhode Island was supposed to have wired 60,000 homes with fiber-optics by 1995 as well. See our Complaint filed in 1999 with the Massachusetts Department of Transportation and Energy, demonstrating how Verizon, instead of building these services, pocketed over a billion dollars as well as additional $800 million dollar tax write-off. http://newnetworks.com/Masscomplaintsummary.html The tale in New Jersey was equally as bleak. In the 1990s, the Bell Atlantic made grandiose promises to also rewire the state. Instead, the company created an extra billion dollars in dividends, while it deducted an extra billion dollars in tax write-offs. The customers never got the promises of their fiber-optic future. According to a report by the New Jersey Ratepayer Advocate, "...low income and residential customers have paid for the fiber-optic lines every month but have not yet benefited." and "Bell Atlantic-New Jersey (BA-NJ) has over-earned, underspent and inequitably deployed advanced telecommunications technology to business customers, while largely neglecting schools and libraries, low-income and residential ratepayers and consumers in Urban Enterprise Zones as well as urban and rural areas." To read a synopsis of the failed deployment plan, known as Opportunity New Jersey see: http://www.newnetworks.com/chapter4.html And the timelines on fiberizing the states? According to a NYNEX 1991 report, the term "Broadband" is the capacity to handle up to 600 megabits per second and "Wideband" refers to capacity of up to 60 megabits per second.(source: New York Public Service Commission report, 1993) According to New Jersey Bell plan, the state should have had 60 megabit services by now and the entire state was supposed to be completed by 2010 with fiber-optic broadband. ("Opportunity New Jersey", filed 3/92)
Maryland was equally as ambitious. According to the "Modernization of the Maryland Telecommunications Infrastructure: A Summary of Plans to Upgrade the Local Networks", fiber to the home was to be completed by 2010 as well, and all copper wiring between the offices should have been upgraded by 1994.
We need to also make clear that this same bait-and-switch pattern is not unique to Verizon but also occurred throughout the other Bell companies. For example, here's Pac Bell California’s failed Broadband deployment, 1993-2000, as told by the San Diego Tribune (with our additions.) http://www.newnetworks.com/tauzinfactsheet9.htm But these promises to rewire not only affected ALL prices to ALL residential and business customers, but also affected ALL prices to competitors. For example, the New York State Public Service Commission in 1997 allowed for the prices to competitors to reflect the costs of upgrades to 100% fiber-optic feeders, the network endpoints--- which of course didn't exist and still doesn't exist. (York Public Service Commission, 1997 (Opinion 97-14, page 10) "We adopted New York Telephone’s position and used, as an input, 100% fiber (optic) feeder. In doing so, we …acknowledged the "incontrovertible evidence" that New York Telephone contemplated installing a broadband system and that fiber and associated equipment were needed for that system." (A feeder is the endpoint of the network that connects multiple homes, offices, etc.) These promises also had impacts on all segments of the Telecom and hardware sectors as well. In 1996, Verizon cut a 6 and 1/2 year deal with Lucent (good through 2003) to build fiber-optic based equipment. Imagine being a company planning for a future that was not going to exist. (Bell Atlantic press release, July 1996) "Later this year, Bell Atlantic will begin installing fiber-optic facilities and electronics to replace the predominantly copper cables between its telephone switching offices and customers…. The company plans to add digital video broadcast capabilities to this "fiber-to-the-curb," switched broadband network by the third quarter of 1997, and broadband Internet access, data communications and interactive multimedia capabilities in late 1997 or early 1998." In fact, according to the release, the entire Bell Atlantic region would be rewired. "Bell Atlantic plans to begin its network upgrade in Philadelphia and southeastern Pennsylvania later this year. The company plans to expand this Full Service Network deployment to other key markets over the next three years. Ultimately, Bell Atlantic expects to serve most of the 12 million homes and small businesses across the mid-Atlantic region with switched broadband networks." And what's the condition of the networks today? According to the Verizon 2002 Annual Report, the company cut 14% of staff and construction expenditures are down 42% for wireline telecommunications, meaning most customers' phone services. And while the company keeps talking about the impact of competition, Verizon's profits (EBITDA), is up 6% and the number of phonelines, known as "Voice Line Equivalents" is up 19% over the last two years. In fact, according to a Communications Workers of America report filed in New York in 2002, the company doesn't even have enough copper wiring to fulfill current orders and is using makeshift line-splitters to deliver service, which can't support DSL service. (Communications Workers of America, August 29th, 2002) "Verizon does not supply enough clean copper pairs to enable technicians to properly install new customer lines or replace defective pairs on existing customer lines. Instead, Verizon utilizes a "short term" technological fix called an AML or DAMLs." AML/DAMLs cannot support DSL service. Also, competitors seeking to provide DSL to Verizon’s voice customers via line sharing cannot do so where an AML/DAML exists on a customer’s loop. Use of these temporary fixes therefore interferes with CLEC efforts to compete with Verizon in the DSL market." (Quotes trimmed for length and clarity. See the full quotes in the report.) Tell The Truth Broadband Challenge vs the 100 Megabit Challenge. If anyone wants to believe that Verizon, this time, is going to roll out any fiber-optic based services, Verizon should be made to--Tell The Truth ---and answer some basic questions. We call it a "Broadband True-Up".
Secondly, the FCC is also to blame. The agency has currently ruled that any new networks Verizon builds should be given to the companies as their property, without having to open these networks up to competition. If the customers have been doing the funding of the networks that were never built, then how can the FCC give away networks and block access to competitors when they have already been paid for by customers though higher phone and data rates? We also note that the FCC has neglected to include any of the state broadband deployment plans, including the aspects related to customer funding, in any of their published broadband reports or analyses. See our Complaint: http://www.newnetworks.com/FCCbroadbandcomplaint.htm Finally, if Verizon makes any statements about any broadband deployments, make them put it in writing and have very serious fines imposed if they do not fulfill their commitments. This isn't simply about large corporations gaming the system to make more money. This is about the fact that it is the year 2003 and not one commitment for fiber-optics to the homes was ever fulfilled in any state. And in virtually every state, the laws were changed to give the company more money in the form of higher phone rates and tax deductions. More importantly, the real loser has been America's Digital Future. We were promised a Ferrari on the Info-bahn and now we're all driving a skateboard on a dirt road. America has been left with a 100 year old network that can't handle most advanced applications or services, and this lack of next generation growth has also helped to cause the current economic woes, including the Tech sector stock crash. The networks are now in the hands of Robber "Bell" Barons who, as history has shown, should not be trusted with America's Digital Future. How many more blatantly misleading statements by the company will it take to convince the reader that this company, based on history, should not be trusted? Here's a quote from Verizon's latest press release from March 19th, 2003. ("Verizon Broadband To Be Available to 10 Million More Homes and Businesses in 2003. With Urban Areas Already Served, Company Encouraged by Preliminary Reports on FCC Broadband Decision; Anticipates Future Broadband Services Using Fiber Optics , March 19, 2003) "Verizon already is serving most larger businesses on fiber links, and the company expects that fiber-optic technology ultimately will become the preferred communications medium to reach homes as well as businesses. Verizon is exploring ways to advance its broadband deployment in 2004, including deploying fiber into neighborhoods and even bringing fiber to the premises of an initial set of customers. http://newscenter.verizon.com/proactive/newsroom/release.vtml?id=79393 Sound familiar? Verizon can you hear us now? To read an extensive discussion of
this topic, see the Unauthorized Bio of the Baby Bells, a
free book at: To read a report 'How the Bells Stole
America's Digital Future", published by NetAction, see: To read a collection of Bell statements about networks they never delivered see "The Bell's Greatest Broadband Failures http://www.newnetworks.com/bellbroadbandfailures.html To read a report on the Bells Revenues and Profits, http://www.newnetworks.com/profitreport2002.htm Bell Executive Compensation http://www.newnetworks.com/prcompensation2002.htm Bell Overseas Losses and Write-offs see: http://www.teletruth.org/docs/ForeignBellinvest.doc For more reading and information visit http://www.teletruth.org Bruce Kushnick, Teletruth March 28th, 2003 |