Waiting for Godot is More Useful
(Priginally posted on Cybertelecom listserve in response to a question.)
>" ...assuming for the moment that universal broadband access is a desirable
>societal goal (if it's not, what's the alternative telecommunications goal
>if any?), how do we get there? What are the five-seven (or is it
>twelve-fifteen?) essential regulatory, legislative (or other policy) or
>industry steps that must happen before this can be a reality?"
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As an analyst who has focused on broadband since the 1990's, when we were
all convinced that the Digital future would be rolled out if the Bell
companies were just given regulatory incentives -- read more money --- to
deploy broadband as a ubiquitous product, it is now clear that the first
part of creating the proper regulatory framework should start with an
accurate assessment of what happened over the last decade and how to fix
those mistakes.
1) Enforcement ---Holding the Bell companies accountable for the monies
collected to date. --- Are customers the real defacto investors of the
current networks?
Starting in 1991, the Bell companies were able to convince state regulators
that they should be given serious financial incentives to deploy fiber to
the homes. For a collection of statements and other links see:
http://www.newnetworks.com/Bellsfailedfiberopticdeployments.html
However, the Bells were essentially using broadband as a 'regulatory'
carrot --- If you do this, we will do this...We've documented that this
scam happened in the majority of states. For example, because of the
democratic convention see our analysis of the Alt Reg. Plan in Massachusetts,
which was filed and ignored.
http://newnetworks.com/Masscomplaint.html
They simply pocketed the money and never deployed fiber-based broadband.
How much money was already collected by the Bell companies using a
bait-and-switch approach to Alternate Regulations?.We estimate that it is
about $3-4 billion a state that has been charged to customers
for networks they will most likely never receive
--- Our estimate in PA was $1135 per household since 1994. -- The total
estimate is about $120 billion, counting tax deductions.
Sadly, almost no state in the nation, (*except for maybe PA, NJ, and
Indiana,) tried to hold the Bells accountable for what they had told the public that
changed the state laws to give these companies financial incentives.
Prior to the 1990's, the Bells were under a 'rate-of-return', where the
companies profits were examined. Remember, they
were and still are utilities. In these new plans, Deregulation means giving
the phone companies more money under'price caps" --- since the
networks keep getting cheaper to offer service (staff cuts and depreciation
and lack of new construction) you make more money- Unfortunately, without
serious enforcement of what was promised, the money was not used for new
construction -- it went to pay for buying overseas companies, stock options
and perks for top executives and the wireless licenses they bought. The
major debt is NOT from network expenses, but from losses overseas, and
buying wireless licenses. Local phone service is still a cash cow.
Not one state actually said -- hey, you said you were going to do this, now
do it or give us the money back. So, built into the price of service today,
in many states, is a broadband tax... Remember, each state is different.
And this problem is not simply 'historical' Many of the plans,
like NJ or PA, extended to 2010-2015.
2) Definitions of broadband need to be investigated.
What was promised was NOT DSL over copper wire. --- And the definition of
broadband was not 200K in both directions, as the FCC later determined. In
state Alt Reg. plans the speed for connectivity was 45-60mps in both
directions over fiber-optic and coax. DSL was an 'inferior' service.
The FCC, politicians and states are at fault for putting the country on a
low-broadband path. In fact, the FCC dummied down the definition to such an
extent as to put the US on the wrong path. --We are now
Broadband-as-faster-web-pages vs
broadband as a totally new series of applications.... at gigabit speeds.
We filed comments on the current 706 advanced network proceeding asking for
the FCC to redo every broadband report to reflect the state Alt reg. plans
and the impacts on broadband. Not once did the FCC, even in its history
section,
discuss the Alt reg plans, the role of the customer as investor, or the
commitments made to the regulators and the public about fiber-based
broadband. The FCC only tried to show how well things were going.
http://www.teletruth.org/docs/706Dataqualityactreplycomments.pdf
Ironically, while these reports spouted the party-line of everything is
going along peachy, then one has to wonder why they decided in the last Triennial
to screw every company and make any fiber-build private property.
We also asked that all reports be rewritten to include the role of the
independent ISPs, which are also missing from the FCC's broadband reports. --- No wonder the
FCC can kill off ISPs -- they can't even give the industry its just deserts.
Therefore, before any new policies on broadband are promulgated, we would
argue that the definition of broadband --- fiber-to-the-curb vs copper-based
DSL, is the issue. Right now, everyone seems to see faster web pages as
'broadband' -- it can't do video, especially high-definition video.
3) Regulatory capture of the regulators by the Bells. ---- An old and new
embarrassing story.
I guess if you have millions to buy off politicians and make enough noise in
the press, people will listen...
Recently, we now see Verizon saying once again -- We're building fiber-optic
broadband, We're fulfilling our goals. And once again, these roll outs
smack of --- tell-the-regulators-what-they-want-to-hear. However, there's
some disturbing caveats to the current Verizon-fiber-to-the-home announcements,
that have been overlooked by the press.
The "Dirty, Little Secret"?
First, the new roll outs announced are not to the areas where the customers
already paid the money but are new builds in small towns in the GTE
territories -- Nothing universal about it. More to the
point, I now believe these announcements are nothing more than
yet another ploy to get regulations to move in their favor...
I.e, plead poverty and beg for more deregulation.
On the list was posted some Verizon press releases about this deployment...
Here's the FIOS press kit
http://newscenter.verizon.com/kit/fiber/
However, what really should sticks out is this 2 pager
Broadband: Our Communities Have A Lot Riding On It..
http://newscenter.verizon.com/kit/fiber/broadband-communities.pdf
While the puffery in the beginning of this is nothing more than regurgitated
materials from 1991-1995 -- "economic development", "better healthcare",
"more jobs", ---- (I can show you almost identical quotes from 1991),
the rest of this document are the caveats about why they're not going to
be really serious about this roll out unless regulators change laws even
more in their favor.---- In short,
THERE IS NO GUARANTEE THEY WILL EVER ROLL OUT ANYTHING PAST A TEST.
They write: In bold ----"Unfortunately, last generation regulations are
actually slowing the deployment of next-generation broadband and
fiber-to-the premises."
And "Although Verizon has begun deploying fiber-to-the-premises and has
committed to continue, plans by the other companies to deploy fiber directly
to homes have been delayed or suspended in the absence of a clear national
broadband policy."
It continues:
"We want to deploy it.... However, public policy markers must recognize that
they have the responsibility to help create the positive, pro-competitive
regulatory environment that will make it feasible for broadband providers
to invest the billions of dollars of private section capital that broadband
and FTTP networks will require."
This exact plan -- if you, the regulators, get rid of regulations --- is
Verizon's broken record. It worked in the creation of the "Triennial Review", and
it smells of campaign contributions piled high onto either very naive, or
very well paid regulators. The broken record was used in both state
and federal fights -- The exact same argument. How so?,
Well, .from our MA complaint, you find we tracked some of Verizon's
statements for the last decade+. On June 21,
1991, NYNEX CEO Ivan Seidenberg testified to of the House Committee on
Energy and Commerce stating that "the public switched network is burdened by
a number of restrictions which frustrate our ability to deploy new
technology as rapidly as possible." Seidenberg also was "concerned" that if
new laws weren't forthcoming, then the "ability of the broadband electronic
highway to play a critical role in defining our strength as a nation in a
global information economy" was at stake."
Sound familiar?
Two years later, in NYNEX's 1993 Annual Report, CEO Ivan Seidenberg sounded
the same theme: "restrictions have been major roadblocks to bringing the
Information Age to all Americans. [and if Congress passes the Telecom Act]
it would enable phone companies to offer video programming in their own
service areas."
NYNEX got what they wanted: "The Communications reform bill signed into law
by President Clinton in February 1996 helps us grow to our full potential
and lets us take advantage of new freedoms to provide a range of services
that include new communications, information and entertainment choice.(t)he
new market freedoms spelled out in the nation legislation complement the
state regulatory breakthroughs we've already achieved. With incentive
regulation plans approved in New York, Massachusetts and Maine, we've
brought the regulation of more than 95% of our telecommunications operations
into line with marketplace reality." (Ivan Seidenberg, NYNEX, Annual Report,
1996)
Greed has no boundaries.... But besides this broken record and going back to
the original question -- if we depend on the Bell companies to roll
out fiber-to-the-home as a universal service, it is waiting for Godot.
Outcome?
The fiber optic builds are should not be the sole private property of a
collection of companies that had the chance and blew it. It should remain a 'utility', open to
all--- since we all paid for it. If we believe that each year the economy would
expand $500 billion, that's the Bells' estimates, then, we've already lost
about $5 Trillion dollars. As I've written previously, the Bell companies lack of
deployment helped to fuel the telecom crash and economic downturn,
since many of the fiber-optic companies were left hanging
with unfullfilled contracts, and we lost the next generation of technology
development and innovation -- new services weren't designed to fill the new pipes....
What should be next?
1) Sue the companies for fraud --- That's right, what should happen next is
that customers should be made whole and monies returned for non-existent
fiber-optic services. Why is it fraud?
Verizon's May 2004 press release states that offering fiber-optics in Keller
Texas will be a "first", that this is still a 'test'm moving to the real world.
---- "Although the use of fiber-optic technology is
common throughout the telecom industry, Verizon is the first company to
begin using it to directly connect homes and businesses to the network on a
widespread scale." Also, "FTTP is moving from field trials and the lab to
the real world, and it's happening in Keller first,"
http://newscenter.verizon.com/proactive/newsroom/release.vtml?id=85137
If all of this is true, then every previous statement by Bell Atlantic and
NYNEX and GTE about the lines to be installed were nothing more than puffery
to change state regulations. I guess the New Jersey Public Advocate
statement about NJ Bell Atlantic, was correct (4/1997) "...low income and residential customers
have paid for the fiber-optic lines every month but have not yet benefited."
2) The monies collected could be returned or turned over to a 3rd party to
deliver broadband. MUNIs and wireless could be getting funds for this directly out
of current monies collected. --- The funding is already there built into
rates.
3) Sue over the actual costs of service ---I would also argue that if we
were really doing the investigation correctly, it would examine the actual
cost of the current networks because, as we know from the FCC audits, about
20% of the equipment that has been used in the calculations of the original
price-of-service under 'rate-of-return', which was the original price used
before the Alt Reg. plans were implemented. It is also the starting point
for ALL PRICES OF ALL PRICE CAP SERVICES, from the FCC Line Charge
to the costs of services bought under Universal Service. Obviously, if the
Bells used false statements for the changes of the law then the actual costs of
service BEFORE the laws were implemented would need to be ascertained.
Also, anyone who has seen the cooked books knows just how bogus
much of the data they have been supplying to the regulators has been.
For a collection of materials see: http://www.teletruth.org/auditupdate.html
4) Divestiture II.... In 1992, New Networks Institute started with the
assumption that the Bell companies would never supply universal broadband --
Thus "New Networks", nor would they ever properly open their networks
to competition. The only solution would be to separate the companies from
network control.
This is a wild card that was never played because the Bells control the
agenda in congress and at the FCC. No one had the kahuanas to do anything, though some
states tried.
5) Applications? VOIP as a stand alone service is doomed to be considered a
voice call and thus taxed out of business unless someone demands a study on
why the current taxes should be removed -- or at least not applied to new
services. --- it ain't going to bring about a broadband revolution.
I would argue that most applications that would sell are hybrid of
high-definition video, voice and data --- both incoming and peer-to-peer. --- and that it would
compliment/replace video, phone and other services today. --- Current applications like music,
movies, etc are all boundless in their speed requirements --- especially if the quality
is maintained through less harmful compression algorithms.
The real new applications of serious broadband aren't here yet, nor will
they be without serious acceptance of a universal fiber-plan. Some examples --- a band
rehearsal of three friends cross-country, where you see and hear the person
with clarity, or the "Live-online", where any live event (or taped) can be
called up, such as going to a Broadway-show and seeing an HDTV quality
presentation, or a favorite rock band, high-school football, or any other
live-event broadband-cast. --- A billion potential programs, without any
intervention from someone charging me a fee to connect to the content, as
well as paying for the programming. Or seeing my god-children on the large,
none-jerky, HDTV quality screen instead of what our future is going to be --
slow, jerky, low res, no guarantee on service quality, where someone else
can dictate what I can and can not do on the network. (such as a preemption of
video over a certain length, etc.)
Having gone to MIT in the 1970s there is a law --- whatever bandwidth you
have will be filled beyond capacity by entreprenuers eager to do 'the next
thing'..
A few caveats:
I liked Ferguson's book on broadband. However, he missed the details of
the history of broadband, like the FCC did in their reports..
Wireless service did not replace wireline service. -It expanded
Verizon's business, Remember, they got the original cell licenses FOR FREE!
And then had customers fund their new builds, only to be able to spin them
off and make even more money -- AKA AirTouch, which had to pay something like $60
million instead of $7 billion and then sold the services to a foreign concern,
Vodaphone, without ever paying anything for the license sales.
And let's not forget that Cingular (BellSouth and SBC joint venture) was
able to get new licenses posing as "Very Small Businesses" ----
Meanwhile, Verizon, et al still holds onto the wires in 95+% of homes --
and according to a recent survey of customers about cell phones (released today) --- "About 1 per cent of people said they had already cut their local phone lines, says San Francisco-based LetsTalk.
The survey of 1000 Americans aged 18 and older was conducted in May"
Also, access-line-equivalents have continued to rise. In fact, if you add up
the DSL over wireline networks, as we as the LD customers
the company got, the number of lines and revenues per line are going up, not
down.
So, the cry babies are not going anywhere. They will continue to simply cry
to the regulators when the want to print more money. One other data point ---
The Bells now have 50% of the LD markets in their own territories as
a bundled deal while according to the Annual Report, only 11% of lines are
competitive.
We also believe an investigation into the various cross-subsidization issues
are obviously needed when rate increases are discussed... Why, well, how did these
companies start from scratch and get 30 million Long distance customers --- it was
from having this business and others get a free ride on the advertising, network builds,
etc. Simple proof is examining the 'consumer' education pieces in the phone
bills, which are now simple adds for Verizon's products.--- Who pays for these 'inserts",
well, customers.
And competition from cable?... he laughed... The Bells were supposed to be
competing with Cable companies for cable services in 1993.... Ray Smith, Bell Atlantic
president said they'd have 50% of the customers in five years....
Cable modems have the advantage because the Bells never replaced
their copper, which has serious distance limitations and is 100 years old.
Any lawyers on the list interested in taking legal actions should contact me off-line.
Bruce Kushnick, Teletruth.
Author of "The Dirty, Little, Secret Lives of Phone Bills"