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BUSINESS DATA SERVICE MARKET PLAGUED BY ILLEGAL COST ALLOCATIONS, OVERCHARGES AND EXCESS PROFITS

 

Joint Comments Filed

BUSINESS DATA SERVICE MARKET PLAGUED BY ILLEGAL COST ALLOCATIONS, OVERCHARGES AND EXCESS PROFITS

Consumer Federation of America and New Networks Institute data show deeply anti-competitive, anti-consumer practices

Joint Press Release: Consumer Federation of America and NNI

On April 28, 2016, the FCC presented their findings about special access and discuss next steps.

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NYstatebroadbandanswers

Good morning Mr. Kushnick,

Responses to your questions are posted below your original questions, and will be posted on the CIO/OFT website as well.

Have a great day!

Chad Smith

Contract Management Specialist

CIO/OFT Division of Telecommunications

[email protected]

This e-mail, including any attachments, may be confidential, privileged or otherwise legally protected. It is intended only for the addressee. If you received this e-mail in error or from someone who was not authorized to send it to you, do not disseminate, copy or otherwise use this e-mail or its attachments. Please notify the sender immediately by reply e-mail and delete the e-mail from your system.

From: Bruce Kushnick [mailto:[email protected]]
Sent: Thursday, January 17, 2008 3:31 AM
To: oft.sm.counsel.cpo
Subject: questions for the broadband grant

NOTE: We provide this email as well as submitted the questions in a word document. “THE BROADBAND OPPORTUNITY PLAN FOR NEW YORK STATE”

Submitted by Bruce Kushnick, New Networks Institute and Teletruth, on behalf of the Open Infrastructure Alliance. (OIA)

CONTACT: Bruce Kushnick, [email protected] 718-238-7191

Questions for New York State:

Open Infrastructure Alliance (OIA), is a group of some of America’s leading experts in broadband, Internet, wireless, as well as regulatory, legal and implementation issues. Will be proposing a practical, real world, multifaceted research and implementation plan to fund, without raising new taxes or even matching funds, the state’s stated goal — to deploy to ALL New York state citizens and businesses 100 mbps services to urban areas, (potentially 1 gigabit) and 20 mbps in rural areas (or higher), not to mention underserved areas, by 2015. These services would be open to all competitors. We are also proposing to create in New York State new areas of economic development using the Governor’s broadband initiative.

We have 2 sets of questions:

  • The establishment of baseline requirements and the information currently available through the state.
  • Issues surrounding the state’s RFP as a research and implementation grant and our requirements to fulfill the state’s RFP requirements.

Baseline Requirements and Rational for Data Development:

The actual cost of deploying 100 mbps services (or higher) to the entire state will be $10-$20 billion dollars. This requires not only changes to existing laws, but a large amount of data to be created as a ‘baseline’ as to what is and is not available today, what are customers currently paying, the actual costs to offer services, not to mention the current plant and location of the wiring, etc.

Broadband is currently (and in the future) not sold as a standalone product but includes at least 5 different product areas — Local, long distance, connection to the Internet (ISP), broadband-DSL (faster pipe), and cable/video services, each with their own cost models, usage, suppliers, etc. A strong business model requires an understanding of both the user side as well as the cost of offering these services, not to mention the requirements of the current infrastructure as well as upgrading existing plant, and regulatory and legal issues surrounding the current infrastructure and use as starting points

  • Customer information: This information should provide not only what the current costs to customers are, and who is using the service, (or does not have service), as well as current competition levels for broadband and all related services.
  • Network and plant information: What current networks are available today, including their location and capabilities?
  • Cost of service issues: How much do these services cost to provide today?
  • What are the current regulatory and legal starting points?

CIO/OFT Response: This response is applicable to the questions you have asked regarding the telephone (local exchange) companies and the franchised cable television companies currently operating in New York State. The CIO/OFT does not have this information at the present time and we are beginning to work with the incumbent service providers to voluntarily provide this data. We also want to better understand their pricing models and service delivery costs…as well as what they consider to be impediments insofar as expanding their footprints and opening their facilities to third-party providers. With the exception of the latter, this information is proprietary and the CIO/OFT is developing the necessary safeguards to ensure each service provider’s information is protected from their competitors so they are comfortable sharing the data with us. The CIO/OFT will develop a provider-neutral map of NYS identifying where broadband gaps currently exist. We recognize the difference between accessibility and affordability…and plan to identify solutions to both problems.

Does the state have the following information, or should OIA create separate grants to create this data?

  • Phone Company Requirements:

(We note that the phone companies’ regulatory, technology deployments, customer services, have different treatment than cable companies.)

1) Technical: Wiring and Plant.

Does the state have a map of all current incumbent wiring plans, including

  1. a) All fiber optic wiring, including all dark fiber (not in use) and lit fiber.
  2. b) All copper wiring plant both in use and not in use
  3. c) All switching, central office equipment and network layouts.
  4. d) All planned upgrades of the plant through 2015.
  5. e) All installations of all lines capable of ISDN, Special Access, DSL, broadband,

2) Customer side (by carrier)

The price and usage by customers of

  1. a) Local service
  2. b) long distance
  3. c) DSL
  4. d) broadband
  5. e) connectivity to the internet (ISP)
  6. f) wireless services
  7. g) Custopak and business services
  8. h) Triple play or bundles
  9. i) Video services, cable services.

3) Cost models

The costs to offer local phone service (business and residential.) including

  1. a) the costs of the maintaining the current plant
  2. b) the depreciation schedules for the plant,
  3. c) the costs spent on upgrades of the copper plant over the last 5 years
  4. d) the costs of the upgraded plant being used by FiOS
  5. e) the cost of all switching upgrades over the last decade.
  6. f) Audits of “Continuing Property Records: The state started on an audit of the actual equipment in the plant and found $634 million in missing equipment, impacting both rates as well as taxes paid. This was only ¼ of the audits required. Did the state continue these audits?
  • Cable Company Requirements:

(We note that the cable companies’ regulatory, technology deployments, customer services, have different treatment than phone companies.)

1) Technical: Wiring and Plant.

Does the state have a map of all current incumbent wiring plans, including

  1. a) All fiber optic wiring, including all dark fiber (not in use) and lit fiber.
  2. b) All copper wiring plant both in use and not in use
  3. c) All switching, central office equipment and network layouts.
  4. d) All planned upgrades of the plant through 2015.
  5. e) All installations of all lines capable of ISDN, Special Access, DSL, broadband,

2) Customer Side (by carrier)

The price and usage by customers of:

  1. f) Local service
  2. g) long distance
  3. h) DSL
  4. i) broadband
  5. j) connectivity to the internet (ISP)
  6. k) wireless services
  7. l) business services
  8. m) Triple play or bundles.

3) Cost Models

the costs to offer local phone service (business and residential.) including

  1. a) the costs of the maintaining the current plant,
  2. b) the depreciation schedules for the plant,
  3. c) the costs spent on upgrades of the plant over the last 5 years
  4. d) the costs of the upgraded plant being used by the cable companies
  5. e) the cost of all video and telephone switching upgrades over the last decade.

Legal and Regulatory Baselines.

  1. a) A list of all pertinent cable and telephone regulatory and legal decisions needs to be compiled to be mapped to the projected future plan.

FILING REQUIREMENTS:

Part ONE:

  • How many potential bidders did NYS include on its initial distribution of this RFP?

CIO/OFT Response: We cannot answer your question because the Broadband Grant Program RFP was not released via a “distribution list.” It was announced in a press release/press conference by Governor Spitzer on December 6. The RFP was also advertised in the NYS Contract Reporter (beginning on December 10). Both announcements directed interested parties to our website (www.oft.state.ny.us) from which the RFP could be downloaded or the interested parties could request that a copy of the RFP be mailed to them by contacting our office. The RFP has been publicly available since Friday, December 7, 2007.

  • How many have since been added or deleted from the list?

CIO/OFT Response: This is not applicable…as explained above.

  • Please provide a complete list of all potential bidders and indicate which are considered eligible for special credits (Minority, Woman Owned, SBA, etc.).

CIO/OFT Response: This is not applicable…as explained above.

  • Is partnering with other potential bidders permitted? If so, what special measures or guidelines are prescribed by the State?

CIO/OFT Response: Partnering is highly encouraged! There are requirements in the RFP that could make it difficult for a single applicant to be successful. Where these elements are beyond one organizations core strengths, they are being encouraged to partner with others in order to submit a comprehensive proposal. There are no special measures or guidelines beyond what is stated in the RFP.

  • Will these questions be emailed to the entire list of bidders?

CIO/OFT Response: We have committed to responding to each individual/organization submitting a question or concern during the open Question and Answer period (which closed on 1/17) by January 24, 2008. All questions and responses are being stripped of any identifying language and a generic version of the question and response are being posted on our website to benefit all potential applicants. Many questions and answers have already been posted. Please visit our website (www.oft.state.ny.us) and click on the Universal Broadband Q&A link on our “Hot News!” banner in the middle of our home page.

  • Has any organization been pre-selected to receive funds and if so, who and how much.

CIO/OFT Response: No! This is a competitive process.

Part TWO: Our Proposal and the GRANT

“The Broadband Opportunity Plan” (working outline.) — OIA, using a team of experts, will be presenting a proposal that outlines a multi-faceted, robust plan that could fund New York state’s goal to deliver at least 100 mbps (more likely 1 gigabit) services to ALL New York state residents and businesses, (lower speed in rural areas) by 2015,

It includes

  • A new revenue plan to pay for broadband networks which does not include raising taxes or state funds,
  • A deployment and implementation plan to upgrade New York state, including regulatory, technology and implementation issues. This includes urban, rural and suburban areas including municipalities, with multiple technologies when needed.
  • An economic development plan to create new “growth zones” and serve underserved areas.
  1. A) Does the proposal we are creating fit your guidelines or is your grant proposal only open to companies and groups who are looking for matching grants to roll out services?

CIO/OFT Response: From what you have stated above, your proposal could qualify to compete for these funds, but please be advised that the intent of the Grant Program is to provide state funding as a catalyst to encourage accessibility to and affordability of broadband services. There is a minimum $1 matching commitment by private or other governmental entities for each $1 of State grant funding applied for.

The grant states:

“A. $2,500,000 is available for distribution to facilitate increased physical access to broadband Internet services statewide. Such activities may include but shall not be limited to: research, design, implementation, operations, management and administration of programs related to infrastructure initiatives to facilitate physical access to communities and entities that lack such access.”

Our reading of this —we will provide research and implementation designs to create infrastructure initiatives as well as fund this implementation, thus provide access to customers who lack access, both short term as well as to create ubiquitous 100 mbps services.

Obviously, a successful plan to fund the state’s initiatives will also greatly help to make “available to provide equal and universal access to broadband Internet services for underserved rural and urban areas, including schools and libraries.”

  1. B) The state is requiring ‘matching’ funds.

The Grant:

“It is the intent of the State to seek public-private partnerships that maximize state-provided funding to the greatest extent possible with matched funds. While not mandated, the desired objective is a 4:1 match ratio, where the eligible applicant guarantees $4 will be provided for each $1 awarded by the State. Applicant commitments may be in the form of cash, in-kind goods and services or a combination of the two.”

As analysts, including experts, lawyers, et al, our matching funds will be in the form of in-kind work – i.e., work being done below normal costs, as well as marketing through our organization. Does that qualify as matching funds? Example, the ‘Broadband Opportunity plan’, part one, will be structured as a one time –report. The market value of this report is estimated $155,000 (or more as we close the details). OIA will perform this module for $40,000 thus the matching funds in-kind is 3 to 1. Other areas can have higher-ratio matching funds as many of the ‘experts’ will be working at a fraction of their normal per diem.

CIO/OFT Response: In-kind goods and services may include labor/professional services.

  1. C) OIA Requests an Extension of deadline

OIA believes that the time frame set can not be used by anyone who has to develop relationships to do matching grants from other sources. For example, approval of a grant by the state to match the research and implementation we are proposing by a 3rd party grant can not be done in a month.

It is clear that reading the other questions presented to date, we are not the only one who is questioning the State’s short timeframe.

CIO/OFT Response: While we sympathize with your request, our responsibility is to select winning grants and award contracts prior to the end of the State’s fiscal year on March 31, as such the deadline for submitting applications will not be extended.

  1. D) 5 Year Information.

Our proposal will call for one-time fees and ongoing fees on a ‘retainer’ basis or per diem. These expenses can not be ascertained until the acceptance of the one time report — i.e., we can not work on an implementation plan if the original report or the baselines outlined above have not been accomplished. We are assuming that the 5 year plan is based on provisioning of services and not research. We can project our costs associated with a retainer if “Part One” is done.

CIO/OFT Response: Your assumption is correct. The intent of the 5-year reporting requirement is to annually document and report increases in broadband availability, subscriber usage and other important demographics from current baselines.

  1. E) Modular Submission.

    Based on the state’s response, we will be submitting this plan as a plan presented as a series of modules, including ‘surveys’, research, implementation, legal and regulatory, as well as economic development modules. Are there constraints to this approach as to how many modules we submit?

CIO/OFT Response: No…there is not.

Bruce Kushnick, Executive Director, New Networks Institute

Chairman, Teletruth

 

 

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fixingtelecom

Fixing Telecommunications

We just released the first two reports in a new series, “Fixing Telecommunications”. It is based on mostly public, but unexamined, information that exposes one of the largest financial accounting scandals in American history. It impacts all wireline and wireless phone, broadband, Internet and even cable TV/video services, and it continues today with impunity.

Verizon, AT&T, CenturyLink, and other large telephone companies have been able to manipulate their financial accounting to make the local phone networks and service look unprofitable and have used this ‘fact’ in many public policy and regulatory decisions that benefited the incumbent telecommunications utilities.

American history. It impacts all wireline and wireless phone, broadband, Internet and even cable TV/video services, and it continues today with impunity.

 

Verizon, AT&T, CenturyLink, and other large telephone companies have been able to manipulate their financial accounting to make the local phone networks and service look unprofitable and have used this ‘fact’ in many public policy and regulatory decisions that benefited the incumbent telecommunications utilities.

In NY State, Verizon used this excuse to raise rates multiple times, stopped deploying and upgrading the fiber optic-based wired networks fiber and even stopped maintaining the copper networks with the plan to shut off the copper and force customers onto wireless. This has left most cities with deployment gaps or no upgrades at all.

Worse, it also impacts the price for wireless services, as almost all mobile data, video or calls end up riding over a wire, known as ‘special access’. These services are mostly controlled by Verizon, and in their own territories, AT&T and Centurylink (they do not compete among themselves for this business in any significant way).

Adding insult to injury, the losses were caused by the other Verizon lines of business dumping expenses into the state utility. Much of Verizon Wireless’s fiber wires to the cell towers were paid for by local phone customer rate increases.

Finally, this impacts every aspect of the FCC’s Internet Order, commonly known as Net Neutrality, which is now in court. The massive cross-subsidies between and among Verizon NY and Verizon’s other subsidies have allowed the company to control the networks and services over them, including blocking competition —which caused Net Neutrality concerns in the first place.

The FCC’s Big Freeze—15 Years of Regulatory Neglect:

While there are multiple questionable acts, at the core, the fact is that the losses were created, in part, by the FCC, which sets the rules about the incumbent phone companies’ accounting. Simply put, in 2001, the FCC “froze” the calculations of expenses that are used in every state, based on the year 2000 — and this freeze will continue until the year 2017. It assigns the majority of all expenses to the local phone service category. There have been no major audits or investigations by FCC nor the states for 15 years. This phrase has appeared, in one form or another, since 2000: “until comprehensive reform could be achieved”…

 

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Civic Hall Book Day – New Expose: The Book of Broken Promises

Civic Hall Book Day — Tuesday, April 28, 2015

NOTE: Other speakers include Susan Crawford, Astra Taylor, Allison Fine, Micah L. Sifry, and Alissa Quart — (See below)

New Expose Released: About the Book: Fact Sheet, Table of Contents, About the Author, About the Trilogy. Now available in paperback, ebook for Kindle, or an inexpensive PDF

bookcoversmallamazonsmallwe

It Is Time to Start Fixing What’s Broken with Communications in America.

With the Comcast-Time Warner Cable merger now dead in its tracks, and weeks earlier, the FCC released its new Open Internet/Net Neutrality decision only to be greeted by an onslaught of legal challenges that will continue for years, The Book of Broken Promises emerges to expose the sad truth about communications services in America and to answer a fundamental question — How did we get into this mess and what can we do to fix it today?

Bruce Kushnick, author, senior telecom analyst and industry insider, lays out, in all of the gory details, how America paid over $400 billion to be the first fully fiber optic-based nation yet ended up 27th in the world for high-speed Internet (40th in upload speeds). But this is only a part of this story.

It is Time for Audits, Investigations, Accountability, Oversight, Enforcement, Un-Manipulated Data, Transparency and Ethics.

  • SPECIAL: How to Get New York City and New York State
  • Competition Now: Re-open the phone networks (as well as the cable networks) to direct competition. Customers should regain the right to choose their own ISP (Internet), cable, broadband and phone provider over the wires coming into homes and offices — that they paid for.
  • Broadband Scandal: Start immediate investigations into the commitments that were made to upgrade homes, offices, schools and libraries with fiber optics, replacing the aging copper wires, as well as the billions charged to customers per-state.
  • Deceptive Billing: Everyone reading this knows that their bills are littered with ‘made up’ fees, pass-through-taxes, and the advertised price means nothing. Let real competition and ‘choice’ lower rates and fix deceptive sales practices.
  • Investigate the Time Warner and Comcast Social Contracts; actual agreements with the FCC to wire schools and charge customers.
  • Investigate the massive financial shell game and cross-subsidies we uncovered between and among the wired networks and the companies’ wireless services and other lines of business.
  • Separate the companies’ control of the wires and airwaves because— “The Companies that Control the Wires Control Access & America’s Communications Future.”.

Everyone Gets Upgraded: How Do We Get There? Broken Promises provides extensive documentation and a proactive plan, a road-map on how states and cities can take advantage and leverage the companies’ failed broadband commitments and the companies’ questionable financial and business practices. The goal — Move America to an open, very fast, fiber optic-based, yet affordable, broadband, Internet, and cable service for everyone — since everyone paid for it over and over and over.

Check Out the Details: The Book of Broken Promises is the third in a trilogy spanning 18 years. See the Fact Sheet, Table of Contents, details of “$200 Billion Broadband Scandal” featured on Bill Moyer’s PBS “The Net at Risk”, in 2006 (with over 730,000 downloads) and “The Unauthorized Bio of the Baby Bells”, (with Foreword by Dr. Bob Metcalfe), published in 1998.

NOTE: WE ARE ALREADY WORKING ON CHANGE

Broken Promises is based on over 20 years of research and analysis. However, it is not just a history book; it has been enhanced by the work of New Networks Institute’s team of independent experts, analysts, auditors and lawyers who have been working on projects together over the last decade.

From helping to get communities upgraded to fiber optics in New Jersey or in New York, (in 2012-2014), filing complaints at the FCC and at the state commissions, or helping to develop current and successful, settled class action suits (getting customers back tens of millions of dollars), Broken Promises uses this wealth of expertise to create an active guide for real change and it documents, in detail, the reasons why fixing communications is now an imperative.

New Networks’ Current Activities:

Want to be part of the change? [email protected]

==============================================================

Civic Hall Book Day — Tuesday, April 28, 2015

156 Fifth Avenue, Second Floor, New York City

Other authors and speakers include:

  • 8:30 AM – Susan Crawford, author, Captive Audience and The Responsive City
  • 12:00 PM – Astra Taylor, The People’s Platform: Taking Back Power
  • 2:00 PM – Afternoon snack with featured authors
    Bruce Kushnick author of The Book of Broken Promises: $400 Billion Broadband Scandal and Free the Net
    Allison Fine author of Matterness: Fearless Leadership for a Social World
  • 5:00 PM – Micah L. Sifry, The Big Disconnect, Why the Internet Hasn’t Transformed Politics
  • 6:00 PM Poetry in the Café, Happy Hour with Alissa Quart, author of Monetized