Teletruth News: May 13th, 2009

New Networks Institute Releases Report: (63 pages)

http://www.teletruth.org/docs/belldata.doc

Bibliography and Free Ebook:

http://www.newnetworks.com/html/Bibliography.htm

Covers: Market consolidation, revenues, profits, executive compensation, foreign investment and losses, wireline and wireless competition, Internet competition, broadband deployment, construction expenditures, depreciation, employees, cost of local, long distance, wireless service, 'access line' manipulation, 'very small business' wireless spectrum issues, and 'vaporware' and corporate influence over policy.

The name of this report should be: "How 25 years of deregulation and massive consolidation with almost no oversight harmed the US economy, America's world standing, as well as America's telecom, broadband, Internet and cable customers."

This report details specific key indicators outlining why America is 15th in the world in broadband, why prices continue to rise, why there is little or no competition for most services and why, on our current path, America will not fix the issues that have harmed competition and choice. In short, we had better learn from the last 25 years as the problems created are harming the country's economic growth, our worldwide competitive edge, as well as phone and broadband customers.

From excessive executive pay and corporate profits, to a failure to invest in critical infrastructure, the current incumbents, AT&T, Verizon and Qwest, with the help of laizze faire regulators, are clearly more concerned about their shareholder wealth then as the caretakers of America's essential Public Switched Telephone and Broadband Infrastructure.

In short, the financial sector was not the only industry where deregulation and a failure of oversight harmed the public good in exchange for corporate greed.

Verizon and AT&T and Qwest: Some Data Bits. (As of December 2008)

Business

• Excessive Mergers have Eliminated Competition -- In 1984 through 1996, there were 12 potential competitors. Legacy-AT&T and MCI were the 2 largest competitors. By 2009 there are three companies that do not compete for wireline service, long distance service and broadband.
• Revenues -- Grew 220% since 1984 to $235 billion, split mostly by AT&T and Verizon.
• Executive Compensation -- From 2006 through 2008, Verizon's top 5 executives received $194 million dollars. In 2006, AT&T was bought by SBC and the top 6 executives made $168 million.
• Profits and CASH -- In 2008, Verizon and AT&T had $74 billion in "cash", known as "EBITDA", Earnings Before Interest, Taxes, Depreciation & Amortization.
• Employees: Job cuts are over 70% since 1984, when compared to revenues for wireline phone services.
• Tax Payments in 2008 -- Verizon only paid 3% of the total revenue on income taxes, while AT&T only 5%.

Broadband and Spending

• Broadband Funding -- Collected over $300 billion for broadband yet failed to upgrade the Public Switched Telephone Networks. The money is still being collected today in current phone rates as excess profits.
• Broadband -- America lost almost $6.5 trillion dollars in GDP growth for the failure to upgrade America.
• Construction -- Underspent $58-$161 billion dollars on capital expenditures.
• Depreciation -- Took from $100 billion to $371 billion in excess tax write offs (deprecation).
• Overseas -- Collectively lost over $40 billion dollars in overseas and other investments.

Competition

• Harmed Competition -- Today, only 6% of the incumbent lines are competitive, down 61% since 2004 as a direct consequence of bad FCC policies.
• Harmed ISPs and Choice -- Over 7000 independent Internet Providers were harmed, many were put out of business through bad deregulation or predatory customer service.
• 6+ Revenue Streams with No Serious Competition -- The telcos split broadband and Internet Provisioning (ISP) with the cablecos - a duopoly. The cablecos are cable monopolies. Verizon and AT&T combined had 3 million TV-upgraded homes. The phone companies are wireline monopolies, as well as control the ancillary incomes from directory assistance, long distance and other related businesses. Cable only has 15% of local service. Wireless only households are 15% and AT&T and Verizon control over 80% of wireless service and have the majority in their territories.
• Wireless and all of the other Bell businesses have been subsidized by raising local rates with little oversight.
• Merger Failures --- Merger after merger the Bell companies lied to regulators, claiming that they would be competing out of their own territories if the mergers were approved. SBC was to be in 30 cities by 2002, Verizon 24 in the same time period. They never competed against each other in any meaningful way.
• Mergers Harmed Broadband -- AT&T's latest merger required the company to have 100% broadband capable of at least 200K in all states by 2007 and offer $10 DSL to new users. Didn't happen. In 1999, AT&T had claimed they would spend $6 billion on 'Project Pronto'. Stopped spending post merger. Almost every AT&T state had plans for broadband that were cancelled after each merger, including SNET, Pacific Bell and Ameritech.

Phone Services

• Competition failure harmed customers with less choice and higher prices.
• Local Service -- By 2008, Verizon, New York's local phone service increased 524% since 1980.
• Long Distance -- In 2009, AT&T's basic long distance rate one minute call cost $.42; higher than 1980.
• Long Distance -- A recent California phone bill study found that because of plan fees and other charges, the average subscriber paid $.55 a minute.
• Wireless -- A recent California phone bill study found that because of plan fees and other charges, the average subscriber paid $3.02 a minute.
• High volume customers with 2 or more lines averaged $.29 a minute.
• Packages -- High volume customers save using packages, representing approximately 1/3 of users. The majority of customers are usually on expensive plans and are paying more.
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• Scandals
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• Wireless -- Verizon & AT&T were able to bid with a 'designated entity' on spectrum as "very small businesses", saving $8 billion.
• Missing Equipment "Vaporware" -- In 1999, the FCC released an audit of the Bell companies and found $18.6 billion in missing network equipment had been added to rates. This was only ¼ of the required audit, thus $80 billion dollars of missing equipment could have been added to phone rates and as tax savings.
• FCC Data is Atrocious -- From the FCC data on broadband, phone bills or data used in regulatory proceedings pertaining to small business competition, the FCC's bad data has led to bad US policy. For example, the FCC's small business impact studies discuss the current market harms to competition using data from 1992, 1993, 1994, 1997 -- 8 to 17 years old.
• Corporate Influence -- Through lobbying, campaign contributions, astroturf groups, corporate-funded think tanks, co-opted consumer groups, and even the corporations' own staff, deception and undue influence are now the working agenda in the US on both the state and federal level.

Note: This report was prepared as part of presentation by New Networks

Institute at: "Has Divestiture Worked? A 25th Anniversary Assessment of the Breakup of AT&T",

Sponsored by Open Infrastructure Alliance and the Internet Society, New York Chapter. To see http://www.isoc-ny.org/?p=618

Bruce Kushnick, Executive Director, New Networks Institute

[email protected]

http://www.newnetworks.com

Teletruth

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