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The FiOS ads say, 'This is big!' Well, maybe it is, and maybe it isn't

COMMENTARY | May 09, 2008

Bruce Kushnick scoffs at the new FiOS ads in New York and wants to know where all the billions earmarked for broadband have gone.

By Bruce Kushnick

I'm sitting here in Bay Ridge, Brooklyn, being bombarded by advertisements for Verizon's FiOS TV. These ads are only the most recent in a drive that has been going on for years in different media. So what if I can't order the service today? Except for pockets of customers in some communities, hardly anyone in New York City can.

The new ads follow a recent announcement of a proposed franchise agreement with New York City. Bay Ridge isn't even listed as a potential deployment area for FiOS TV in the next five years.

Verizon has been announcing FiOS in New York City since September 2005. It is now putting out press releases with celebrities and ordinary people, with the slogan, "This is Verizon FiOS. This is big."

Excuse me, but I think the second part of the slogan should be, “This is bull.”

New Yorkers have paid about $2,400 per household since 1995 and counting for a service we may never get or want. Under earlier plans, the city was to be rewired with high speed fiber optics starting in 1995. Verizon has been collecting money ever since in the form of billions in higher rates and tax perks.

Here's what Verizon, then known as NYNEX, said in 1995:

"New York is the most information-intensive economy in the world, and telecommunications networks – which transport this information – will spur economic development in the state... With an advanced telecommunications infrastructure, a number of industries can, and should, flourish in New York: health care, financial services, information technology, research and development, educational services, entertainment and real estate."

Sound familiar? Economic growth, advanced telecommunications networks, education and entertainment would flourish.

Think of it this way: Suppose a company is paid billions in fees and taxes to upgrade dirt roads into a modern turnpike. Instead, the company puts in new dirt roads but continues to collect the fees. Then it says, "We'll put in the highway, but we’ll own it and we decide which cars can be on it. Keep paying or we'll just stop building. In the meantime, we'll charge you more for the current roads." 

The dirt roads in this case were ADSL, Asymmetric Digital Subscriber Line, which was rolled out around 1998. ADSL allows people to use their phone lines for Internet service. It was considered an inferior technology in 1992. It is carried over old copper wiring, not upgraded fiber optic cables. It can't deliver high quality video services. Compared to a Ferrari, it’s a skate board.

Verizon's FiOS, if built, is now defined as an 'interstate information service' by the FCC and not any longer as a 'telecommunications service'. The change is more than a semantic one. By this decision, Verizon does not have to open its new networks to competition of any sort and is essentially being funded through the upgrading construction budgets for local phone service. In fact, the FCC’s original decision in August 2005 claimed that this change was important because the phone companies would not have to delay “development and deployment of innovations to consumers”. Over the next few years virtually all requirements to open the networks were eliminated.

When Verizon was considered a utility, it had obligations to the public. Based on federal laws, including the Telecom Act of 1996, it and other telecoms were to be open to competition and have ubiquitous deployments. As an “information service,” Verizon is now a “free market” company that can build and install FiOS with mostly public funding. Depending on the cable franchise agreement, it can have few or no obligations for placement of its networks. (Each state and city franchise agreement is different.) It can negotiate which areas will get service and when they will get it.

America is now 15th in the world in broadband because Verizon and other firms didn't build out their networks when they said they would. Japan and other countries already have broadband 100 times faster than what Verizon is providing in most communities, at prices cheaper than our inferior DSL products.

Local New York City phone prices have increased 472 percent since 1980 because the phone companies have been able to keep excess profits in an environment where competition has been mostly eliminated. Cable prices, which should have dropped with the introduction of Verizon TV, have instead increased by about $3.5 billion, or $500 a household.

This same scam is occurring throughout the U.S. According to earlier promises, AT&T and Verizon should have rewired 98 million homes by now. Since the early 1990s they have collected $240 billion – and counting – for such rewiring. In my first Nieman article, I outlined much of this, working largely from the companies’ annual reports.

Among the questions regulators and legislators should be asking are:

  • Verizon and other companies were paid for extensive new broadband networks but installed hardly any. Where did all the money go? We are talking billions.
  • Why is Verizon allowed to advertise a service that customers can't get?

It’s hard to track the money trail without audits. Some of the excess profits to be used for network upgrades went into failed overseas activities, executive compensation and other corporate items. There was an indication that expenses for DSL and long distance, and even some wireless costs were being dumped into local costs.

Not long ago, former Governor Spitzer announced a plan for New York State to have ubiquitous, open networks capable of 100 mbps in both directions by 2015—speeds comparable to those in Japan and South Korea. Verizon may roll out something in the state but it won’t have open, ubiquitous networks and there is no reason to think it will deliver those high speeds at reasonable rates. There is also no sign that Verizon will be held accountable for the billions it has accumulated under false pretenses until now.  

Verizon’s new “This is big” campaign is just the start. Next we can expect drummed-up support from corporate think tanks, fake consumer groups, co-opted black, Hispanic, and senior citizen groups and even corporate-funded activists for the disabled. They’ll work in tandem with lobbyists and political office holders flush with telecom campaign contributions. Verizon has a history of out-shouting everyone by funding politicians and creating dubious research and fake consumer groups to make their case.

Even the small details about the proposed franchise are misleading. Example: Verizon says it will pay the city a 5 percent annual franchise fee." Verizon doesn't pay this fee. Subscribers do. It is a tax directly placed on phone bills – a separate line item on the bill. Time Warner also passes through this tax on its franchise tax charged to customers.

So, as I watch the advertisements for a service I can't get, paid for by me and millions of others viewing these same ads, I know that the digital divide that is coming to Bay Ridge is a small part of what is pushing the U.S. forward into becoming a third-world digital nation.

[Click here for earlier Nieman Watchdog articles by Bruce Kushnick.]

Posted by Bruce Kushnick - Teletruth
05/23/2008, 02:12 AM

> A large portion of Brooklyn has been connected to fiber for years now. But it was fiber to the curb, not fiber to the prem.---I was hired, in 1995,

As an expert, I can tell you what happened... What happened was that in 1993-1995 Verizon went state by state promising to rewuire the states. And from your own experience... they did wire it, they just didn't roll out the services they committed to... That's because the equipment didn't work at the cost models they submitted... and it couldn't be deployed because the technology cost $4-5,000 per home.

After all of the state laws passed to give Verizon money, the company simply pulled the plug.. DSL over copper was considered inferior in 1992 -- according to Verizon (then NJ Bell, Bell of PA, NY Tel.)

Now, Verizon is claiming it will finally deploy --- but now, instead of being open, ubiquitous networks, it will be their property for personal use -- still be funded through increases in local rates that happened in 1995...

And when they do disconnect the copper they are cutting the utility property's service... so what they want is for a "cable company" with few obligations to replace the utility...

And Asia--- The money that was given to Verizon comes directly from phone users -- so whether the government gives it or they get the regulators to take the money from seniors, low income families, and small businesses is better? The big different in Asia is that at least they built it -- we're still 15th in the world and falling...

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