Irregulators v FCC: The Trillion Dollar Broadband and Accounting Scandal
4:59PM Jul 30, 2020
In 2018, our next speaker presented a whole talk on how America was supposed to be. Fiber Optic nation where the telecom pipes be open to all forms of competition. However, through mergers and the takeover of the FCC in some state Commission's a few companies have taken control of most of America's telecom infrastructure and services can net neutrality and the digital divide be fixed. Our next speaker is here to talk about it. Please welcome Bruce Cush Nick with a regulators vs FCC, the trillion dollar broadband and accounting scandal.
Hi everybody, my name is Bruce Krishna has mentioned. I've been a telecom analyst with 38 years. And I started as I used to work for the companies themselves which I will talk about. But the most important thing that you should understand today is that we are in the middle of a major legal challenge. Currently to go and redo the entire infrastructure, the United States to basically make it so that the fiber optic wires are more important than the wireless networks that have been put in and that we already paid for the fiber optic wires. I'm also going to talk about a scandal that most people don't know that the counting that's been used for the State Commission for the states, of which there. They have been in place since the year 2000 basically takes most of the money that's been the expenses and dumps it into the state utilities to make them look unprofitable. This has caused at least a half a trillion dollars of overcharging which I will explain. So let me start off by giving you a basic understanding of the world as I see it, the years 1984. at&t is a about to break up and at&t controlled, all of the wires in the United States pretty much except for GCP which was a separate incumbent local phone company, but at&t controls all of the wires including the East Coast, West Coast, such as Pacific Bell, or New York telephone. It also controlled all the long distance services. So if you made a call from your house to in New York to California. That was a long distance call. At the same time it controlled all the hardware and the technology it control the switches that were in the networks and it controls actually the phone, the rotary phone. So in 1984, they decided under the Ronald Reagan's administration to go out and break up. at&t breakup at&t and they created separate independent quote unquote phone companies known as regional Bell companies that control multiple state utilities. So, in the case of New York, New York was part of nine x, which was the New York telephone and nine x basically control the state of New York. And, as well as, Massachusetts, Maine, New Hampshire, Vermont and Rhode Island. And then there was Pacific telesis which control, California and Nevada. Now what's interesting about all these things is that there were seven baby bells. At this point in time they've been eaten alive and the siblings married each other which was definitely an act against God. As I will discuss. So you have a situation where in 1984, you have these separate companies that are basically claiming they're going to compete with each other, and we go forward to 1992, so I should start, so I was a consultant. My background was I went to MIT and was a I guess you would call it a phone hacker. I
used to make these little boxes to make phone calls around the world and we use the tone 2600 to disconnect the operator and connect us to the international phone line so that we can make calls around the world. And we were working in the dorm I was in, was torn down in Bexley, so I can mention it. And basically, we're working with other groups including I've heard captain crunch and got it was the act out in California Building boxes with Apple. So I had a vision of a thing called touchdown service, and that I had and I understood digital recording because I was had taking classes in the psycho acoustics lab at MIT of wish I was involved with trying to figure out how to make speaker sound good and I took a acoustics with somebody named Mr Bose, who was teaching acoustics. So I hung out with a fast crowd. Anyway, that those, those lessons that I learned were in 1984, when they broke up happened, nobody had a clue about the networks themselves everybody. They were case you don't know there's touchdown services basically tones, it's actually sounds so and I, I have a degree in music So along the way. So what happened was is I knew a lot about the recording of digital sounds I knew a lot about the touchstone service and how the networks work. And so I went from being a musician to writing research reports for international data corpse with resources. And I wrote a bestseller, where I basically predicted that the addition of new technologies will change the way we use the phone networks. Fast forward, 1992, I ended up working and developing the first three digit dialing service. 511 with Cox newspapers. And I also was heavy into something called the information superhighway. So, in 1984 at&t breaks up in 1992 91 al gore and Clinton announced it for the National Broadband Plan something called the, the information superhighway. Now the information superhighway was to take the original state, utility copper wires and replace them with a fiber optic access line, ie a replacement of your other wires that were in there. Now, everybody was entitled to phone service, starting in 1934 with the Telecommunications Act of 1934 which said that the wires which will give me copper, everyone's entitled to it so by the 1960s American been wired. But those wires were never really upgraded or changed. And so by the time we are hitting the 1992. Most of America had already been wired with copper wire and now the plan was to just replace it. As a senior telecom analysts, companies, I had the misfortune of actually looking at the, the financials, to see that they, or that were being pitched. So, Verizon, what is now Verizon went to New Jersey Bell went to the state and said, We will rewire the entire state of New Jersey by the year 2010 with 45 megabits services in both directions and we will start in 1996. Now, the one thing that bothered me about this is okay they gave me the plans as a senior telecom analyst and then I realized,
none of the numbers match, you couldn't actually build it for the services and the hard drives that were on computers at that time happened to have been only 40 Meg's. So the idea that they're gonna deliver 45 megabit services in both directions and that it would only cost $900 per line which is what they gave the states seem to be a little odd, so I stood up in the National Press Club and I said, Excuse me, we should separate the wires from these companies because they're never going to open the networks to competition. And they're never going to go out and upgrade the networks, and unfortunately I was correct on both fronts. So in 1996, the Telecommunications Act happened and you were supposed to open up the networks to competition, and everybody was supposed to be able to choose their own internet provider, their own long distance company, their own broadband provider. And I did that one prop. My favorite wall. This backwards, is the internet service provider directory for 1998 and basically there were, by the end of 2001, there were 9335 independent ISP is offering service internet service. Now the internet had not been around in 1996 it was just starting, and all of the pieces that were being put together, such as the ability to use the with the club you know the graphic interface. Email all those things were starting to be figured out. Same thing with browsers even, so you have a situation where the basic understanding of how we are going to communicate on the internet, really wasn't there, there were groups companies like AOL that were offering what they call Walden networks, but this was to take the regular phone network. Take a cable, take a your computer. Take a modem, and you would call dial up the internet service provider and connect to the internet. This model was the original was the original model was considered to be inferior in 1992 when they were pitching the fiber optic wires, of course, but by night by the year 2000, they had not wired America. They had basically collected money for it. And by the year 2004. That's also in 1998. I wrote my first book called The authorities by with a baby bells, with a foreword by Dr. Bob Metcalf and Bob's idea was that he called a Coppertone which is we should separate the wires from the companies, because they were never going to open up the networks to competition. And we saw the companies that networks being opened, and then the networks being closed. So by 2004, the FCC says we're going to close all the networks to competition. And essentially, And this will under Michael Powell, essentially what happened was is the phone companies just took over the FCC, and by the end of the, the end of it, 7000 small internet providers had been put out of business. We had created with Congressman Adler, the broadband Bill of Rights, and that didn't go anywhere and we also had a summit with the Small Business administration's Office of Advocacy to try to save all of the small RFPs, it didn't go very well. In fact, what happened was is all of the companies in the southern. So, a small ISP would go to nine x or New York telephone and say I want to rent the wire, they would say, they would place their order and 40% of the times the orders didn't go through. And that was documented by a number of places that we had on the. So by 2004 I wrote my second book called
absolutely forgets broadband 200 billion broadband scandal, and that book basically took all the information that I knew, up to that point, and was basically said we were supposed to have half of America finished by now with fiber optics, and we all paid about $200 billion for this product for this process. Now I attract being a nerd that I am in every state, all of the changes to state regulations and all the monies that were accrued based on those changes. You would think that somebody else had noticed, but it really hadn't happened that way and the FCC decided to ignore all of the state commitments. So, what you have is a situation where by 2004, the entire network should be in close to competition. Now, the interesting thing is that Verizon, Verizon was bit, I should give you the, what happened with companies. So in 1996. There were seven baby bells, and there was at&t and a company called MCI and a company called sprint offering long distance. But these companies wanted to go into long this wanted to go into local service and rent, the wires. Unfortunately, what happened was is that the networks were open these guys started offering the services, the incumbents refused to go out and actually close the orders for most of the companies, and by 2004, they figured out that at&t and MCI were put up for sale, and the baby bells, these companies had already started merging now SBC, which was Southwestern Bell in Texas, Kansas. It had bought it bought first, California, which is pacbell in 96, and then and saying that it was going to bring out, bring broadband to the States. And then in 2019 98. net, which was Connecticut it bought and said it was going to spread out and it was going to take over the East Coast, using, Connecticut. and then there was about ameritech, which was the five states including Illinois Ohio, Indiana, Michigan and Wisconsin. And that those those dates were basically bought in 2001, and then SBC finally bought at&t changes name to at&t but it basically was the baby bells all in one place one time. So by the end of 2007, what is now at&t had 21 of those, another baby Bell was Bell south and Bell South was this, Florida, South Carolina, those states, Mississippi. And so, at the end of this at&t owns 21 local incumbent states now. Along the way, just going back. All of these companies and made commitments in their states to go out and roll out fiber optics. So let me give you some examples. Pat bell in California was supposed to have 5.5 million households wired with the fiber optic wire by the year 2000 and spend $16 billion, starting in 1996. net. Cal in Connecticut was supposed to spend $4.5 million, and have the entire state finished by the year 2007. ameritech was supposed to have 6, million lines of fiber in the year 2000, and for the other states. And in each of the mergers, they were all supposed to be competing with each other out of region. So ameritech, an SBC SBC with its ameritech with its pacbell was supposed to go out and be in 30 states in 30 months or pay penalties. Well, of course, they didn't pay any pet they pay trivial penalties. And in each of these conditions. They went SBC took over that state it closed what was ever was being built so in California, 1996 there was agreements in San Diego, San Jose, Sacramento, and I think San Francisco, all to be wired with fiber, and they never did it, and they basically in 98 or 97 SBC after the merger shut everything down, that was being built, and didn't give the money back to the customers, even though there were rate increases now the way it went was, oh, we're poor phone companies we can't really build these networks. So if you just let us charge a little more for the customers. We'll be glad to build them. So by 2004. They had basically not, they'd all been starting to merge they're all just a couple of companies, and then they decided that what they would do would roll out, Verizon announced files, which was a fiber optic to the home service, and at&t announced Uverse which was supposed to be a fiber to the home service, and they misrepresented it. And so it was using the old copper wires, which they claimed were not work. Didn't work for Uverse by 2008 and Verizon
cable service to compete with the cable companies. And guess what, didn't really go the way that anybody thought as well. When the way I thought, which was they made these commitments and then didn't build out the networks. So, in the in various states, they decided to roll out files. I knew New Jersey very well because I had actually tracked the original commitments, which was done in 93. And then in 96, in 2006 I testified with our group saying, excuse me, you know there's already a commitment to have the rest of the state wide by 2010 Why aren't you actually fulfilling that obligation, and the commission didn't even know that it was an obligation. Because there is no institutional memory I've discovered. So you have a situation where basically in every state the companies went back to the state, even if they said that they were gonna roll out something prior to that, and then said oh no no this is all new, this is all different. This is fiber optics, and by 2010 eight Verizon announced it was going to stop doing FiOS. And at&t said it was going to stop doing u verse, and that suddenly in 2007, we had a little twist. at&t came up with. Sorry, Apple came up with the app, and the phone, the iPhone, and all of a sudden, the phone companies decided we're no longer those stodgy wireline companies we are now the high class, and we can make more money wireless companies. So, though, they all decided to go out and change their business plans to go be wireless. Now you can't blame them for being wireless, except for the fact that they didn't actually fulfill their obligations to wire most of the cities, or most of the states. But the thing that people don't know which is scandal number two is that they were figured out how to transfer the funds, the funds from the state utilities to the wireless company to build out the wireless company, so that the wires and the cell sites would be paid for by local phone customers via rate increases. Now, scandal two, which is going to be the punch line of my of my talk. For all those watching you probably don't know that there is a state utility in place today. And I guarantee that it is something that when I bring this up, everybody knows the you word, it doesn't exist. Okay, so I'm gonna I'm gonna go to the end and then come back in. In, I've had this problem on stage as well. In June of, 2000, June 8 2020 Verizon, New York, released an annual report for Verizon, this primary state based utility. This is very important because it's the only state still publishing the data. And what does it show. It shows that basically local service was was basically put upon. It took the monies that were supposed to be used for the, the wires to the, to the homes, and it gave them to the wireless company. It dumped expenses like corporate operations into local service, more than it did and all the other lines of business. Oh, New York, couple of a couple of things in 2017. So there's three cat three basic categories of the wires in our industry today, right, that there's more, but let me just give you the basics. Number one is basic phone service, which is the copper wires. Oh yay in New York, there was at least a million and a half phone lines. At the end of 2018, and that for just this one category, but there was an additional five to 7 million lines that were not being accounted for. But I'll get to that in a second. Second part is the is access, and sometimes called backhaul. So there are wires that are basically the same wires as the ones used for phone service, but they've been reclassified to be called backhaul which are data lines. So that's called special access or business data lines, and they go to the cell sites, or they go to the competitors. And then the third category of revenue is the non regulated which is the wires, which is the category for Verizon video for files and VoIP and some other services that are not regulated. So, you have three categories right, the category, local service in 2019 was still 860 $4 million. But then, being charged $1.2 billion in construction and maintenance expenses. Even though local services only. Unfortunately, about him for 75 to 100 million dollars to maintain the copper, all of the rest of the money somehow went somewhere and it went probably to the wireless company. We know this for, but I'll explain how we know it.
Will the local service also paid 61% of all the corporate operations expenses. It's so it paid in 2017 it paid $1.8 billion of corporate operations expenses against against revenues, which may lose money immediately now corporate operations expenses are the executive pay. They are the money, the golf for golf tournaments. They are the, the monies for basically lobbying lobbyists, the monies that give you the Foundation grant it's basically a slush fund for anything that corporate corporate wants to do. Why is local service paying 61%. Oh after even my favorite. My favorite marketing. So in 2019, the new report, local service was paying would pay 200 and was charged 200 and $5 million for marketing, of which they stopped selling local service in New York and other states. they still charging $200 million for it. And that's because it's 54%. of the total. Now, what happened was crazy. All right, back up to 2010 in New York. I find that New York is the only state that starts publishing and reports, and I have no idea what these things mean. There's all these numbers and, to be quite honest, it was not my area of expertise. But by 2014. We put together a team which turned into the regulators, and one of them is a former assistant. Assistant Attorney General the state of Texas. Another one is a former FCC,
Assistant Chief of the pricing policy division, a special specialist in dealing with accounting accounting numbers over a period of five years it took us, we figured out that the FCC rules and formulas were being applied to the state utilities to make them look unprofitable on purpose. At which point, then they could say other unprofitable we don't have to upgrade them other than profitable we need rainy, oh they're unprofitable we can get rid of the unions there and so what happened was, is they set the FCC in 2000 2001 set the accounting rules to match the year 2000 in 2000 local service with 65% and pay 65% of revenues, expenses in 2019, it's 21% of the revenues and it's still somehow paying 61% of corporate operations expenses. This is crazy. This is one, this is between 950 and $1.6 billion of overcharging in just 2019. And sorry in just 2019, and just New York for just these three line items, marketing, corporate operations and construction budget. How crazy is this, if you multiply it out to the rest of the country, it's over $25 billion that are being charged currently that could be used for other things now. We know that the we're sitting here with the pandemic the digital divide and we're all in our homes. Well it turns out that this money we believe can be used to go out and rewire the fiber optic parts of America. Now, what happens, there's a couple of other points to this. First, everybody's screaming about 5g and wireless I should address this fg is not profitable when you take away the when it has to pay the budget for its construction, and it has to pay the access fees, it has to pay the rights of way and all these other things that somehow it got away from paying. This is a serious problem. Number two, all of the things that we've heard about 5g is based on the idea that they're going to get one one gig speeds and everybody I assume knows by now that the only way you get one gigabit speeds is to have some reporter standing there, a couple hundred feet away from the antenna going moves a little to the left, okay I got I got, I got a gig I got a gig, and he goes around the block and there's no, there's no signal. So what's been happening is, they've always used the shiny bauble the new technology as the way to get rid of regulations. So, the play for 5g has nothing to do with wireless. It has to do with the fact that we have a, we have a situation which is kind of not understood by most people, America is based on a series of state utilities, most of which are being dismantled. They're being dismantled by a series of regulations and obligations that are being stripped away by the FCC, using the losses that the that are artificially created to say that we have to get rid of the regulations. So if you go to the FCC s five g fast page and you look at the, and you look at the five g FAS page and you go down a little you scan down, what you see is, well, we have to get rid of net neutrality. We have to get rid of, because it gets in the way of being able to use it that works. We have to get rid of it what they call the, the copper transition. We have to shut all the copper wires off because of course it's getting in the way of the wireless companies. We have to go out and get rid of and make private property of the special access lines. Now the special access lines now in New York, have a profit margin of 55%, which is basically monopoly rates, while local service, which is on the same page isn't the same set of books is losing $1.9 billion.
So all of these numbers that I've just mentioned to you comes down to a couple of basic facts. Number one is over the last 20 years they've been able to manipulate the accounting to make the entire US infrastructure appear unprofitable to, they were supposed to turn that infrastructure into fiber optics and did not do it. And this is a very serious problem because as we sit here today, most of the areas that the United States have one provider that offers high speed, which is the cable company, three big pricing, there's a couple of reasons why we're paying. Two to 14 times more than in Europe. And this is an Asia and there's a bunch of studies that we've published, showing that in, in the currently in a freewheel research found that in most of the like most of the EU. You can get unlimited gigabit service unlimited meaning thousand gigs, with the service for 5g and it will cost you somewhere around $25 in the, in the United States. It's 70 to $90 and you get maybe 50 to 75 gigs. When it comes to the triple play, America's paying my triple play now is over $215, and I do did want to a wire phone line. So I pay through the nose for that, but in Europe. It's $40 $35. So our field. My feeling is is why it was, why is that pricing differential important Well first, if we don't solve it. It turns out that in doing studies, most of the people who are not online can't really afford to ended up going either don't have or don't want to spend large sums of money on on their kind of activity. In most cases that they. It's a double play a double threat because the rural areas weren't properly upgraded. So you're sitting with, how do you fix this part. Ah, so in the budgets that I talked about Verizon New York annual report which just came out, which happens to be. We put we're putting it up by the way with a pop quiz, so that people can actually read it see for themselves the numbers, which will go out in the next few days, what we believe is that basically it's time to renovate we. Okay, I have to back up. So, a group of us got together called the regulators and we decided, how do we fix all of the stuff that's broken. How do we go after all of the cross subsidies that are making local services, profitable, how do we bring fiber to the home, and more importantly, how do we make it so the prices go down. And the answer for us was the only thing left to do was to sue the FCC over these accounting rules. Because if we didn't do that as we found out the states are still using these accounting rules they think these accounting formulas they think that there's nothing wrong with them they've never done an audit themselves. So you have pretty much every state being overcharged. So we took the FCC to court and we got the decision we want. So the regulators are now going back into New York, and I didn't want to go all the details while going back into New York and calling for an investigation of all of our subsidies, of which we believe, as I mentioned, there's a billion a billion and a half on the table to go after. And that we're going to start doing this in other states and get the state legislators to start calling for the investigations at same time we have to go after the, the actual profit margins of things like the the access fees which are known as backhaul. If we don't do that, we'll never get lower prices. It just can't happen, because the companies now have control over the wire, they have control over all services over the wire and it turns out that the wireless is part of those wired services whether we like it or not, and pretty much all of the wires were paid for now. It turns out that we have a lot of details that are very important in 2011 the ag of New York, actually did a small audit and found out that 75% of the construction budgets for the state utility had been diverted to wireless, and for files video, which is that good. We have another quote from our friend.
Fran Shambo over at Verizon, a former CFO, and he said that basically the construction budgets were in the wireline networks. But we also have a whole bunch of documents that we've gotten through a couple of discovery. Well, we know that the wires in New York, were basically they were spending, 175 to $100 million for the copper. And so the differential of what local services paying which is a billion dollars. billion two verses with what they should be paying is enough to actually upgrade the entire state of New York. Will the will the politicians and all these other people like yourself, get involved and help this happen. My feeling about other states, a lot of other states are basically all of them going, how do we solve the digital divide the digital divide is, is I just gave you the reasons, it was formed was the companies basically decided to take the money and run. There was no accountability to help make sure that they actually rolled out the fiber that they said they never went back in, they never adjusted the rates for your refund to the customers, and essentially they've just made it so that the wireless company got a free ride and has a profit margin of 55%. Secondly, I'm going we're going to solve net neutrality and I thought everybody should jump up and down about this, and so it turns out that. Okay. In 2004, the FCC decided that that that the wire, which was going to which was broadband, ie the speed, well I'll use dial up as a mile, you have your, you have a your your house, you take your phone line, you call the internet. The internet provider he connects you to the internet. All right. So that was the basic model. All of that was, quote, titled to the internet service was was not titled to the internet service was an Information Service, but the wire from your house is still was titled to the right to. As soon as you add speed to that wire, the wire doesn't change. It's only that the speed capacity changes that was still broadband, that was still titled
under the original telecom act that was still titled
in 2004, they decided to do a glob which said, local service, the wire that it's in your house. If it has a broadband connection on it. It's suddenly an Information Service, we reclassify it as an Information Service, they don't have to read the wires to the competitors anymore. Ah, suddenly the entire, all of the internet providers are put out of business because they have been restricted by a reregulation now the telecom act of 96, which was that opened the networks, was called the regulation by 2004, the closing of the networks was called deregulation. Now the funny thing is, is the companies were able to actually get rid of the U word as well. There's no longer utility. Now these are broadband lines, these are fiber optic lines, these are anything else but turns out in New York, and all the Verizon states, Verizon filed, claiming that the wires that were being put in the fiber optic wires were part of the state utility and were title to common carrier networks. And that's languages in the every document that and every state in every cable franchise, claiming that the wires were titled to. Nobody's ever bothered to figure out that if that the title to part of this whole equation is is not did not harm investment, but was the was the way that the investment happens, ie Verizon goes to New York and says, We want to build out files, we need rate increases. We need you to change the laws, and by the way files is really just a title to service, so we can put this into the state. The state utility. Construction budgets. Well, if it was an Information Service, they couldn't that was not legal they couldn't do that. But they did. And it turns out that we have the language that shows that the investment was done using title two. It was not the other way around. So we're now looking to take this case in New York as well, because our belief is that if you want to solve this whole net neutrality issue and it's based on title to harming investment. We have reams of documents that show that the, this was the investment. It didn't harm the investment. So I have a couple more minutes but my goal, our goal now is to go out and fix what's broken, we don't want to keep this current status as is, we think this is a bad thing. We think that the companies are playing us with 5g, we don't believe that it's anything more than a shiny bauble to get rid of the state regulation, get rid of the rest of the regulations. Now the rest of the regulations are you. There's a wiring in your, in your that you're using. If that wire breaks, too bad. You don't have to fix it. The carrier of last resort. We don't have to even give you a service anymore, if you're if you're an if you're a wire, for whatever reason, you want to go out and get a new service, for the most part they're not telling you certain new wire services anymore they decided to hold off on that there's no, there's only certain places but not most places. So, we are in a situation where almost all of the states have been starting to be the dismantled where they're taking the public property that was created by charging local phone customers extra. And then moving those networks into being wireless networks, with no regulations and nobody could use them, and they are going to essentially then have control over the wires now our position is customers paid for the wires those wires should be open to all competitors. And if we're going to go out and use the new money after getting rid of these, these fancy footwork, of the cross subsidies, those wires should have a lot more obligations to them, because we should be able to go out and give wires. Now, our belief is this is not a quick quick solution. We've been talking about this stuff for 15 years so it had that done, I mean 20 years, so that's why years ago, we wouldn't have been done by now but right now where we are is you have a knee jerk reaction of everybody wants to give Wi Fi to everybody and everybody wants to give wireless to everybody. And the answer is, is that Wi Fi requires a fiber optic wire, and only has a distance of a couple hundred feet. So, you're still gonna have to run the wire. And so if you're going to start running wires. The other big thing which I will tell everybody, I think, is. I don't know how many people know about dark fiber, dark fiber is the fiber optic wires that have been put in. Along the way over the last 30 years and, and some of them were never turned on and then shut off and some of them are never turned on. We're talking about the fact that the amount of wires that are in the ground in the last accounting by the FCC 60% of the wires that were in the ground that were fiber were never in use, they were dark
going after and lighting these wires up for cities where they have been running up and down the streets, and they were never turned on, or they're in going up and down the highways which companies have decided that was private property instead of being public property, all of these things. Now, if we're going to try to make sure that everybody has cheap. Very fast competitive services. We have a lot more work to do to make sure that we can open up these network so as part of our, our thinking. The fiber in the ground, that's already been that's dark is probably been written off. It's probably was paid for via the state utility title to customers. It would probably was charged as part of rate increases that the company's got, and then the wires just sat there talking to the union guys around the country, it's very obvious that a lot of people don't know that the wire is there, even in the cities, there's no maps that they're going to show all the easily find all this stuff. And, to be quite honest and going through what's happening, we found out that there were agreements for example in San Diego, and San Jose, and other parts of California that were supposed to go out and have been wired. And they have maps of what was supposed to be done. And they were never done. But in San Diego, they started wiring it, and they may have wired for a couple of years without doing it now this is old. The old technology, but it may be better than nothing at this point to get things kick started. We also believe that some of the copper. That's still in place can definitely high speeds when it's bonded, meaning you take 234 lines, you put them together and you get 100 Meg's in both directions. Other companies are doing this now, the phone companies claim is private property, but if it's already been written off customers paid for it. I think we need a new model. The amount of money that's been cross subsidized now comes out to be. Over the years about 40 to 50 to $60 billion annually. So when I say that there is one. There's $1.1 trillion of overcharging. It's because we, the continuation of the first part which was customers, the state laws are changed customers pay extra for the fiber optic wires and then get them, and I we track that and then alongside that was this whole other scandal, where the accounting has been manipulated to go out and make it so that the entire networks become profitable. And so that you do this manipulations, our fear is that this is mostly just hand waving, and that we're going to end up with crap networks over the time, and we're not going to go out and really fix the issues that are out there, and I think it may be that the final, the final take could be, we may have to go out with a cold structural separation, meaning. Okay, the companies themselves have not been a good have not taken care of the network's. They basically let them deteriorate, which is the serious problem. And throughout the United States. They left rural areas because it wasn't quote profitable for them based on manipulating the accounting. So all of these things and they basically then did things like what advertising company so that they, when you go online, they can track you and all these other pieces of things that are just onerous. So, our feeling is is it may be time to discuss and bring to the bring to the discussion, the breakup of at&t once again, ie, we separate the wires from these companies, and we start creating that we reinstate the utilities to be stronger and more resilient, but also use this this extra money to go out and build them out. This is not government subsidies.
Bruce. Thank you. This has been incredible. And I have to tell you, the matrix the live chat with people who are listening to your session, the chat is absolutely on fire, we have a ton of questions that have come through. We're just gonna pass you a couple because we have to, we only have a few minutes before we need to finish the session but people are loving this and I want to remind everybody, you can also go to the hallway track after this talk is done if you want to continue these conversations because they're amazing. So, the question I'm going to ask you is, how can people get involved and help fix this, this is what people are talking about. They want to know how to help.
How are we, uh, we're starting a campaign in the next two weeks to make that happen. The problem has been the pandemic slowed everything down to a crawl and be quite honest, we have to raise just, you know, the court case that we took cost over $250,000. So we have to go out and raise a large sum of money to take legal actions, because no one is going to do these fights the politicians are not going to step up to the plate and this is a serious problem, and so are you know we and we, you know, we're both of all of us took a personal hit on the on all this money. The second, the third part is is we're going to need state by state, a real fight. And we're going to make. So, make it clear what the fight is what they can do and how to sign up, I could use help and getting people to aggregate and sign up. So if anybody wants to help us do that part of it. Some organization, I think that'd be great because we, you know, we're a bunch of old guys, by the way, I'm gonna be 69. So get everybody else's on everybody else is either on Medicare, Medicaid. Medicaid, Medicare, and we all have a RP cards I'm sorry you know it's,
yeah, I'm gonna interject because you're talking a lot about New York, and I'm in New York City as well in Rochester, and a lot of hub hovers happened last year in the year before with spectrum, and the merger that happened with Time Warner Cable and the requirements that they had to deploy to about 100,000 homes and they didn't need it. So the state was going to kick them out. Right, make it into a public utility instead. There's like some backroom deals going on now because of
that. Well, let me let me give you a little heads up on this because Cuomo cut a deal with Verizon, and put a Verizon, president of the East Coast, as one of the new commissioners in the state commission in 2018 and his staffer Lisa Eve, who testified against us, made statements that bordering on perjury. And he has, he is not going to go after Verizon, and he basically shut down the original calls for cross subsidy investigations in the state of New York, that we had brought forward. So both of the companies as far as I'm concerned, we need to go after we can't just go after one of them, but we have to the question comes down to, if they if that we gave them a franchise, we gave them the rights to do these things, and then they're milking us for what we're worth. I think we have to go out and come back with a, what I call a clean sweep. You know, we have to get rid of the the whole idea that these guys are these guys are doing a good job because they're not especially Verizon, you know, when Cuomo said that the number of lines. He didn't say well Verizon didn't show up in these places either, which they were supposed to. So we got just you know we we we did get an investigation and ended in 2018 we got 32,000 lines of fiber installed and unserved areas in New York, and we got the copper to be reinstalled to be upgraded with the CWA the union guys, but this was just a, but when we went one to go forward. Cuomo stepped in and said, well, we're not gonna listen to that. And so, my feeling is is and I tried I tried liking Cuomo recently because of the, you know, I thought okay he's trying to, he's trying to the bit, but my feeling is is he talks out of both sides of his mouth on this one. And so we're gonna go most politicians do that, we're gonna we're gonna basically try to get her to get the new Commissioner to recuse herself, because, uh, so they redacted certain information they redacted the salaries and compensation to the executives of which in 2017. She's one of the executives in the information they redacted. They redacted the number of lines, so that they, which is ridiculous, so they don't want you to know how many lines there are. So, in the way they account for lines they say well there are the basic copper lines, and then they don't say well there's the DSL lines. There's the special access lines. There's the fiber lines.
So I imagine there's some fudging going on because you know we're counting each pair cable in this big giant, you know, T one bundle that nobody's using it goes to the building that nobody has phones on anymore or something like that. Right, right.
Or they with special access, they have $1.9 billion of revenue and zero lines. How do you have $1.9 billion of revenue in zero lines, the answer is is, and this has been going on. By the way, this is not news, this is going on since 2007, we actually filed the FCC saying you have to give us the total line so in New York. We are asking for all lines, every goddamn line, whether it's in service or not, whether it's copper wire or fiber optic wire, we're always we're going to ask for all of it.
So with a lambda x.
While we have, there's supposed to be an index, known as the continuing property records. We asked to see them. And it turns out that in 2001 we actually filed the with the IRS about this, and with the FCC, There was a report by the FCC that said 20% of the equipment was missing or being and being written off.
Well, from from a complexity standpoint because they really over, they really over engineered and made a lot of complexity changes in the last you know 3040 years, but that I can see that happening right those old T one, you know implant boxes stuff to the building that nobody's using anymore because nobody bothered to really cancel the cancel service but No, nobody came and pulled the equipment out right, we see that all the time, right, I worked for an MSP I know how that is right they just leave crap behind because it costs more to pull it out. So they have all this.
Well imagine imagine this you have you have all these wires that have been that have been put in there basically just abandoned. Right. Yeah. Can we use them use them to bring high speed internet to other people, quickly, with, and you know about bonding right because Well yeah, yeah. Well, here's an opportunity to say maybe that's a. Maybe that's an interim step that we need to take, because the wires are already just there, and we get the, and we get the, we use them to give speed to people who have
never done that requires them to maintain that and,
Well, I have to say, you will be surprised at the amount of money that Verizon Wireless didn't pay back to Verizon New York for the use of the networks in the wires is $5.5 billion in the last six years, that they basically just took and should never have taken, that's separate from the money I've mentioned before, it's ridiculous amounts of money, the Verizon Wireless paid a third of what sprint paid for using the networks, known as access fees, and this is in documents that they filed in their annual reports. The question is, is whether they lie to investors, because they never told the investors that they were state utilities left, they were told them now is one of the things we work, we will have an auditing firm that we work with in New Jersey. There's at least three times the amount of number of wires that are in the ground, they're not counted anymore four times that should be in the darkness.
So we actually have about 30 seconds left so we need to do some up if people want to find you get in touch with you what's the best way for them to do
shoot new networks, calm. Fantastic.
Yeah, it's really pushed, quite honestly,
it's an open it's gonna have an open call in the next couple of weeks so we will do what, maybe we could do a webinar and tell everybody what's going on and get a more action from hope gang to go out and build the army that we need to fix all this stuff. That'd be great. Um,
so it looks like I'm kind of going to the question so we can push them just for a second because we started a little late on him. So, is there a wiki with all the overcharged details or any other information that kind of combines all of this information together.
I'm working on pieces of that I have lots of it already, but it's, you know, it's his way I've been doing this now for 38 years, I wrote three books, and so by the time I'm done, I have 20 years of how do you how do you aggregate everything to make it easy for people, the new stuff is based on 2019 annual report, and it's very clean, it's coming out next week this next few days.
And what about today on ISP some phone lines, yay or nay.
My belief is that the cities, the cities in the states have woken, the cities have woken up that they're part of the state utility. Unless you know I, when I talk to them, we pitch, a lot of cities. And we said, Excuse me. Okay. It wasn't thing in 2012 we got snow Creek in Greenwich small towns in New Jersey wired because it was part of the state law. In all of these times we went to the other cities and said, Listen, under the state law you're. They are required to build out. Why don't you ask them for it. And nobody wants to take them to court. Nobody wants to take them to court and do the heavy lifting. They'd rather go try to do what I call, walk arounds, which is not effective. It doesn't you know and if it was effective, we'd have all the cities and everything would be hunky dory, but everybody quotes like Chattanooga, one place yeah oh we have one place in United States is really doing well. But as utopia and as you know, you go on and on. So with that,
I think that's gonna be the end for a time, go.
Yep, that's, that's right now. So thank you so much prescrition Nick, keep talking in the matrix chat, and that's all. Thank you.