States’ Rights, Net Neutrality, & 5G: Broadband Is a State-Based, Title II, Telecommunications Utility Service.

The above quotes are from a Verizon NY, 2005 FiOS cable franchise and a Verizon Massachusetts franchise application, 2016. As we will discuss, similar, if not identical language appears in all of Verizon’s fiber optic FiOS franchises for over a decade. To stress the basic points, these contracts state that:

  • The broadband “Fiber-to-the-Premises”, “FTTP”, fiber optic networks are part of the existing state telecommunications utility.
  • The FTTP is classified as Title II, and part of the Communications Act of 1934, (and updated by the Telecommunications Act of 1996).

IN FACT,

  • Verizon’s broadband, Fiber-to-the-Premises wires are Title II and part of the state utility in order to get the utility rights-of-way and be able to have the construction expenses be paid using the existing STATE-based wireline construction budgets.
  • Moreover, Verizon halted most of their FiOS deployments circa 2010 and due to negligence on the part of the regulators, these construction budgets, instead of being used to build out rural areas or low income areas, were diverted and have been used for the wires to the cell sites and Business Data Services.
  • Verizon et al. were able to charge local phone customers thousands of dollars extra per line because they are classified telecommunications services, as well as telecommunications networks.

The irony is that there are multiple fights going on that are all related to the above — and it all directly contradicts everything the FCC has been claiming.

The FCC is attempting to preempt the states’ rights in multiple decisions, from ‘shutting off the copper wires’ (retirement), preempting states’ rights in small cell wireless deployments, while the Department of Justice, with the support of AT&T et al., are taking the State of California to court over its state-based Net Neutrality legislation.

Inter-State vs. Intra-State: A Structural Flaw in Every FCC Proceeding

The FCC presides over ‘interstate’ services and creates ‘federal laws’, but this has led to a basic structural flaw in every FCC proceeding. The FCC has never acknowledged that there are still state-based telecommunications utilities, that the fiber optic broadband wires were paid for via local “intrastate” rates, starting in the 1990’s, or that over the last decade, the FCC’s own accounting rules are so corrupted that they dump the majority of all expenses into Local (intrastate) Service of the state utility. This corrupted mathematics has also let Verizon’s wireless networks, including 5G wireless (in-region), be mostly cross-subsidized and paid for by phone customers — including low income families and rural customers, as well as everyone else.

Broadband has been part of the state utility and a Title II service for over the last decade. The states and cities could have made this argument… but didn’t. As we detail, the investment’s for these wires are overwhelmingly state-based, (‘intrastate’) and in most states there were rate increases, clearly demonstrating that customers illegally paid for these upgrades.

IF THE FIBER OPTIC BROADBAND WAS REALLY AN INFORMATION SERVICE THEN VERIZON COULDN’T USE THE UTILITY INTRASTATE CONSTRUCTION BUDGETS OR CHARGE LOCAL PHONE CUSTOMERS OR USE THE STATE UTILITY RIGHTS-OF-WAY.

Verizon et al. yell and scream and distort the financial accounting so that they can claim that Title II harms investment — when it is the method of broadband investment.

But, if broadband and the FTTP are upheld as an information service, then the state could remove Verizon’s rights-of-way privileges and they’d have to pay market prices. And the networks that were paid for by local phone customers — billions per state, would have to give refunds, thousands of dollars per line, as you can’t charge customers extra for an information service. And the wired networks that are used for wireless would revert back to the state utilities — as they have been mostly paid for by the utility construction budgets; wireless 5G is no longer profitable as it would have to rent the wires like everyone else.

The FCC will make ludicrous claims that when an Information service is going over the wire, the wire should be reclassified as an information service — and no longer even counted as an access line. (AT&T’s U-Verse is a copper-to-the-home service and the aging, existing, utility copper wire was suddenly no longer a landline, and not counted as a line.) But this is mumbo-jumbo and nothing more than a shell game and it is directly contradicted by who is actually paying for the networks — customers — who have been paying extra for broadband (that never showed up) for decades.

Let’s Just Strengthen the Point that Broadband is Title II and Part of the Existing State Utility.

In the quotes that follow, the FTTP is classified as Title II, a telecommunications network upgrade of the existing state utility.

§ MASSACHUSETTS & RHODE ISLAND

Verizon New England (Massachusetts & Rhode Island) SEC-based 4th Quarter 2010 Report. Here it is in black and white. Verizon offers 3 types of ‘telecommunications’ services, including FTTP — broadband.

§ Verizon District of Columbia (DC)

The Verizon District of Columbia (DC) franchise application shows that by 2007, Verizon had franchises in 835 different locations in 12 states, and in the application Verizon again repeats that the DC deployment is a Title II service.

Let us be very clear. This states that there is a “Title II FTTP network” that is a telecommunications service as defined by the Telecommunications Act of 1934.

And Verizon DC continued claiming it was not seeking permission for building these networks, only to use the networks, once installed, for cable TV service.

§ Verizon New Jersey

Verizon New Jersey’s FiOS Cable TV Franchise Agreement, renewed in 2014, details that FTTP is part of the state telecommunications facilities.

Verizon NJ has been upgrading its telecommunications facilities in large portions of its telecommunications service territory so that cable television services may be provided over these facilities. This upgrade consists of deploying fiber optic facilities directly to the subscriber premises. The construction of Verizon NJ’s fiber-to-the-premises FTTP network (the FTTP network) is being performed under the authority of Title II of the Communications Act of 1934 and under the appropriate state telecommunications authority granted to Verizon NJ by the Board and under chapters 3 and 17 of the Department of Public Utilities Act of 1948. The FTTP network uses fiber optic cable and optical electronics to directly link homes to the Verizon NJ networks.”
“Pursuant to the NJSA 45:5A-15, telecommunication service providers currently authorized to provide service in New Jersey do not require approval to upgrade their facilities for the provision of cable television service.
As such any construction being performed in the public rights of way is being undertaken pursuant to Verizon NJ authority as a telecommunication service provider.”

§ Boston Massachusetts

To add to the opening quote, the Boston Massachusetts FiOS franchise details that this is part of the EXISTING TELECOMMUNICATIONS NETWORKS, as told by this response to a question to obtain their franchise agreement.

We can go on and on…

The FCC and Net Neutrality

In the ongoing Net Neutrality ping-pong game, there are now lots of current actions. The FCC has been taken to court to appeal its latest decision. This is what the FCC says in its response, Oct 11, 2018. (Thanks to Ars Technica.)

“In 2015, however, the Commission briefly departed from this historical consensus by reclassifying broadband as a Title II ‘telecommunications service’ and imposing onerous, utility-style rules on broadband providers. Title II requires, among other things, that telecommunications carriers charge just, reasonable, and non-discriminatory rates, see id. §§ 201(b), 202(a), and design their systems so that other carriers can interconnect with their networks, see id. § 251(a). Information service providers, by contrast, are not subject to common-carrier regulation.”

This actually says: prices do not have to be just and reasonable and they do not have to allow carriers to ‘interconnect’ if it is an information service. And this is a good thing?

The FCC also claims it has done extensive work demonstrating that the Net Neutrality rules were regulatory burdens, and…decreased broadband investment.

“While this legal analysis sufficed to support the Order’s classification decisions, the Commission also found that ‘public policy arguments advanced in the record and economic analysis reinforce that conclusion.’ For example, the Commission noted, the regulatory burdens (including the heavy-handed conduct rules and regulatory uncertainty) created by the Title II Order decreased broadband investment and prevented the development of innovative new services.”

The record Chairman Ajit Pai quotes is broken as the FCC didn’t include any of the Verizon franchise agreements and it only quotes research from companies and pundits that have a financial relationship to the phone or cable companies.

And wait… Pai was a senior telecom attorney at Verizon and FCC Commissioner Brendan Carr worked for Verizon and AT&T while as a lawyer at Wiley Rein.

The Department of Justice Sues California Based on Rewriting History.

At the same time, the Department of Justice is suing the State of California for its Net Neutrality legislation, based on the FCC’s decision, September 30, 2018.

“Justice Department Files Net Neutrality Lawsuit Against the State of California”
“In 1996, a bipartisan Congress decided that the Internet should remain ‘unfettered by Federal or State regulation.’ Since 2002, the FCC has accordingly classified broadband Internet access as an “information service” that is exempt from public-utility regulations.”

This is just adds irony to the insult and injury as the DOJ can’t even get the facts straight. Under the 1996 Act, broadband was Title II and the Act was designed to open the existing monopoly copper (and upgraded fiber) wires of the state utility so that customers could choose their ISP and broadband provider over this wire. The “Internet” was a separate service that rides over the wires and an ISP connects the customers to the net and the World Wide Web. And this part was an information service. There is no such thing as a “broadband internet access” service in the Telecom Act of 1996, and this ‘glob’ combined 2 services. Unfortunately, the previous Wheeler FCC did not separate this glob and should have required that the networks were reopened to competition.

Verizon’s Janus 2-Faced Approach to Title II

While Verizon’s cash cow is based on using Title II to dump the expenses into the state utility, at the same time, Verizon filed at the FCC claiming Title II “would deter these heavy and much needed investments”.

Verizon Open Internet Remand Proceeding, May 14, 2014

“Rotary Telephone-Era Utility Regulation Is Not the Answer. In contrast to an approach that encourages innovation and investment in all parts of the Internet ecosystem, some now propose that the Commission ‘reclassify’ Internet access service and apply 1930’s utility regulation to these services ‘Any proposal now to reclassify broadband Internet access or some new ‘transport’ component of Internet access as subject to utility regulation would therefore undermine innovation, destabilize current investments and cast a cloud of regulatory uncertainty that would deter these heavy and much needed investments.
“The Commission itself foresaw these risks nearly a decade ago when it argued before the Supreme Court that common carriage regulation likely would ‘discourage investment in facilities’ and spur broadband providers to ‘raise their prices and postpone or forego plans to deploy new broadband infrastructure’.”

Talk about talking out of both sides of one’s mouth. Didn’t we just see that Verizon embraces Title II in every state-based franchise?

Who Paid for the Broadband, FiOS Deployment or the Wires to the 5G Cell Sites? 
 

 In New York State alone, and in just 2011, out of a billion dollar construction budget, Verizon diverted 75% of the monies to ‘FiOS TV’, a cable service, and for use by Verizon Wireless. In a response to an inquiry by the New York State Attorney General’s Office about capital investment, Verizon stated that in 2011 the company spent over $1 billion. The Attorney General claimed this is misleading, as the money has been shifted to fund Verizon Wireless and FiOS:

“Verizon New York’s claim of making over a “billion dollars” in 2011 capital investments to its landline network is misleading. In fact, roughly three-quarters of the money was invested in providing transport facilities to serve wireless cell sites and its FiOS offering. Wireless carriers, including Verizon’s affiliate Verizon Wireless, directly compete with landline telephone service and the company’s FiOS is primarily a video and Internet broadband offering.”

Conclusion: The FCC has a Structural Flaw in Every FCC Proceeding. It has ignored all state-based intrastate financial information; it ignored the fact that every Verizon fiber optic deployment is part of the state-based utility and is Title II, and it has never examined the role of intrastate phone customers, who have been ‘defacto’ investors of all interstate services.

In short, the FCC has no state-based data that it can rely on.

Unfortunately, most of those who are attempting to stop the FCC have never read a state-based financial report and keep calling these incumbent state utilities “ISPs”. And most have not bothered to examine the record of broadband deployments in their own state.

George Santayana said:

“Those who cannot remember the past are condemned to repeat it.”

But the problem is much deeper. Over the last decade, AT&T et al. have convinced America that the state telecommunications state utilities no longer exist, that the wired networks no longer are needed and that everything would be so much better if we just go to 5G — a service that has a range of 1–2 blocks and requires a fiber optic wire. Worse, they have even been able to take over of the FCC and have rewritten history until it has become a collection of faux-facts — and it is now the common wisdom.

A more appropriate quote about all this might be Charles Baudelaire’s line:

“The finest trick of the devil is to persuade you that he does not exist.”

We are at the tipping point of the end game; the FCC and this administration have strip-mined all customer protections and basic obligations and are dismantling the state utilities to become private property for personal use of the wireless companies.