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Did Verizon Scam Pennsylvania?
Teletruth releases some scathing claims
by sporkme 03:05PM Wednesday Feb 19 2003 Tipped by Karl Bode See Profile
NY-based TeleTruth today released a report claiming that Verizon failed to keep their end of the bargain in a 1994 broadband deal with the state of Pennsylvania. That deal, which benefitted Verizon (then Bell Atlantic) to the tune of $2.1 billion dollars, promised the delivery of broadband infrastructure capable of 45Mbps symmetrical speeds to the door. TeleTruth claims Verizon intentionally misled the state and public simply to boost profits and ease regulation.

Chairman Bruce Kushnick, a telecom analyst and consultant for the last two decades (with access to a lot of telco dirty laundry) founded TeleTruth in January 2002 in the hopes of "fixing the problems in telecommunications" and protecting consumers from, as their mission statement indicates, "customer overcharging....and customer issues surrounding Broadband deployment and competition".

Last week, Teletruth urged the Securities and Exchange Commission to investigate Verizon's accounting practices, citing more than $5 billion in assets the group claims were improperly accounted for during Federal Communications Commission staff audits in the 1990s. (read more about that in this PhonePlus article)

Today's report, which focuses on Verizon's activities in Pennsylvania, (which should be read, and is available here in Word format) focuses on a 1994 agreement in which Bell Atlantic was granted financial incentives by the state of Pennsylvania if the company met certain broadband rollout criteria.

As part of that agreement, Bell Atlantic agreed to have 20% of the state broadband wired by 1998, and 50% by 2004. The TeleTruth report suggests that this wasn't copper based DSL they were talking about...but 45MB/s symmetrical fiber service right to the door of homes and businesses, ambitious and impractical for certain, but nonetheless included in the language of the agreement.

The report goes on to note that by March 28, 2002, the Pennsylvania PUC acknowledged Bell Atlantic's failure to adhere to the state's Alternate Regulation plan: "...this Commission has a legal obligation to reject Verizon PA’s 2000 Update and require it to submit a new update specifying its plans to satisfy its legal obligation to provide a modernized network with broadband capability of at least 45 Mbps upstream and downstream, to be available within five days from the customer request date."

That update, which will need to show Verizon is working toward that 45Mbps goal, is expected by the end of next month, and will be reviewed and ruled on by the Pennsylvania Public Utility Commission shortly thereafter.

The bottom line? Teletruth argues that Bell Atlantic made false and misleading statements about future broadband rollouts to the Pennsylvania PUC and the public in order to reduce regulation and significantly ramp up profits. According to the report, Bell Atlantic "succeeded in getting large financial incentives for a broadband network they could never deliver."

Speaking to the Philadelphia Inquirer, Ronald F. Weigel, director of government relations for Verizon's Pennsylvania division, says the company could provide any school, business, or residence within Verizon's service area with a 45 Mbps connection, provided they could pay for it. "I don't care if they're in Altoona or Philadelphia, we're prepared to offer it," he suggests.

Teletruth puts the profits made by Verizon thanks to the 1994 deal at roughly 2.1 billion dollars, $1.5 billion of which consisted of extra tax deductions the company received from significant tax write-offs thanks to the deal. Bruce Kushnick suggests this breaks down to $785 per household, a total he believes Verizon should be forced to pay out in refunds for broken promises to Pennsylvania residents.

But the claims don't end there, in addition to urging an SEC accounting investigation, and slamming Verizon for broken promises, Teletruth is also taking the FCC to task, criticizing the commission for using research that fails to include state level data analysis, and for allowing the telcos to "game the system".

Additional details on all of Teletruth's recent moves and accusations can be found at the organization's website.

72 comments .. click to read

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Newton Highlands, MA

2 recommendations

Fiber to the home was assumed to be on the way

Let's set the wayback machine to 1985. That was the year I joined an ATIS ANSI-accredited subcommittee that was writing standards for digital telecom networks. I represented a large computer company, putting me in a minority there (surrounded by Bellheads, some very smart and some, well, bellheads). There was "narrowband ISDN" (what is normally called ISDN), which was a couple of years away from trials. There was frame relay, which was just being thought up as a replacement for X.25. And there was a new CCITT (now called ITU-T) project that we were the US input to, called "Broadband ISDN". In CCITT terms, Broadband began at 50 Mbps; 2-50 Mbps was merely "wideband".

B-ISDN was starting to be developed by telcos (remember PTTs?) worldwide as their response to the potential threat of cable. I first saw a cable modem being marketed in 1982. (It didn't catch on with the cablecos at the time, but they could have bought the product.) The telcos in 1985 thus figured that the best defense was a good offense. If they could offer video, then they'd be able to fight the cablecos on their own turf. Now in 1985, cable TV was old technology, all analog, mostly one-way 300 MHz coax with lots of repeaters. To get over 100 channels on the brand-spankin'-new Cablevision Boston system, they pulled dual coax. The telcos figured they could jump-start this with fiber optics.

So the B-ISDN project focused on what were outrageously long time frames, even by telco standards (for whom it takes three hours to watch "60 minutes"). We figured we'd see narrowband ISDN widespread around 1990, and B-ISDN roll out in volume somewhere in the late 1990s.

It was around the beginning of 1986 when CCITT really adopted "ATM" as the core technology of B-ISDN; before that, there was interest in using TDM over OC-3. B-ISDN with ATM was assumed in 1986-1990 to begin at OC-3 (155.52 Mbps); that was expected to be wide enough for one HDTV channel plus whatever else a house might need. (Today's 20 Mbps HDTV compression was not anticipated in the days when an 80286 was a "turbo" CPU.) The old copper telco plant was depreciating, so replacing it with FTTH over 20 years or so seemed, well, both sensible and inevitable. We continued using these assumptions well into the 1990s.

That, my friends, was the background of Bell's broadband promise. DSL was not on the table. In 1993, the Internet wasn't even open to the public yet; the high-speed applications were expected to include telecommuting, LAN interconnection, videoconferencing, video-on-demand, and as-yet-uninvented services. The Bells figured that they were going to do this FTTH thing to keep ahead of CATV. And they wanted out of the old rate-of-return regulation, because they foresaw higher productivity (or perhaps union busting, knowing Bell Atlantic) leading to lower costs. Rate caps would let them keep their higher profits.

Of course when it came time to actually look hard at FTTH, the numbers didn't add up. The Bells saw DSL as a mid-life kicker for the old copper plant. And they didn't see enough demand to pay for FTTH. They still don't -- the FCC's bargain in the UNE review is no bargain! But TeleTruth's argument is truthful; the Bells were talking about FTTH broadband, and conveniently forgot it after winning rate caps.



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reply to DonLibes

Depends on what your definition of IS is.

This is exactly why you can deal with weasels and liars. Lawyers can always twist words, this is why people consider lawyers a step above child molesters on the human totem pole.

"On March 28, 2002, the Pennsylvania Public Utility Commission rejected Verizon Pennsylvania's compliance with the state Alternate Regulation plan, stating that the Bell company had not satisfied its legal obligations to supply broadband services at 45mbs.

"…this Commission has a legal obligation to reject Verizon PA’s 2000 Update and require it to submit a new update specifying its plans to satisfy its legal obligation to provide a modernized network with broadband capability of at least 45 Mbps upstream and downstream, to be available within five days from the customer request date."

It seems pretty clear that the PUC was not satisfied that commitments were met. Apparently their "interpretation" was not satisfied.

The rhetoric surrounding the regulatory pushes in the middle of the decade swirled with talk of video services and fiber optic lines into the home. We aren't talking about a 10,000$ a month line or a "you can get anything if you are willing to pay for it" type of line.

For example(bell atlantic at the time)
""We expect Bell Atlantic's enhanced network will be ready to serve 8.75 million homes by the end of the year 2000. By the end of 1998, we plan to wire the top 20 markets"
Notice the term enhanced network, which doesn't mean dsl. Also notice the term homes(i.e. we aren't talking T3 service or "bazillion dollar a month you can get anything with enough money whatever yada yada belch")

We all know what was meant. The fact that verizon comes back later and claims that the words don't say that is only further proof that you can't deal with these people. These people will hand you cow dung and claim it's filet mignon and they'll have a lot of overpaid sacks to deny the validity of objective reality, discuss the complexities of human perception, yada yada belch, until any sane normal human being would rather stick a spike through their own skull than play any more bullshit games. You can condemn the government for not nailing them down explicitly enough but in the final analysis you can't make deals of any kind with sleazy liars who will twist everything in any way they can. Ultimately business can only function if there is some integrity behind the deals and negotiations made.

Donuts-Is There Anything They Can't Do?
Englewood, CO

2 recommendations

reply to Archivis

Re: It does more then regulate your poop

From Verizon's Web site - - - "Make progress every day. We understand that life is not always about dramatic change, but more often about the small steps and achievements we make each day. Whether you want to make progress in your life or business, we can help. We're standing behind you to help you move forward, however you define progress in your life."

All PA taxpayers should rise up, demand that progress, and shout, "Can you hear us NOW?"

Some say the glass is half full; others say it’s half empty. I say, “Are you going to drink that?”

ObamaCare Kills Americans

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reply to Archivis

said by Archivis:
If that means that we benefitted them 5 billion dollars, then I guess the PA citizens should expect 5 billion dollars.
I would expect more if I were you.

Actual Damages:
- $5,000,000,000
- Interest on that $5,000,000,000 for the years that the money was in Verizon's posession

Punitive Damages (this is where I would have fun if I were a judge and a case involving this came before me):
- $15,000,000,000 (or whatever the maximum the law stipluates I could award)

As these were promises made to public officials, I would also suggest that the state see if they can prosecute Verizon's upper management (at least those who managed the PA operations) in some fashion. There needs to be both civil and criminal penalties thrown at Verizon and their crooked management; that's the only way they will learn that being the bad corporate entity they choose to be can (and will) cost them big time.

When they promise something they have no intention of delivering, they should be made to hurt. Make Verizon bleed over this. Screw them as they screw others. Make an example out of them-- that's the only way to prevent this from happening in the future.
Cox cable: the hallmark questionable business practices and lousy cable service!