6 ms·

$300 Billion Broadband Scandal (2009) [pdf]

64 points by kushnick 12y ago

In the previous thread there was a discussion to give the details of how the phone companies were able to charge customers excess profits and get tax perks that were supposed to be used to upgrade the networks. This book -- link attached --- has a description of how we calculated the numbers -- though it was written in 2004 - the 20th anniversary of the break up of AT&T.We have a new book coming out where we update most of the stats, but essentially, the phone companies were able to claim -- en mass --that they were going to replace the copper wires with fiber starting in 1991, and from 1993-to about 2005 they did nothing (with some exceptions) but they were able to get state laws changed to do funding of the upgrades. No state ever went back and examined the commitment and got refunds—so all rate increases are based on the original ‘commitments’—and changes in the law.In 2005, after they closed the networks to direct competition they started to do new upgrades-- "FiOS-Verizon" and AT&T, which simply used the old copper wires, added some remote terminals and called it U-Verse. Yet, Verizon and AT&T were able to charge basic POTS customers -- phone customers in most states for upgrades-- again. -- even if they will never get it.Our new report on Verizon New York shows that the 'affiliate companies, such as Verizon Online or Verizon Wireless, are able to use the networks and get expenses paid for by regular phone companies-- even though Verizon had announced no more upgrades http://newnetworks.com/verizonfiostitle2/ The cringley numbers are also our stats.The one thing to keep in mind is that we've been tracking this since 1991-- and so every year the numbers are going to increase.... thus differing amounts based on the date.

tantalor 12y ago
What does "allow the Bells to enter long distance more than upgrade America's networks" mean? I can't parse that jargon. Edit: "Bell telephone companies, largely to serve the growing market for data transmission and Internet access, are trying to enter the long-distance telephone market denied to them in the order that broke up AT&T in the 1980’s." http://praxagora.com/andyo/wr/bell_application.html http://praxagora.com/andyo/wr/bell_application.html Edit: I still don't get it. Why was it denied?
- deleted 12y ago
  [deleted]
- mbreese 12y ago
  It was part of the anti-trust case that broke up AT&T in the 80s and broke up local phone service into the baby-Bells. They were restricted from entering the market for long distance phone service as part of the deal. The author is arguing that the primary purpose of the Telecom Act of 1996 wasn't to upgrade data networks, but rather deregulate them so that they could enter the long distance market. Given that AT&T and MCI ended up getting bought by two of the old baby-bells, this argument might have some merit.
  - tantalor 12y ago
    > restricted from entering the market for long distance phone service Sure but what does that mean? And why?
    - throw_away 12y ago
      It used to be that phone calls were tiered, in that you got free "local" access, but it cost more to call out of your immediate area. The baby bells handled local access, but you used a different company to get your per minute long distance calls to work. There were ads on tv all the time trying to get you to switch your long distance provider.
    - kcorbitt 12y ago
      One of the reasons that Bell was broken up in the first place was because they wouldn't allow competitors with cheaper long-haul rates for long distance calls to patch into their interconnects and thus offer their services to Bell customers. It sounds like as a result of the settlement that broke up the monopoly the baby bells had some sort of restriction on providing cross-country or inter-regional service. The author is contending that the 1996 legislation, lobbied for by the telecom industry, was more about removing that restriction than actually motivating them to provide better service.
- EEGuy 12y ago
rahimnathwani 12y ago
kushnick: the text you included with the submission is not displayed because HN displays the text of a submission only if there is no URL. kushnick's text is reproduced below: In the previous thread there was a discussion to give the details of how the phone companies were able to charge customers excess profits and get tax perks that were supposed to be used to upgrade the networks. This book -- link attached --- has a description of how we calculated the numbers -- though it was written in 2004 - the 20th anniversary of the break up of AT&T.We have a new book coming out where we update most of the stats, but essentially, the phone companies were able to claim -- en mass --that they were going to replace the copper wires with fiber starting in 1991, and from 1993-to about 2005 they did nothing (with some exceptions) but they were able to get state laws changed to do funding of the upgrades. No state ever went back and examined the commitment and got refunds—so all rate increases are based on the original ‘commitments’—and changes in the law.In 2005, after they closed the networks to direct competition they started to do new upgrades-- "FiOS-Verizon" and AT&T, which simply used the old copper wires, added some remote terminals and called it U-Verse. Yet, Verizon and AT&T were able to charge basic POTS customers -- phone customers in most states for upgrades-- again. -- even if they will never get it.Our new report on Verizon New York shows that the 'affiliate companies, such as Verizon Online or Verizon Wireless, are able to use the networks and get expenses paid for by regular phone companies-- even though Verizon had announced no more upgrades http://newnetworks.com/verizonfiostitle2/ http://newnetworks.com/verizonfiostitle2/ The cringley numbers are also our stats.The one thing to keep in mind is that we've been tracking this since 1991-- and so every year the numbers are going to increase.... thus differing amounts based on the date.
deleted 12y ago
[deleted]
kushnick 12y ago
thanks. AT&T was broken up in 1984 and the company became a 'long distance company', while the local phone companies were spun off to create seven baby bells -- there was no internet then, and 'long distance' was a monopoly. In 1984 MCI wanted in, so that's one of the major reasons AT&T was broken up. The court realized that they companies should be restricted from these other markets, like long distance because they could vertically integrate-- ie, combine local, long distance, broadband, and control the wire. Long distance -- while that market has been diminishing year by year, in 1996, the incumbents wanted to get into this market, so they created the "Telecom Act of 1996" to trade off-- opening the networks in exchange for entering long distance. If you look at any triple play they still have a long distance component-- about $12 bucks.. not counting taxes and while many might go voip - the average customer just wants the thing to work. if you want the full history search for the "Unauthorized Bio of the Baby Bells" -- also a free download, with Foreword by Dr. Robert Metcalfe. (1998) The opening in $300 billion was taken from this first book.
tzs 12y ago
rayiner raised some serious questions about the accuracy of this a month ago [1]. [1] https://news.ycombinator.com/item?id=7709556 https://news.ycombinator.com/item?id=7709556
- rayiner 12y ago
  What I don't understand is why a group of people so against regulation is so willing to embrace a number calculated on the premise that an entire industry should have 1970's style utility regulations, where the government decides based on political factors how much service should cost. There is of course the natural monopoly concern. But if you want to wonder into antitrust economics, natural monopoly isn't the only market failure that warrants regulation. Antitrust concerns can arise based in network effects, the kind which led to the Microsoft monopoly, and the kind that sustain companies like Facebook and EBay today. Should we set regulated rates for what EBay can charge? (In the 1970's when telecom regulation was in force, the idea of the government setting rates for auction services of EBay's scale wouldn't be unthinkable). Or do we acknowledge that we've been trying to get rid of that sort of ham-fisted regime, and that maybe telecoms should profit from the enormous boom in demand for their product over the last two decades.
  - jbooth 12y ago
    There is of course the natural monopoly concern. Pointing out that it's not bad enough in facebook's case to warrant regulation does not obviate the fact that it's clearly very, very bad with the telecoms, who for some crazy-ass reason aren't classified as providing telecommunication services.
  - chimeracoder 12y ago
    > telecoms should profit from the enormous boom in demand for their product over the last two decades. They haven't benefited from the boom in demand as much as they have benefited from the contraction in supply[0], combined with the fact that Internet access is essentially a utility. If it were simply a boom in demand, that could be matched by a boom in supply and customers would be better off today than they were 20 years ago. Except we're worse off - if you had broadband 15 years ago, chances are you have fewer options today in your choice of provider, you're paying more, and you're getting approximately the same amount of service[1]. [0] There was far more choice in ISP in the late 90s than there is today for most consumers. [1] The number of people with access to broadband has increased, but that's partly due to the insanely low threshold for "broadband" speeds, as well as a function of time.

64 points by kushnick 12y ago

tantalor 12y ago

What does "allow the Bells to enter long distance more than upgrade America's networks" mean? I can't parse that jargon. Edit: "Bell telephone companies, largely to serve the growing market for data transmission and Internet access, are trying to enter the long-distance telephone market denied to them in the order that broke up AT&T in the 1980’s." http://praxagora.com/andyo/wr/bell_application.html http://praxagora.com/andyo/wr/bell_application.html Edit: I still don't get it. Why was it denied?

deleted 12y ago
[deleted]
mbreese 12y ago
It was part of the anti-trust case that broke up AT&T in the 80s and broke up local phone service into the baby-Bells. They were restricted from entering the market for long distance phone service as part of the deal. The author is arguing that the primary purpose of the Telecom Act of 1996 wasn't to upgrade data networks, but rather deregulate them so that they could enter the long distance market. Given that AT&T and MCI ended up getting bought by two of the old baby-bells, this argument might have some merit.
- tantalor 12y ago
  > restricted from entering the market for long distance phone service Sure but what does that mean? And why?
  - throw_away 12y ago
    It used to be that phone calls were tiered, in that you got free "local" access, but it cost more to call out of your immediate area. The baby bells handled local access, but you used a different company to get your per minute long distance calls to work. There were ads on tv all the time trying to get you to switch your long distance provider.
  - kcorbitt 12y ago
    One of the reasons that Bell was broken up in the first place was because they wouldn't allow competitors with cheaper long-haul rates for long distance calls to patch into their interconnects and thus offer their services to Bell customers. It sounds like as a result of the settlement that broke up the monopoly the baby bells had some sort of restriction on providing cross-country or inter-regional service. The author is contending that the 1996 legislation, lobbied for by the telecom industry, was more about removing that restriction than actually motivating them to provide better service.
EEGuy 12y ago

rahimnathwani 12y ago

kushnick: the text you included with the submission is not displayed because HN displays the text of a submission only if there is no URL. kushnick's text is reproduced below: In the previous thread there was a discussion to give the details of how the phone companies were able to charge customers excess profits and get tax perks that were supposed to be used to upgrade the networks. This book -- link attached --- has a description of how we calculated the numbers -- though it was written in 2004 - the 20th anniversary of the break up of AT&T.We have a new book coming out where we update most of the stats, but essentially, the phone companies were able to claim -- en mass --that they were going to replace the copper wires with fiber starting in 1991, and from 1993-to about 2005 they did nothing (with some exceptions) but they were able to get state laws changed to do funding of the upgrades. No state ever went back and examined the commitment and got refunds—so all rate increases are based on the original ‘commitments’—and changes in the law.In 2005, after they closed the networks to direct competition they started to do new upgrades-- "FiOS-Verizon" and AT&T, which simply used the old copper wires, added some remote terminals and called it U-Verse. Yet, Verizon and AT&T were able to charge basic POTS customers -- phone customers in most states for upgrades-- again. -- even if they will never get it.Our new report on Verizon New York shows that the 'affiliate companies, such as Verizon Online or Verizon Wireless, are able to use the networks and get expenses paid for by regular phone companies-- even though Verizon had announced no more upgrades http://newnetworks.com/verizonfiostitle2/ http://newnetworks.com/verizonfiostitle2/ The cringley numbers are also our stats.The one thing to keep in mind is that we've been tracking this since 1991-- and so every year the numbers are going to increase.... thus differing amounts based on the date.

deleted 12y ago

[deleted]

kushnick 12y ago

thanks. AT&T was broken up in 1984 and the company became a 'long distance company', while the local phone companies were spun off to create seven baby bells -- there was no internet then, and 'long distance' was a monopoly. In 1984 MCI wanted in, so that's one of the major reasons AT&T was broken up. The court realized that they companies should be restricted from these other markets, like long distance because they could vertically integrate-- ie, combine local, long distance, broadband, and control the wire. Long distance -- while that market has been diminishing year by year, in 1996, the incumbents wanted to get into this market, so they created the "Telecom Act of 1996" to trade off-- opening the networks in exchange for entering long distance. If you look at any triple play they still have a long distance component-- about $12 bucks.. not counting taxes and while many might go voip - the average customer just wants the thing to work. if you want the full history search for the "Unauthorized Bio of the Baby Bells" -- also a free download, with Foreword by Dr. Robert Metcalfe. (1998) The opening in $300 billion was taken from this first book.

tzs 12y ago

rayiner raised some serious questions about the accuracy of this a month ago [1]. [1] https://news.ycombinator.com/item?id=7709556 https://news.ycombinator.com/item?id=7709556

rayiner 12y ago
What I don't understand is why a group of people so against regulation is so willing to embrace a number calculated on the premise that an entire industry should have 1970's style utility regulations, where the government decides based on political factors how much service should cost. There is of course the natural monopoly concern. But if you want to wonder into antitrust economics, natural monopoly isn't the only market failure that warrants regulation. Antitrust concerns can arise based in network effects, the kind which led to the Microsoft monopoly, and the kind that sustain companies like Facebook and EBay today. Should we set regulated rates for what EBay can charge? (In the 1970's when telecom regulation was in force, the idea of the government setting rates for auction services of EBay's scale wouldn't be unthinkable). Or do we acknowledge that we've been trying to get rid of that sort of ham-fisted regime, and that maybe telecoms should profit from the enormous boom in demand for their product over the last two decades.
- jbooth 12y ago
  There is of course the natural monopoly concern. Pointing out that it's not bad enough in facebook's case to warrant regulation does not obviate the fact that it's clearly very, very bad with the telecoms, who for some crazy-ass reason aren't classified as providing telecommunication services.
- chimeracoder 12y ago
  > telecoms should profit from the enormous boom in demand for their product over the last two decades. They haven't benefited from the boom in demand as much as they have benefited from the contraction in supply[0], combined with the fact that Internet access is essentially a utility. If it were simply a boom in demand, that could be matched by a boom in supply and customers would be better off today than they were 20 years ago. Except we're worse off - if you had broadband 15 years ago, chances are you have fewer options today in your choice of provider, you're paying more, and you're getting approximately the same amount of service[1]. [0] There was far more choice in ISP in the late 90s than there is today for most consumers. [1] The number of people with access to broadband has increased, but that's partly due to the insanely low threshold for "broadband" speeds, as well as a function of time.