Report: Impact of 25 Years of Telco Deregulation

May 13, 2009

New Networks Institute Releases Report: (63 pages)
http://wwww.teletruth.org/docs/belldata.doc

25 Year Analysis of Key Financial Indictors for the Bell Companies - AT&T,
Verizon and Qwest

Bibliography and Free Ebook:
http://www.newnetworks.com/html/Bibliography.htm

Covers: Market consolidation, revenues, profits, executive compensation,
foreign investment and losses, wireline and wireless competition, Internet
competition, broadband deployment, construction expenditures, depreciation,
employees, cost of local, long distance, wireless service, 'access line'
manipulation, ‘very small business' wireless spectrum issues, and
‘vaporware' and corporate influence over policy.

The name of this report should be: "How 25 years of deregulation and massive
consolidation with almost no oversight harmed the US economy, America's
world standing, as well as America's telecom, broadband, Internet and cable
customers."

This report details specific key indicators outlining why America is 15th in
the world in broadband, why prices continue to rise, why there is little or
no competition for most services and why, on our current path, America will
not fix the issues that have harmed competition and choice. In short, we had
better learn from the last 25 years as the problems created are harming the
country's economic growth, our worldwide competitive edge, as well as phone
and broadband customers.

>From excessive executive pay and corporate profits, to a failure to invest
in critical infrastructure, the current incumbents, AT&T, Verizon and Qwest,
with the help of laizze faire regulators, are clearly more concerned about
their shareholder wealth then as the caretakers of America's essential
Public Switched Telephone and Broadband Infrastructure.

In short, the financial sector was not the only industry where deregulation
and a failure of oversight harmed the public good in exchange for corporate
greed.

Verizon and AT&T and Qwest: Some Data Bits. (As of December 2008)

Business
• Excessive Mergers have Eliminated Competition -- In 1984 through 1996,
there were 12 potential competitors. Legacy-AT&T and MCI were the 2 largest
competitors. By 2009 there are three companies that do not compete for
wireline service, long distance service and broadband.
• Revenues -- Grew 220% since 1984 to $235 billion, split mostly by AT&T and
Verizon.
• Executive Compensation -- From 2006 through 2008, Verizon's top 5
executives received $194 million dollars. In 2006, AT&T was bought by SBC
and the top 6 executives made $168 million.
• Profits and CASH -- In 2008, Verizon and AT&T had $74 billion in "cash",
known as "EBITDA", Earnings Before Interest, Taxes, Depreciation &
Amortization.
• Employees: Job cuts are over 70% since 1984, when compared to revenues for
wireline phone services.
• Tax Payments in 2008 -- Verizon only paid 3% of the total revenue on
income taxes, while AT&T only 5%.

Broadband and Spending
• Broadband Funding -- Collected over $300 billion for broadband yet failed
to upgrade the Public Switched Telephone Networks. The money is still being
collected today in current phone rates as excess profits.
• Broadband -- America lost almost $6.5 trillion dollars in GDP growth for
the failure to upgrade America.
• Construction -- Underspent $58-$161 billion dollars on capital
expenditures.
• Depreciation -- Took from $100 billion to $371 billion in excess tax write
offs (deprecation).
• Overseas -- Collectively lost over $40 billion dollars in overseas and
other investments.

Competition
• Harmed Competition -- Today, only 6% of the incumbent lines are
competitive, down 61% since 2004 as a direct consequence of bad FCC
policies.
• Harmed ISPs and Choice -- Over 7000 independent Internet Providers were
harmed, many were put out of business through bad deregulation or predatory
customer service.
• 6+ Revenue Streams with No Serious Competition -- The telcos split
broadband and Internet Provisioning (ISP) with the cablecos - a duopoly. The
cablecos are cable monopolies. Verizon and AT&T combined had 3 million
TV-upgraded homes. The phone companies are wireline monopolies, as well as
control the ancillary incomes from directory assistance, long distance and
other related businesses. Cable only has 15% of local service. Wireless only
households are 15% and AT&T and Verizon control over 80% of wireless service
and have the majority in their territories.
• Wireless and all of the other Bell businesses have been subsidized by
raising local rates with little oversight.
• Merger Failures --- Merger after merger the Bell companies lied to
regulators, claiming that they would be competing out of their own
territories if the mergers were approved. SBC was to be in 30 cities by
2002, Verizon 24 in the same time period. They never competed against each
other in any meaningful way.
• Mergers Harmed Broadband -- AT&T's latest merger required the company to
have 100% broadband capable of at least 200K in all states by 2007 and offer
$10 DSL to new users. Didn't happen. In 1999, AT&T had claimed they would
spend $6 billion on 'Project Pronto'. Stopped spending post merger. Almost
every AT&T state had plans for broadband that were cancelled after each
merger, including SNET, Pacific Bell and Ameritech.

Phone Services
• Competition failure harmed customers with less choice and higher prices.
• Local Service -- By 2008, Verizon, New York's local phone service
increased 524% since 1980.
• Long Distance -- In 2009, AT&T's basic long distance rate one minute call
cost $.42; higher than 1980.
• Long Distance -- A recent California phone bill study found that because
of plan fees and other charges, the average subscriber paid $.55 a minute.
• Wireless -- A recent California phone bill study found that because of
plan fees and other charges, the average subscriber paid $3.02 a minute.
High volume customers with 2 or more lines averaged $.29 a minute.
• Packages -- High volume customers save using packages, representing
approximately 1/3 of users. The majority of customers are usually on
expensive plans and are paying more.

Scandals
• Wireless -- Verizon & AT&T were able to bid with a ‘designated entity' on
spectrum as "very small businesses", saving $8 billion.
• Missing Equipment "Vaporware" -- In 1999, the FCC released an audit of the
Bell companies and found $18.6 billion in missing network equipment had been
added to rates. This was only ¼ of the required audit, thus $80 billion
dollars of missing equipment could have been added to phone rates and as tax
savings.
• FCC Data is Atrocious -- From the FCC data on broadband, phone bills or
data used in regulatory proceedings pertaining to small business
competition, the FCC's bad data has led to bad US policy. For example, the
FCC's small business impact studies discuss the current market harms to
competition using data from 1992, 1993, 1994, 1997 --- 8 to 17 years old.
Corporate Influence
• Corporate influence -- Through lobbying, campaign contributions, astroturf
groups, corporate-funded think tanks, co-opted consumer groups, and even the
corporations' own staff, deception and undue influence are now the working
agenda in the US on both the state and federal level.

Note: This report was prepared as part of presentation by New Networks
Institute at: "Has Divestiture Worked? A 25th Anniversary Assessment of the
Breakup of AT&T",

Sponsored by Open Infrastructure Alliance and the Internet Society, New York
Chapter. To see http://www.isoc-ny.org/?p=618

To view this release online.
http://www.newnetworks.com/attverizontwentyfifth.htm

Bruce Kushnick, Executive Director, New Networks Institute
bruce [at] newnetworks [dot] com
http://www.newnetworks.com

Teletruth
http://www.teletruth.org