Verizon NY Charged ‘Basic Rate’ Phone Customers Multiple Rate Increases for the Deployment of the FiOS, Title II, FTTP Broadband Networks

Verizon NY lost $11 billion over the last five years and paid no income taxes. Isn’t FIOS profitable?

Part II of a new series based on the new report: “It’s all Interconnected.

In Part I we outlined that Verizon’s FiOS services ride on a Title II, common carriage, telecommunications FTTP, (Fiber-to-the-Premises) network. FiOS products include cable TV, phone, Internet and broadband service. But “Title II” is only one part in solving Net Neutrality. Another question is — Are customers really defacto investors and are their rights to have ‘open networks’ being trampled on?


Starting in 2006, Verizon New York (VNY) was able to get the NY State Public Service Commission (NYPSC) to agree to multiple rate increases on business and residential POTS (“Plain Old Telephone Service”) customers, including low income families, as well as increased the prices for ‘ancillary services’, such as Caller ID, inside wiring and non-published numbers. The price of basic local service went up 84 percent while these other services increased 100-300 percent. This added over $500.00 per line to customers’ phone bills, about $4.4 billion in extra charges.

The NYPSC allowed these increases in reliance upon Verizon’s claims of ‘massive deployments of fiber optics’ and financial losses, among other reasons.

And Verizon New York is using a Title II classification for their FTTP networks as it gives them the use of the utility rights-of-way and the ability to charge POTS local phone customers for FiOS deployment.

Who’s Funding Verizon’s FiOS, Title II, FTTP Broadband?

Using the Verizon New York filings and NY Public Service Commission orders, etc, let’s go through what happened.

In June 2009, the NYPSC issued a press release stating the rate increase was being done due to a ‘massive deployment of fiber optics’.

“We are always concerned about the impacts on ratepayers of any rate increase, especially in times of economic stress,” said Commission Chairman Garry Brown. “Nevertheless, there are certain increases in Verizon’s costs that have to be recognized. This is especially important given the magnitude of the company’s capital investment program, including its massive deployment of fiber optics in New York. We encourage Verizon to make appropriate investments in New York, and these minor rate increases will allow those investments to continue.” (Emphasis added).

We tracked these rate increases and found that they started in 2006. In granting the 2008 rate increase, the NYPSC said that one of reasons was because of the ‘magnitude of the company’s capital investments’ for fiber optics.

“This is especially important given the magnitude of the company’s capital investment program, including its massive deployment of fiber…” (Emphasis added).

Prices Increased 84 percent since 2006.

When tracking the monies, we found:

  • Based on actual New York City customer phone bills, since 2006 the price of residential ‘dial tone’ service (one line item on the bill) went up 84 percent, while other services, such as inside wire maintenance, went up 132 percent.
  • Based on Verizon New York’s information about the number of POTS access lines in service from 2006 to 2013, price increases approved by the NYPSC allowed VNY to collect an estimated $2.4 billion extra for the ‘dialtone’ line. We estimate that between $1.4 to $2.0 billion more in additional charges were added for optional or ancillary services, such as Caller ID, inside wiring and non-published numbers. Including estimated taxes, the total added charges since 2006 amount approximately $4.4 billion.
  • On average, POTS customers paid about $500.00 in excess charges per line.

Verizon New York also revealed that raising the price of POTS service would force customers to buy bundles of Verizon’s other services.

“Moreover, this price change will encourage the migration of customers towards higher-value service bundles, consistent with the trend toward bundled service offerings in the market as a whole.”

Financial Losses

Then we have the losses. In the 2009 request for a rate increase, Verizon New York’s filing quoted the State that had paraphrased Verizon’s statements about their losses.

“There seems to be little question that the company is in need of financial relief; Verizon [New York] reported an overall intrastate return of a negative 4.89 percent in 2006 and its reported intrastate return on common equity was a negative 73.6 percent. i3 For 2007, Verizon reported an overall intrastate return of negative 6.24% and an intrastate return on common equity of negative 46.0 percent.”

In fact, Verizon lost $11 billion dollars over the last 5 years, with an ‘income tax benefit’ of $5 billion that was used by Corporate to lower their tax liability. This whopping amount — about $2.2 billion annually, was surprising as Verizon Communications overall annual report for wireline services showed no losses in any of these years. I’ll get back to that.

But the bottom line is that Verizon New York’s financials showed that the company paid no income tax over the last five years.

Unfortunately, tying these losses to POTS service costs is questionable as the price of local service should have been continually decreasing.

  • There is supposed to be competition that lowers the price.
  • Most of the copper networks have already been fully depreciated (written off).
  • POTS is based on the copper networks and they are not being upgraded.
  • The construction budgets were moved to pay for FIOS.
  • There have been multiple staff reductions and much of the union employees serving these networks were either moved to other products, like FiOS, or laid off.
  • The company no longer advertises the product so those costs are all gone.

And while the number of POTS lines has been in steady decline, there is no accounting of the total, actual copper-based lines still in service. (There are a host of other copper-based lines, like DSL, or special access, that are not part of the accounting of access lines.) And ironically, the losses appear to be coming from Verizon’s largest competitor –Verizon, as FiOS directly competes (or is being substituted for) the copper-based lines. And, Verizon Wireless is also another major competitor to the wired services.

Losses in Verizon’s Other States

Verizon New York wasn’t the only Verizon company with losses. In our previous report on five of Verizon’s state-based companies (2012) — New York, Pennsylvania, New Jersey Rhode Island and Massachusetts — all were all losing money in 2009 and 2010, which was the last year that the SEC-state-based reports were available from Verizon.

From 2009-2010, Verizon’s state-based SEC 4th quarter reports revealed $5.4 billion in losses with an income tax benefit of $1.96 billion. While Verizon New York had the largest losses with $2.2 billion in just 2010, in the state of New Jersey, Verizon claimed to have lost $786 million in 2009-2010 and received an income tax benefit of $321 million. These losses appear to be common throughout the Verizon territories as in just 2 years, 2009-2010 New England Telephone (Massachusetts & Rhode Island) claimed to have lost $1.2 billion and had a tax benefit of $477 million while Pennsylvania claimed $202 million in losses and a tax benefit of $62 million.


(NOTE: Massachusetts and Rhode Island are combined because they are part of “New England Telephone” which was part of the original regional Bell Company, NYNEX.)

And based on the data from Verizon New York, we assume all of these companies are still showing losses, even though their financial information is no longer publicly available.

Verizon Communications’ Overall Wireline Business Showed No Losses.

But here’s the real conundrum. In our current report we examined Verizon Communications, Inc, the parent company’s overall wireline profits and found that in every year the “Mass Market” wireline services were profitable. The details of Verizon Communications Annual Report for 2011 (covering also 2009 and 2010) showed no loss of revenues and even profits for the wireline ‘Mass Market’, while other categories of services, such as Global Wholesale, had losses. (Global Wholesale, from 2009-2011, lost $1.56 billion.)


Verizon’s wireline services for local service and FiOS services are referred to as “Mass Markets”.

“Mass Markets” Mass Markets operations provide local exchange (basic service and end-user access) and long distance (including regional toll) voice services, broadband services (including high-speed Internet, FiOS Internet and FiOS Video) to residential and small business subscribers.”

How can some of Verizon’s largest states have had massive losses, but at the same time, Verizon Communications wireline services, which includes Verizon New York, showed no losses?

Here is a clue to this. The next exhibit shows that the “switched access lines”, i.e., the utility POTS services, have declined while ‘broadband lines’ (sometimes called “broadband connections”) increased. Verizon apparently makes a distinction as the “broadband lines” are not part of the accounting of lines given to the public. These “broadband lines” include DSL or the FiOS brand of services from Internet, cable TV or broadband services can also be bundled with phone service.


Reading the details of the financial reports by year we see that the ‘local exchange revenues’, which include the ‘switched access lines’ are losing money but the FiOS services, using the fiber optic networks, are profitable. This is from the Verizon Communications 2011 Annual report:

“2010 Compared to 2009 — The increase in Mass Markets revenue during 2010 compared to 2009 was primarily driven by the expansion of consumer and small business FiOS services (Voice, Internet and Video), which are typically sold in bundles, partially offset by the decline of local exchange revenues principally as a result of a decline in switched access lines.”

Connecting the Dots

If POTS customers were charged for the ‘massive deployment of fiber optics’ and if the FTTP is Title II, are the revenues from the FiOS services paying any part of the FTTP, Title II networks? And are the losses being caused by POTs customers or by the expenses to deploy FiOS?

And we mentioned low income families in the opening; our next article will discuss this issue in more detail.

Part III — Did Verizon Short Change “Upstate” New York, and are POTS Customers, Especially Low Income Families, Paying for Fiber Optic Services They Will Never Get?

Americans’ Car Ownership, Driving In Steep Decline

The ’57 Chevy was still a year away when the launch of the interstate highway system kicked U.S. car culture into high gear. But six decades later, changing habits and attitudes suggest America’s romance with the road may be fading.

After rising almost continuously since World War II, driving by U.S. households has declined nearly 10 percent since 2004, with a start before the Great Recession suggesting economics is not the only cause. “There’s something more fundamental going on,” says Michael Sivak of the University of Michigan Transportation Research Institute. The average American household now owns fewer than two cars, returning to the levels of the early 1990s.

More teens and 20-somethings are waiting to get a license. Less than 70 percent of 19-year-olds now have one, down from 87 percent two decades ago.

“I wonder if they’ve decided that there’s another, better way to be free and to be mobile,” says Cotten Seiler, author of “Republic of Drivers: A Cultural History of Automobility in America.”

Those changes — whether its car trips replaced by shopping online or traffic jams that have turned drives into a chore — pose complicated questions and choices.

TRYING ALTERNATIVES: Each day, about 3,500 people bike the Midtown Greenway, a freight rail bed converted to cycle highway in Minneapolis, where two-wheel commuting has doubled since 2000. It’s still a small percentage, but more residents are testing the idea of leaving cars behind.

A second light rail line opens in June. Street corners sprout racks of blue-and-green shared bikes. About 45 percent of those who work downtown commute by means other than a car, mostly by express bus. That syncs with figures showing Americans took a record 10.7 billion trips on mass transit last year, up 37 percent since 1995.

“There’s a lot of people who want the less-driving lifestyle, definitely,” says Sam Newberg, an urban planning consultant and transportation blogger.

They include Kimani Beard, 40, who used to drive for a package express company. Now he’s a graphic and apparel designer who walks or bikes to a coffee shop a few days a week, with its Wi-Fi providing an instant office.

“I don’t want to drive anywhere,” he says. “I’ve spent my time behind the wheel, but I think I’ve done enough.”

Meanwhile, some are rethinking the paradigm of vehicle ownership.

In the suburbs just north of Chicago, Eugene Dunn and Justin Sakofs live four miles apart, but met only because Dunn’s 2005 Pontiac broke down.

Dunn, 43 and a math tutor, takes a train to work. But getting to his second job, refereeing youth basketball on weekends, required a car he didn’t have.

Luckily, Sakofs, the director of a Jewish day school, had a Nissan he didn’t need from sundown Friday to sundown Saturday, when his Sabbath observance precludes driving. They found each other through RelayRides, whose app pairs individual car owners with neighbors looking to rent.

“Right now, I just need (a car) to get back and forth and make money,” Dunn said.

TESTING THE BONDS: Car culture is about an emotional attachment that can be hard to measure.

A good place to start is Carlson’s Drive-In in Michigan City, Indiana, where a car hop arrives at the window before you turn off the ignition.

“It definitely takes you back to an older time,” says Barry Oliver, recalling teen nights driving the strip and stopping here.

Places like Carlson’s were destinations for Americans embracing driving as recreation. As recently as the 1990s, Indiana had nearly 60 vintage drive-ins. Today just five or six are left. Drive-in movie theaters, which numbered 4,300 nationally in 1957, have dwindled to just 350.

Where does that leave car culture?

“Gear heads live here,” says Todd Davis, a Lansing, Michigan native visiting the R.E. Olds Transportation Museum from Orlando. Away from Michigan, “it’s not like that.”

But Davis’ cousin, Sol Jaffee, isn’t convinced.

“Kids will always be interested in cars! I mean, cars are America, don’t you think?”

But at Wisconsin’s Oshkosh North High School, enrollment in driver’s education, no longer required for graduation or subsidized by the state, has declined 40 percent.

Like other states, Wisconsin eliminated funding for driver’s ed, raising the price of in-school programs. Today’s young people often rely on parents for rides, says driver’s ed teacher Scott Morrison. And then there’s Facebook and other social media. While most students still look forward to the freedom conferred by a license, a small but self-aware contingent says it can wait.

“I’ve never really needed” to drive, says senior Ashwinraj Karthikeyan. “It’s almost like a rite of passage for people to drive, but I know offhand probably about 15 or 20 people who don’t have their license.”

THE FUTURE: In 1939, General Motors captivated World’s Fair crowds with a futuristic vision of technology linking highways and cars. But in 2014, Debby Bezzina will tell you that future is fast approaching.

Bezzina, of Michigan’s Transportation Research Institute, has just begun to explain the technology inside her 12-seat van when a bend in Baxter Road interrupts, setting off a staccato beep that warns the vehicle to slow down. For nearly two years, 2,800 vehicle owners here have been participating in this federally financed bid to connect vehicles with their surroundings so they can join drivers in decision-making.

Meanwhile, on the institute’s second floor, a Nissan Versa wired to let drivers navigate a simulated cityscape will soon be reprogrammed to make it almost entirely self-driving.

There are bound to be complications as people turn over some control to their cars, says the institute’s director, Peter Sweatman. But imagine, he says, summoning a driverless car you might not even own, being picked up and dropped off at curbside, and watching it pull away.

Phil Mickelson Says He’s Cooperating With FBI In Insider Trading Investigation

DUBLIN, Ohio (AP) — Hall of Fame golfer Phil Mickelson confirmed that FBI agents investigating insider trading approached him this week at the Memorial Tournament. The five-time major champion said Saturday he has done “absolutely nothing wrong.”

A federal official briefed on the investigation told The Associated Press the FBI and Securities and Exchange Commission are analyzing trades Mickelson and Las Vegas gambler Billy Walters made involving Clorox at the same time activist investor Carl Icahn was attempting to take over the company. When Icahn’s intent became public, the stock price jumped. The official was unauthorized to speak about the investigation and spoke to the AP on condition of anonymity. Reports of the investigation appeared in several newspapers, including the Wall Street Journal.

Smiling as he stood before a room packed with reporters and cameras, Mickelson said the case had not been a distraction until FBI agents approached him after his opening round Thursday.

He said it would not affect his preparations for the U.S. Open in two weeks, the only major he lacks for the career Grand Slam.

“It’s not going to change the way I carry myself,” Mickelson said after an even-par 72 left him far behind the leaders. “Honestly, I’ve done nothing wrong. I’m not going to walk around any other way.”

The federal official told the AP that Mickelson and Walters placed their trades about the same time in 2011. Federal investigators are looking into whether Icahn shared information of his takeover attempt of Clorox with Walters, and whether Walters passed that information to Mickelson.

The New York offices of the U.S. Attorney and the FBI declined to comment.

The newspaper reports said federal officials also were examining trades by Mickelson and Walters involving Dean Foods Co. in 2012.

After a brief interview, Mickelson stepped outside and signed autographs for about 20 minutes, like it was any other day at a tournament. Fans were supportive as ever on the golf course, and Mickelson gave away so many golf balls to children and his caddie asked a tour official to retrieve more balls from his locker when they reached the turn.

Mickelson wouldn’t discuss details about his relationship with Walters, a multimillionaire who owns several golf courses and auto dealerships. He wouldn’t talk about stock tips he received, but reiterated that he did nothing wrong.

“And that’s why I’ve been fully cooperating with the FBI agents, and I’m happy to do in the future, too, until this gets resolved,” he said.

When asked whether Walters advised him to invest in Clorox or Dean Foods, Mickelson matter-of-factly replied to a Wall Street Journal reporter, “You should know. You wrote the article.”

Icahn, 78, is one of Wall Street’s most successful corporate raiders, famous for buying stock in underperforming companies, pressuring them to reform and selling out for a fat profit. In recent years, his targets have included Apple Inc., eBay and Dell Inc. His efforts have made him one of America’s richest people: Forbes magazine puts his net worth at more than $20 billion, making him the 18th-wealthiest American.

In the 1980s, he pioneered so-called greenmail raids in which financiers threatened companies with hostile takeovers unless they were paid a premium to go away.

Walters is a legendary figure in sports betting circles, widely feared by sports book operators as one of the few people who can consistently win. He’s bet millions on Super Bowls alone, and told “60 Minutes” in a 2011 profile that he has never had a losing year. An early user of computer data, Walters was one of the few bettors whose opinion was so respected that he could move point spreads if it was known what side he was betting on.

Walters and a group of bettors dubbed The Computer Group were indicted in the mid-1980s for running what prosecutors said was a bookmaking operation, but were acquitted at trial. Walters was also indicted on money laundering charges in 1998 and had $2.8 million in cash confiscated from a safe deposit box, but the charges were later dismissed and the money returned.

Walters was also a high stakes gambler on the golf course, regularly playing celebrities or PGA Tour pros for cash. He told Golf Digest that he once lost a $2 million bet and once made a 40-foot putt worth $400,000. Walters teamed up with touring pro partner Fredrik Jacobson to win the AT&T Pebble Beach National Pro-Am by 10 strokes in 2008 while playing as an 11 handicap.

Politically connected in Las Vegas, Walters is also known for his philanthropy, particularly toward Opportunity Village, which trains developmentally disabled adults.

Mickelson, 43, was inducted into the World Golf Hall of Fame in 2011. He goes to the U.S. Open next month with a chance to become only the sixth golfer to capture all four major championships. He has not won since the British Open last summer.

Mickelson has long had a reputation to gamble, though he has said he scaled back his habit after his son, Evan, was born in 2003. The most publicized payoff was when Mickelson and friends won $560,000 on a preseason bet (28-1 odds) that the Baltimore Ravens would win the 2001 Super Bowl.

He has a long history of playing money games during the practice rounds. He occasionally gets a group of players and caddies together for dinner and small wagering during the NBA and NHL playoffs, and prominent fights.

A year ago, Mickelson was criticized for public comments that tax increases in California kept him from being part of the San Diego Padres’ new ownership group and might cause him to leave his native state. He said his federal and state taxes amount to over 60 percent.


Associated Press writer Tom Hays in New York, Associated Press writers Paul Wiseman and Eric Tucker in Washington, AP Sports Writer Tim Dahlberg in Las Vegas and AP Sports Writer Rusty Miller in Columbus, Ohio, contributed to this report.

The Hidden Cash Millionaire Is Causing ‘Pandemonium’ In Los Angeles

The mysterious millionaire who hid cash in random places in San Francisco is now causing chaos at a Los Angeles area beach after surreptitiously “donating” his money there, too.

On Saturday, the purported middle-aged real-estate developer announced on his Twitter account, @HiddenCash, that he stashed 36 “Angry Bird” toys filled with cash around Hermosa Beach, Calif., an oceanfront city just south of Los Angeles, for anyone to find.

The anonymous benefactor, who gained notoriety earlier this month after hiding money throughout the Bay Area, moved on to Burbank, Calif. on Friday and egged people on to go on a scavenger hunt for money there.

The frenzy continues into the weekend. This was the scene at Hermosa Beach a little over a half an hour after Saturday’s clue was tweeted.

One person on Twitter described the scene as “pandemonium.”

Some of the toy birds reportedly contained as much as $180.

Los Angelenos who struck out on Saturday shouldn’t lose hope. The person behind @HiddenCash hasn’t run out of cash yet.