Well, then we should have seen $150 billion in delivered broadband, since we have given $300 billion in tax subsidies to broadband providers, in exchange for broadband development.
We have not seen $150 billion in delivered broadband value.
Ergo, this argument is wrong. I do blame Big Cable.
Do you have a primary source for the $300 billion tax subsidy claim (which would be an indictment of the telcos if true). Something besides a link to a link to a link to something Bruce Kushnick has claimed?
I've read his reports, and while there seems to be a kernel of truth, the numbers are not, IMO, substantiated. He gets big numbers by claiming the telcos are making undeserved profits, which even if true, is not a subsidy.
This is a constantly repeated urban legend. The telcos never received anywhere near $300 billion in tax subsidies. It comes up constantly in threads like this, and the people claiming it can never back it up with actual data or proof of any sort, just vague statements.
The article you linked to in your other comment talks about spectrum being given to CBS and other TV broadcasters. Are you saying that CBS agreed to launch a broadband service in exchange for that spectrum?
It was part of the greater Telecom Act of 1996.. The broadcasters were gifted the spectrum largely because it was assumed that we'd have universal broadband by the time of the HD rollout. They're not causally linked, but the spectrum being swallowed by the broadcasters is a side-affect of the same nonsense.
A copy/paste from my other comment:
The more direct subsidies come from many other places. A good place to start is the Universal Service Fund[2]. Every landline bill, every cable bill, every mobile phone bill has a line item for "Universal Service" on it. These funds are collected from consumers then 'disbursed' to companies for them to provide service extensions. This has been happening since 1997. They've disbursed over $80B back to telecom companies as part of the telecom act, the GAO isn't too impressed with how it was being spent.[3] Besides the direct subsidies, they got favorable depreciation schedules,
The oddly interesting Robert Cringely did a special for PBS on the mess, which is probably the origin of the $200B number[4]:
Over the decade from 1994-2004 the major telephone companies profited
from higher phone rates paid by all of us, accelerated depreciation
on their networks, and direct tax credits an average of $2,000 per
subscriber for which the companies delivered precisely nothing in terms
of service to customers. That's $200 billion with nothing to be shown for it.
The Urban legend speaks – I wrote 3 books on this topic, which outline, in detail how New Networks generated the numbers.
In the 1990s, all of the phone companies in the US applied for and received alternative regulations which was based on their commitment to replace the copper utility wire, known as the PSTN, Public Switched Telephone Networks, with a fiber optic wire. This was based on then Al Gore’s call for America to be completely upgraded by 2010, called the information superhighway.
And the state laws were changed to give the companies billions of dollars per state and this was done by multiple financial incentives—where the phone companies’ services were no longer examined for profits, even though there was no competition at the time – so ‘call waiting’ cost less than a penny, and the companies charged $4.00 – and this included almost all services, such as non-published numbers. Their profift jumped from 12-14% to 35-40%; they had major increases in dividends, they took massive tax write-offs for the networks, among other things.
And the companies lied about their deployments but continued to keep the excess profits. – So, all rate increases were tied to these financial perks, where the state never went back and changed the laws or got refunds when the companies failed to deploy.
While states, like New Jersey, where they collected about $15 billion, were supposed to be upgraded by 2010 with a fiber optic service capable of 45 Mbps in both directions.
http://newnetworks.com/verizonnjbroadbandresources/
And it continues today with more rate increases. Our new report shows that regular POTS, plain old telephone service, customers were charged about $4 billion in New York State for ‘massive deployment of fiber optics’, even though the majority will never get any upgraded service.
I wrote 3 books on this. The first is about 1980-1998, with Foreword by Dr. Bob Metcalfe, second was in 2005 and the third book is coming out next month.
Book 2: http://www.newnetworks.com/broadbandscandals.htm
And we filed in multiples states over this since 1999, we have separate reports about the revenues and profits that’s been published.
If you got specific questions after you read the books, -contact me. I’ve been a telecom analyst for 32 years—and used to work for those who are now called Verizon, AT&T and Centurylink as a senior analyst at multiple telecom consulting firms. bruce@newnetworks.com
Do you know of a convenient table showing the numbers you use to get those profit figures? I'm mostly interested in a clear understanding of what you are saying, and it is easy to end up talking about different things when discussing corporate earnings.
The profit margin for Verizon today is less than 12%:
short answer..one table, only giving the 'corporate earnings' doesn't tell the story-- but I'll think about a few to post.. highlights.
First, the link is to 2014 financials; the tracking to charge for broadband by changing state laws started in 1993. Also, the numbers in Verizon's overall business reports are a garbage pail of revenues, etc. as the company has over 365 different investments and companies in over 150 countries.
On the earnings, my books use a standard EBITDA, earnings before income tax and depreciation and amoritization, and Return on Equity, among other indicators.
And we used the SEC-filed state-based annual reports, like a report for Verizon New York, but that data stopped in 2010; the FCC data stopped in 2007.
Worse, if you read our new report about Verizon New York you'll see that the numbers can't be ascertained easily anymore because of all of the cross-subsidies for all of the other businesses.
In fact, a previous report we wrote last year about Verizon NY is now part of FOIA challenge in court. It was used by Common Cause, Consumer Union, CWA in a proceeding calling for audits.
The overcharging is also different than just the 'corporate earnings'-- for example, In new york, Verizon got multiple rate increases on regular phone customers for 'massive deployment of fiber optics'; the additions come to about $4. billion from 2006-2013.
It's not legal to charge regular copper-based phone customers for a cable service, for example, or have expenses for the construction of the wireless cell tower wires.
However, at the same time, the company claims to have lost $11 billion in just New York for the last 5 years... the losses caused by the various affiliates (like Verizon Wireless is an affiliate of Verizon NY).. adding expenses.
You can easily get to $200B from the spectrum value alone.
In 2008, as part of the digital transition, 52 MHz in the 700-band were auctioned off for $19B. The telcos were gifted 295mhz of spectrum for the digital expansion when they agreed to invest in broadband. Even if it's only half as valuable as that 52 MHz allotment, simple math indicates a value of over $400B.
The article you linked to does not say anything about broadcasters agreeing to invest in broadband.
and I have no idea what TV broadcasters and fiberoptic broadband have to do with eachother... they're entirely different industries. Comcast and Time Warner don't use TV airways--that's why they call it "cable".
Apologies if my earlier post was unclear, I deleted a few sections in favor of brevity but it was left confusing.
The spectrum giveaway to broadcasters was predicated on 'Universal Service' being supplied by telecom companies.[1] That digital TV spectrum would be immensely valuable for wireless communication today, so it should absolutely be considered a subsidy as a result of the Telecom Act.
The more direct subsidies come from many other places. A good place to start is the Universal Service Fund[2]. Every landline bill, every cable bill, every mobile phone bill has a line item for "Universal Service" on it. These funds are collected from consumers then 'disbursed' to companies for them to provide service extensions. This has been happening since 1997. They've disbursed over $80B back to telecom companies as part of the telecom act, the GAO isn't too impressed with how it was being spent.[3] Besides the direct subsidies, they got favorable depreciation schedules, and tax relief.
The oddly interesting Robert Cringely did a special for PBS on the mess, which is probably the origin of the $200B number[4]:
Over the decade from 1994-2004 the major telephone companies profited
from higher phone rates paid by all of us, accelerated depreciation
on their networks, and direct tax credits an average of $2,000 per
subscriber for which the companies delivered precisely nothing in terms
of service to customers. That's $200 billion with nothing to be shown for it.
Apologies if my earlier post was unclear, I deleted a few sections in favor of brevity but it was left confusing.
The spectrum giveaway to broadcasters was predicated on 'Universal Service' being supplied by telecom companies.[1] That digital TV spectrum would be immensely valuable for wireless communication today, so it should absolutely be considered a subsidy as a result of the Telecom Act.
The more direct subsidies come from many other places. A good place to start is the Universal Service Fund[2]. Every landline bill, every cable bill, every mobile phone bill has a line item for "Universal Service" on it. These funds are collected from consumers then 'disbursed' to companies for them to provide service extensions. This has been happening since 1997. They've disbursed over $80B back to telecom companies as part of the telecom act, the GAO isn't too impressed with how it was being spent.[3] Besides the direct subsidies, they got favorable depreciation schedules, and tax relief.
The oddly interesting Robert Cringely did a special for PBS on the mess, which is probably the origin of the $200B number[4]:
Over the decade from 1994-2004 the major telephone companies profited
from higher phone rates paid by all of us, accelerated depreciation
on their networks, and direct tax credits an average of $2,000 per
subscriber for which the companies delivered precisely nothing in terms
of service to customers. That's $200 billion with nothing to be shown for it.
Well, then we should have seen $150 billion in delivered broadband, since we have given $300 billion in tax subsidies to broadband providers, in exchange for broadband development.
We have not seen $150 billion in delivered broadband value.
Ergo, this argument is wrong. I do blame Big Cable.