
FCC urged to investigate Verizon’s statements on utility rules - jconley
http://arstechnica.com/business/2015/01/fcc-urged-to-investigate-verizons-two-faced-statements-on-utility-rules/
======
DannyBee
So, a lot of folks are missing the point, which is that the investigation asks
for perjury charges.

Verizon swears up and down in FCC filings it is not a title II common carrier
_FOR THE FIBER LINES_ (it always has been for PSTN). But in it's statements to
state regulatory commissions and it's franchise agreement with
states/municipalities state specifically that it is upgrading/building THE
FIBER LINES under Title II.

This is because Title II allows them to do so without getting further
permission/process from the state.

You can't tell the FCC one thing, and state regulatory agencies the other.

The rest of this filing should have been removed. Press statements/etc are
pretty much irrelevant, and they should stick to the simple facts. Anything
else will just be fodder for arguing over when it doesn't matter.

For those wondering about perjury, there are a number of federal perjury
statutes (the most general that i'm aware of being 18 USC 1621,
[http://www.law.cornell.edu/uscode/text/18/1621](http://www.law.cornell.edu/uscode/text/18/1621)).

If you tell the federal government something, and it includes the words "I
declare under penalty of perjury, ....", and you are knowingly misrepresenting
something in that document, you have committed a felony.

(In the case of tax returns, it's at least two felonies, since there is also a
specific tax return perjury statute, and in either case it doesn't matter
whether you owe the IRS money or not)

~~~
rhino369
But Verizon definitely provides a Title II service over those fiber lines,
telephone service. It is required to. It doesn't really advertise it, but you
can buy it. In Fios areas the entire telephone system is replaced by a single
FTTH. Verizon is a common carrier, Title II, telephone provider.

Currently its ISP service is not a Title II service.

The FCC common carrier rules are about services not the underlying network
technology.

The statements aren't even contradictory, let alone so obviously contradictory
that they were knowingly lying.

~~~
DannyBee
"But Verizon definitely provides a Title II service over those fiber lines,
telephone service. It is required to. It doesn't really advertise it, but you
can buy it. In Fios areas the entire telephone system is replaced by a single
FTTH. Verizon is a common carrier, Title II, telephone provider."

Sure, but it then claims to use Title II to do upgrades to it's ISP service
capacity on those licenses, which is ... contradictory.

If the agreements, etc, said "we will perform necessary upgrades to telephone
service over fiber lines under Title II, all others will be under Title X",
that would be different. But they don't. The claim it all falls under Title
II.

So they are definitely contradictory.

------
xnull1guest
The Net Neutrality 'debate' is an example of politics I'm beginning to see all
the time in the United States. A real problem is presented along with a single
problematic solution from which voters, with as much or little influence they
actually have, and their representatives are asked to select the 'lesser of
two evils'.

The real discussion is not whether the country's big media duopoly should be
forced to conduct their business model like a public utility or not, but
whether a duopoly is healthy at all. If communication infrastructure requires
few large investors and centralized ownership it is a natural monopoly and
should be managed as such (and in fact resold on a market of small service
providers a la the UK's internet and American power). If it does not, let
anti-trust law hammers fall. Comcast and Time Warner consistently collect the
very worst consumer reviews (Comcast was the worst of all corporations for
year running). They are both larger and more predatory than Ma Bell was
leading up to 1984.

~~~
rayiner
You have to put the telecom debate in the proper historical context. It's not
some sui generis issue. It's part of a broader debate about how much
involvement government should have in regulating services. There was a time
when the government told trucking companies how much they could charge for a
shipment. The overwhelming trend since then has been to deregulate industries
if possible, or replace heavy-weight regulations (rate setting, etc) with
lighter-weight ones. Full-on Title II represents 1970's-style regulation that
neither party wants to go back to, which is why the debate is between no
action at all or "Title II with heavy forebearance."

People talk about regulating telecom like the power company, but the trend
over the last 30 years has been to deregulate the power companies as much as
possible.

NB: The UK example is a poor one. British Telecom was originally a government
entity, and was "privatized" under agreements that made clear that they would
be subject to constraints. In contrast, since 1996, the telecoms have invested
tens of billions of dollars in capital under the premise that the industry was
deregulated.

~~~
slantedview
Regulation, in this and many cases, is a way for the government to ensure that
companies don't use the privileges granted to them by the government (such
rights to lay cable lines) as an anti-competitive tool - which they naturally
will try to do. The privileges have to come with restraints - else bad things
happen.

~~~
rayiner
The premise of your contention is false. Websites like Ars have perpetuated
this misconception that the cable companies have exclusive rights to put wires
in the ground.[1] But I have not been able to validate this idea with my
research. Every franchise agreement I've read makes clear that it isn't
exclusive.

Which is exactly how Congress chose to deal with the possibility of companies
abusing exclusive rights to put wires down on public rights of way--by making
it illegal for municipalities to give them exclusive privileges.

[1] E.g. [http://arstechnica.com/information-
technology/2013/08/snubbe...](http://arstechnica.com/information-
technology/2013/08/snubbed-by-google-fiber-mad-at-comcast-baltimore-seeks-its-
own-fiber). Ars talks about how Baltimore's franchise agreement with Comcast
"effectively makes the company the exclusive cable television provider in the
city." (Quoting the Baltimore Business Journal). If you actually read the 2004
franchise agreement, it clearly says it's not:
[http://www.baltimoregrassrootsmedia.org/PublicAccessTV/Franc...](http://www.baltimoregrassrootsmedia.org/PublicAccessTV/FranchiseAgreement/FranchiseAgreement.html)
("City hereby grants to Franchisee, subject to the terms and conditions of
this Agreement and the Franchise grant ordinance, _a non-exclusive Franchise_
with the right, privilege and authority to construct, operate, repair,
maintain, and reconstruct a Cable System on, over, under upon, across, and
along the Public Ways within the Franchise Area in accordance with the City's
specifications and this Agreement.")

~~~
belorn
In your research, how many other companies has built a Cable System in
Baltimore? If its non-exclusive only on paper, and in practice a monopoly,
what actually effects does it have on quality, service, and price?

~~~
rayiner
You're changing the goal posts. We were talking about companies using
"privileges granted to them by the government (such rights to lay cable lines)
as an anti-competitive tool." Comcast is a near-monopoly here in Baltimore
(though, I'm one of the lucky ones who has FiOS that Verizon managed to sneak
in when the city wasn't looking), but it's not because they abused their
privileges.

Ars makes it seem like Comcast bamboozled the city into signing an exclusive
franchise agreement, but in reality nobody else wants to build here for the
same reason Google didn't want to build here. Large parts of the city are a
burned-out husk, a quarter of the population is below the poverty line, and
it's unacceptable in the eyes of the city for anyone to just build-out to the
parts of the city that might be able to afford fiber service.

~~~
belorn
My goal posts is not to vilify Comcast as a company in bed with government,
but to find an explanation to why there is a near-monopoly. If a company has
poor service, bad quality, and high prices, there should be competitors that
are willing to earn revenue by competing with better service, better quality
and lower prices. This is basic theory of the market, and as it goes, only
government intervention allows for a monopoly in that environment.

So what is it. No person willing to fund a company in Baltimore? No investors
willing to spend the _same_ price as Comcast, or less if a smart founder can
out-perform the past production cost?

If you can explain the monopoly without invoking government intervention, I am
all ears.

~~~
rayiner
First, you said the issue was: "companies ... use[ing] the privileges granted
to them by the government (such rights to lay cable lines) as an anti-
competitive tool." Now you're saying the issue is: "explain[ing] the monopoly
without invoking government intervention." Do you not see how those are two
different contentions?

The Ars Technica narrative is that we need to regulate the telecom companies
because they abuse their privileges to keep out competitors. But what's
keeping out competition is, e.g., Baltimore forcing companies to build fiber
service to the 25% of the city that's below the poverty line as a pre-
condition for building anywhere in the city. It's Bill de Blasio turning FiOS
deployment into a civil rights issue.[1] It's not clear to me how these
requirements are the result of telecom companies abusing their privileges. And
it's not clear to me how the solution to a problem created by over-regulation
is imposing even more regulation.

I'm not a anti-regulation type. If a telecom company is digging under roads in
a way that's hazerdous to public safety or the environment, that should be
regulated. But this is an issue that turns mainstream liberals into Nader-ites
espousing thoroughly discredited regimes like Title II. For god's sake
Kushnick thinks the government should be in the business of telling companies
_what prices they can charge._ As someone too young to remember the 1970's, it
comes across as insanity.

[1] [http://www.speedmatters.org/blog/archive/new-york-mayor-
bill...](http://www.speedmatters.org/blog/archive/new-york-mayor-bill-de-
blasio-rags-on-fios) ("If you can’t afford to feed your family by the end of
the month, you can't afford $75 a month for the broadband service. And that's
what we have to fix.")

~~~
fnordfnordfnord
>But what's keeping out competition is, e.g., Baltimore forcing companies to
build fiber service to the 25% of the city that's below the poverty line as a
pre-condition for building anywhere in the city.

Why is that pre-condition supposedly preventing companies from building
infrastructure? It's not as though the City has also demanded that they
operate at it a loss, merely that they build out service to the entire city as
opposed to building service out to the choicest bits. And, isn't that exactly
what a city government _ought_ to do?

~~~
rayiner
See the math here: [http://bits.blogs.nytimes.com/2008/08/19/a-bear-speaks-
why-v...](http://bits.blogs.nytimes.com/2008/08/19/a-bear-speaks-why-verizons-
pricey-fios-bet-wont-pay-off).

It costs you $1,000 just to pass a house, even if they don't subscribe, and
you have to maintain that infrastructure too. If 40% of passed houses
subscribe (Verizon has been struggling to hit that number for years), you pay
$2,500 per house that does subscribe. This is the "uptake ratio" and a fiber
provider lives and dies by that number.

Build-out requirements tank your uptake ratio, because you spend a bunch of
money passing houses where people can't afford to subscribe. It increases how
much you need to make on all the other houses to recoup your costs.

But your other subscribers don't give a shit about your costs. They're willing
to pay, e.g., $100/month for triple play, and they don't care if your per-
house cost is $2,000 or $4,000. If you raise your prices to recoup your costs,
they'll just stick with the incumbent, again tanking your uptake ratio.

A small ISP may be willing to ask for a $10 million bank loan to wire up a
yuppie neighborhood like Fells Point, with the prospect of seeing how it goes
and building out from there. Nobody will ask for a $250 million bank loan to
wire up the whole city of Baltimore.

~~~
belorn
I do not take it that Comcast is charity, so either they made a horrible deal
and lost significant amount of investment, or the narrative is lacking some
details. I personally doubt we will find a $250 million investment in Comcasts
books regarding the city of Baltimore however, as I find there is simpler
narratives that would match in how cities like Baltimore gets fiber into
peoples homes. It would also explain why some cities has has semi-monopolies
and others don't.

A city that wants fiber has the obvious choice to subsidize the investment of
a large ISP, say Comcast, thus severely reducing the investment cost. The
permission to build is of course non-exclusive, but the subsidizing is not.
Once built, the ISP gained a government granted advantage, and thus a monopoly
is born.

Alternative, a city can create a government bid for administrating and
building a city fiber network. On paper, this mean that the city owns the
fiber, and the ISP that builds it has to sell access on equal ground with
competitors. The ISP do still get an advantage in operation knowledge, some
payment for doing the administration, and first mover advantage. This tend to
result in healthy, if somewhat constrained, competition.

Ars Technica narrative talk about how the cable division paid little or no
construction costs. That is very different aspect than if the permission to
construct, operate, repair, maintain, and reconstruct a Cable System is non-
exclusive.

~~~
rayiner
> A city that wants fiber has the obvious choice to subsidize the investment
> of a large ISP, say Comcast, thus severely reducing the investment cost. The
> permission to build is of course non-exclusive, but the subsidizing is not.
> Once built, the ISP gained a government granted advantage, and thus a
> monopoly is born.

Cities don't subsidize cable companies. Indeed, they extract concessions from
them. E.g. every time Comcast re-ups the contract in Wilmington, DE, where I
used to live, they have to kick in a random couple of million to government
programs.

> Ars Technica narrative talk about how the cable division paid little or no
> construction costs.

Who cares what division within the ISP paid the construction costs? At the end
of the day, the money came from the company's paying customers, not the
municipalities.

~~~
belorn
If that is true, we will see Comcast try to sell off its losses in the coming
years, and if that fails, go bankrupt. No company, no matter size, can keep a
failing investment indefinitely.

------
evanpw
It seems like the issue is that regulated utilities are not really private
companies, though we like to pretend they are. The segment of Verizon that
provides voice service is effectively a government agency, and if they make
money, the rest of the company is not allowed to use it for something else.
I'm a pretty free-market guy, but this seems worse than having phone service
just be publicly run. This is the worst of both worlds.

------
datashovel
Abraham Lincoln was not just a great president, but could probably be
considered a psychic in many circles:

“I see in the near future a crisis approaching that unnerves me and causes me
to tremble for the safety of my country. . . . corporations have been
enthroned and an era of corruption in high places will follow, and the money
power of the country will endeavor to prolong its reign by working upon the
prejudices of the people until all wealth is aggregated in a few hands and the
Republic is destroyed.”

~~~
NoPiece
It is a fake quote:

[http://www.npr.org/templates/story/story.php?storyId=1251690...](http://www.npr.org/templates/story/story.php?storyId=125169095)

[http://www.snopes.com/quotes/lincoln.asp](http://www.snopes.com/quotes/lincoln.asp)

~~~
datashovel
On the other hand, here is contrary reference:
[http://www.ratical.org/corporations/Lincoln.html](http://www.ratical.org/corporations/Lincoln.html)

Not interested really in figuring out the real source. There's enough
substance to the quote that I think it stands on its own.

~~~
NoPiece
The Ratical source has been debunked, see the snopes link.

 _Pedigree for this quote is often asserted by pointing to the 1950 Lincoln
Encyclopedia, compiled by Archer H. Shaw, which "authenticates" the quote by
citing a purported 1864 letter from Lincoln to one Col. William F. Elkins
found in Emanuel Hertz's 1931 book, Abraham Lincoln: A New Portrait. However,
this source is fraudulent: the Elkins letter reproduced by Hertz was a
forgery, and Shaw, a sloppy compiler, added the bogus letter to his
encyclopedia (along with several other pieces of Lincoln apocrypha) without
verifying its authenticity. As historian Merrill Peterson, author of Lincoln
in American Memory, noted of Shaw's work: Read more at
[http://www.snopes.com/quotes/lincoln.asp#TmQ2MSs5eXjUah3P.99...](http://www.snopes.com/quotes/lincoln.asp#TmQ2MSs5eXjUah3P.99*)

~~~
datashovel
I guess I have no stake in it one way or another, but it's an interesting
problem nonetheless...

It's honestly too bad none of us have real time to put into digging up and
verifying this stuff on our own. The snopes source says "was a forgery...added
the bogus letter to his encyclopedia (along with several other pieces of
Lincoln apocrypha) without verifying its authenticity" but doesn't give
reference to how this is known, or by whom it was confirmed to be a forgery.

The only other point made is that given the author's (Merrill Peterson)
knowledge: "Nonetheless, Peterson concluded, even Lincoln's wartime experience
and pro-labor credentials don't justify the attribution of the 'money power'
warning to him".

And the other reference 'W.J. Ghent' is an article in a newspaper where he's
giving what appears to be an opinion. According to his wikipedia page, he was
not a historian:
[http://en.wikipedia.org/wiki/W._J._Ghent](http://en.wikipedia.org/wiki/W._J._Ghent)

It's hard to read the article given that it's scanned copy of the newspaper
from 1905, but here it is: [http://goo.gl/Qfsqry](http://goo.gl/Qfsqry)

So we have an argument that the letter was fraudulent without references to
who asserts this, and we have the author's own authoritative "spin" as
justification that the letter wasn't real.

I'm no historian, but if the "forgery" claim is based on the fact that they
can't pin the handwriting to Lincoln's own, is it out of the question that the
letter was transcribed?

On the other hand we have a reference which claims to contain a letter written
by Lincoln, the original of which may or may not still be in existence. Who
knows how far down the rabbit hole we could go just to figure this out.
Instead perhaps it's best to leave it to the internet to argue the point
further if they decide to.

------
adwf
I mentioned the same thing the other day [1]. I don't quite get why telecoms
providers who are running ISP services over their lines are not already
regulated by the same standard. A phone call is an analogue audio message sent
over phone lines - guaranteed transit. An early modem was also an analogue
audio message sent over phone lines - guaranteed transit. Nowadays, we
simplify a few phases and have pure digital IP telephony and internet access -
not so guaranteed. But it's still the same thing...

[1]
[https://news.ycombinator.com/item?id=8857793](https://news.ycombinator.com/item?id=8857793)

------
higherpurpose
They should do the same with AT&T:

[https://www.techdirt.com/blog/netneutrality/articles/2015010...](https://www.techdirt.com/blog/netneutrality/articles/20150108/10422129635/att-
plays-legal-pattycake-with-ftcfcc-jurisdiction-common-carrier-law-just-so-it-
can-pretend-limited-data-service-is-unlimited.shtml)

------
superbaconman
I for one think we should put this off for another 5 years minimum. I've been
seeing lots of little guys pop up around my area, and I know network equipment
is about to get a lot better. I'd rather pay more for my internet than fuck up
an entire tech sector.

~~~
zanny
They need to at least stop ISPs from manipulating smaller state agencies and
local authorities into keeping competition out. There needs to be some blanket
policy opening up fiber laying to anyone capable and willing, in addition to
the dissolution of (I'd prefer all) spectrum ownership to enable more wireless
deployment and adoption.

------
forrestthewoods
But those aren't contradictory statements at all? Title II let Verizon charge
more for phone service which was used to fund broadband. Verizon also says
that Title II for broadband would harm additional investment for broadband.
Both statements can easily be true. (emphasis _can_ ) There's nothing "red-
handed" about this.

~~~
jconley
The alleged red-handed part is that Verizon used Title II to build out fiber
lines under the guise it was improving its telephone service, but was actually
using the fiber for broadband services which it does not want regulated under
Title II. Sounds like the proverbial "having your cake and eating it too".

------
rayiner
Unsurprisingly, it's Bruce Kushnick that's doing the urging:
[https://www.google.com/search?q=kushnick&sourceid=ie7&rls=co...](https://www.google.com/search?q=kushnick&sourceid=ie7&rls=com.microsoft:en-
US:IE-Address&ie=&oe=&rlz=&gws_rd=ssl#safe=off&rls=com.microsoft:en-US:IE-
Address&q=kushnick+rayiner+site:news.ycombinator.com). [1]

The irony of the article is that it's kind of right in a way that really
undermines the whole premise of the argument. Suppose that Verizon did use
"Title II money" (i.e. revenues from rate increases on wireline subscribers)
to fund FiOS deployment. That may very well not be kosher according to the
rules, but that just goes to show that the rules are ridiculous. Should we
launch a federal investigation to see if Apple subsidized iPhone development
by increasing Mac prices?

I like Ars, but they've been beating an anti-telco trumpet recently that's
totally detached from reality. Ars paints telecom service as this cash cow,
but the fact of the matter is that nobody in the U.S. is making money on fiber
on deployments of any substantial scale. It's not clear that Verizon is even
earning a positive return on the thousands of dollars per household it has
invested in FiOS in many markets:
[http://www.businessweek.com/magazine/content/11_13/b42210461...](http://www.businessweek.com/magazine/content/11_13/b4221046109606.htm)
(In the PNW: "He estimates the project will end up having cost Verizon $4,000
per connected home. Moffett calculates the present value of acquired
subscribers at $3,200 each. That would give FiOS a negative $800 net present
value per customer.")

Wall Street wants Verizon to get out of the wireline business entirely, and
it's precisely because there's little return on the billions in required
investments, coupled with the regulatory swamp that is Title II.

[1] Kushnick's whole shtick is that there's some rate that's okay for a
telecom carrier to charge, and any price increase beyond that rate is a
"subsidy" from the public to the carrier. Hence, Verizon raising rates on its
_own customers_ to pay for its fiber network is some sort of questionable act.
Applying Kushnick logic to another industry: if Apple raises prices on Macs
and uses that cash to bankroll iPhone development, well that's something that
requires a federal investigation.

~~~
unprepare
>Verizon raising rates on its own customers to pay for its fiber network is
some sort of questionable act.

No, his point is that using Title II status to legally enforce rate increases
under the guise of telephone upgrades and then using that money to invest in a
completely different business (cable and broadband) is a questionable act

And further, to take advantage of this status as Title II to increase capital
investment and then turn around and claim that Title II decreases capital
investment is glaringly hypocritical.

I do agree, however, that Ars is on an anti-telco hunt these days.

>Ars paints telecom service as this cash cow, but the fact of the matter is
that nobody in the U.S. is making money on fiber on deployments of any
substantial scale.

This is a really misleading sentence. I agree that fiber deployments arent a
big money generating enterprise, is any capital investment? They make money
off of subscribers, not capital investment and they certainly are raking in
plenty of cash doing so (over 120 billion revenue in 2013 for verizon)

edit: added the phrase 'questionable act'

~~~
tw04
Anti-telco hunt? They're on a pro-consumer hunt, and we should be thanking
them for it. If the incumbent's have their way we'll be stuck paying per MB
for _ALL_ data while the rest of the world laughs away.

~~~
rayiner
It was the last generation of "pro-consumer" types that got us into the
current mess to begin with. Because at the end of the day, Verizon and AT&T
may not like Title II, but they have the legal horsepower to deal with it.
It's the smaller potential competitors who can't deal with the extra taxes to
fund rural deployment, or having to build out to neighborhoods too poor to
subscribe to fiber service, or having to petition rate authorities to set
their prices.

~~~
warfangle
> smaller potential competitors who can't deal with

Ok, you've got my attention

> extra taxes to fund rural deployment

Well, no, the small guys don't have extra (federal) taxes imposed on them,
unless they're interstate.

"Every telecommunications carrier that provides interstate telecommunications
services shall contribute, on an equitable and nondiscriminatory basis, to the
specific, predictable, and sufficient mechanisms established by the Commission
to preserve and advance universal service." S.254(d)

On the other hand, even if they are interstate,

"The Commission may exempt a carrier or class of carriers from this
requirement if the carrier's telecommunications activities are limited to such
an extent that the level of such carrier's contribution to the preservation
and advancement of universal service would be de minimis." S.254(d) continued

They may, however, have extra (state) taxes imposed on them:

"Every telecommunications carrier that provides intrastate telecommunications
services shall contribute, on an equitable and nondiscriminatory basis, in a
manner determined by the State to the preservation and advancement of
universal service in that State." S.254(f)

But that same section limits what kind of additional regulations states can
impose:

"A State may adopt regulations to provide for additional definitions and
standards to preserve and advance universal service within that State only to
the extent that such regulations adopt additional specific, predictable, and
sufficient mechanisms to support such definitions or standards that do not
rely on or burden Federal universal service support mechanisms."

> having to build out to neighborhoods too poor to subscribe to fiber service

Well, yes.

That's kind of what the universal service fund is _for_.

> having to petition rate authorities to set their prices.

That's what that whole forebearance thing is about. Nobody wants to put that
kind of rate control on ISPs. (I'd be all for putting that kind of rate
control on backbone-tier ISPs, though)

~~~
rayiner
I don't get your point. Are you saying that small carriers should be exempt
from a tax big carriers have to pay? And that this solution is better than
just getting rid of the stupid tax in the first place?

> That's kind of what the universal service fund is _for_.

No, USF is mostly for rural areas. I'm talking about build-out requirements in
franchise agreements, which makes building in poor neighborhoods a
prerequisite for building anywhere in the city. We'd see a lot more small
fiber companies if they were allowed to operate only in expensive
neighborhoods where they could sell a premium service at a premium price.

~~~
warfangle
> I'm talking about build-out requirements in franchise agreements

Which section of Title II defines that?

~~~
rayiner
Who said it was in title II? I said it was the result of well-meaning "pro-
consumer" types who have created a thicket of requirements that makes going
into the telecom business highly undesirable.

See, e.g., Google's blanket rejection of such requirements as a pre-condition
for deploying Google Fiber.

