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.
In 2008, 52MHz of adjacent spectrum was auctioned for $19B, so do the math on what 300MHz would be worth.
I'm going to need some evidence to believe that.
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.
[2] - http://en.wikipedia.org/wiki/Universal_Service_Fund
[3] - http://www.gao.gov/modules/ereport/handler.php?1=1&path=/ere...
[4] - http://www.pbs.org/cringely/pulpit/2007/pulpit_20070810_0026...
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.
http://newnetworks.com/verizonfiostitle2/
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
The profit margin for Verizon today is less than 12%:
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.
Or is that a 'buy the book' sort of thing?
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.
LA Times article from the era making the same point (valuing the spectrum at $70B at the time) -- http://articles.latimes.com/1998/dec/07/local/me-51464
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".
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.
[2] - http://en.wikipedia.org/wiki/Universal_Service_Fund
[3] - http://www.gao.gov/modules/ereport/handler.php?1=1&path=/ere...
[4] - http://www.pbs.org/cringely/pulpit/2007/pulpit_20070810_0026...
edit: read the article he linked before you downvote me... I'm right, he posted somethign that had nothing to do with the discussion...
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.
[2] - http://en.wikipedia.org/wiki/Universal_Service_Fund
[3] - http://www.gao.gov/modules/ereport/handler.php?1=1&path=/ere...
[4] - http://www.pbs.org/cringely/pulpit/2007/pulpit_20070810_0026...