Net Neutrality? Verizon’s Fiber Optic Wires have always been Classified as?Title II and Part of the State Telecommunications Utility.

A short question: The opening quote is from Verizon New Jersey's FiOS Cable TV Franchise Agreement, granted by the NJ Board of Public Utilities, and renewed in 2014. How is it possible that the fiber optic, broadband wires are classified as Title II, and part of the utility?

It states that:

• This is just an upgrade of the existing telecommunications (state utility) network.
• Verizon New Jersey is the state telecommunications public utility,
• Verizon’s plan is to build a fiber optic network.
• This uses a fiber optic wire that goes directly to the home or business, known in the industry as “Fiber To The Premises”, FTTP,
• IMPORTANT: This fiber optic wire is being put in as a “Title II”, common carrier telecommunications network that is based on the Communications Act of 1934.

?

• It is broadband---big broadband, over a glass-based fiber optic wire, being put in as “Title II”.

Net Neutrality? Something is wrong! This is not “Title I”; this is NOT an “information service”, which is the basis of all of the commotion about ‘Net Neutrality. And this is an upgrade of a state telecommunications public state utility!

Institutional Amnesia. You probably didn’t know that there are still state telecommunications utilities or that the fiber in the Verizon networks were put in as “Title II” and thus part of this state telecommunications utility.

Verizon used Title II as the investment mechanism to build out their fiber optic networks and charge local phone customers for network upgrades.

Title II is the telecommunications service classification that,? among other requirements, states that providers shall charge rates that are “fair and reasonable”.? The providers went before the state utility commissions, multiple times, to get approval to raise rates so that they could use those new funds for the construction budgets to upgrade the networks to fiber.? Thus. that was the way that Verizon was able to put the construction expenses into the state telecommunications utility and have local phone customers pay for it via rate increases.

Local telephone service is a ‘regulated’, “intra-state”, service-- i.e., part of the state telecommunications utility. It would be a cross-subsidy if the local, regulated, phone customers were charged for an information or wireless service. Cross-subsidies? are not allowable under various telecommunications regulations.

NOTE It is estimated that Verizon NY has over one million or more copper lines still in service. Verizon NY’s information about lines in service leaves out whole categories of service using the copper wired networks, which can include DSL, or some business services, or the fiber optic based data services, such as “special access”, sometimes called “backhaul” service.? Over the last few years, Verizon NY started redacting the information all together from their annual financial report to the NY Public Service Commission.

Verizon New York was Granted Rate Increases on Local Service for “Massive Deployment of Fiber Optics”, starting in 2005.

We will be specific and detail how the rates were increased for a fiber optic build out. In June 2009, the NY Public Service Commission (NYPSC)?granted Verizon NY the third rate increase?for residential POTS, Plain Old Telephone Service, since 2005. The NYPSC press release explained that the rate increase was due to “massive deployment of fiber optics” -- FiOS.

Statement by NY Public Service Commission.

“We are always concerned about the impacts on ratepayers of any rate increase, especially in times of economic stress…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.”

Let Us Recap.

Verizon New York, which is the largest telecommunications public utility in NY state, used Title II as the classification for its fiber optic deployments, including FiOS. ?And, Verizon NY was able to use ‘Title II” as the investment mechanism by having the state raise local rates, as well as ancillary services, to pay for the upgrade of its state telecommunications utility with a “massive deployment of fiber optics”. This contradicts virtually all arguments that Title II harms investment and it also is in direct contrast to lots of statements made by pundits and regulators about Net Neutrality and Title II, which we will feature in the next few articles.

Verizon Used Title II to Roll out FiOS, its Fiber-to-the-Premises, FTTP Service.

Just to make sure that you didn’t think this happened only in the states mentioned, the next quotes are BLACK AND WHITE (we added the red). These excerpts are from the?Verizon D.C. franchise agreement?of 2007. At the top, Verizon claimed that in 2007 it had 12 states with Fiber-to-the-Premises, FTTP, covering 835 municipal jurisdictions. Then, notice that Verizon actually calls the construction “Title II FTTP”. And it states that it is an extension of the existing utility networks, and that it is a common carrier network and part of the Communications Act of 1934, the original law guaranteeing universal phone service.

Punchline: “Title Shopping“ of Title II Should be Investigated.

In 2014, New Networks filed Comments at the FCC, as part of the Net Neutrality proceedings. We uncovered that the phone companies were able to tell different stories to different regulators, the press, the public and investors, and it appears that the companies told the investors and the FCC Title II harmed investment, when at the same time, as discussed, Title II has been used to fund the deployment of FiOS by including it as part of the state utility.

Coined by Professor Eli Noam of Columbia’s CITI program, the definition:

“Title Shopping is the use of different regulatory classifications for the same product or service in different local, state and federal regulatory or legal proceedings. It is designed to maximize the ‘regulatory’ benefits that would not be available if only one classification was applied.”

There are a myriad of overlapping issues. For example, an the access line can change classification based on the type of service it is handling. VOIP service on a wire will turn that wire into an "information" service, Title I, but the impacts go on and on as there are regulatory, tax and competitive use issues and advantages or harms that follow.

This brings up the question about Dark fiber and should a municipality be able to use it. I.e.; If there is a fiber optic wire that is not in use,-- “Dark”, ?and if the funding to lay it was paid for via local rates via the state utility, and it was done as Title II, and it is now fully written off

We will connect the dots over the next few articles:

PART 2: A Partial Glimpse of the Fiber Optic Financial Trail.

PART 3: The Fiber Optic Budget Wireless Bait and Switch

#TitleII #fiberoptic #NetNeutrality #digitaldivide #TitleI #broadband #internet #FCC