Bad FCC Data Results in Bad Laws -- Teletruth and NIA Claim Harm to Broadband, Competition and Customers

[David Farber <dave () farber net>]

Begin forwarded message:

From: Bruce Kushnick <bruce () newnetworks com>
Date: October 21, 2004 6:23:56 AM EDT
To: dave () farber net
Subject: Bad FCC Data Results in Bad Laws -- Teletruth and NIA Claim  
Harm to Broadband, Competition and Customers

TELETRUTH

FOR IMMEDIATE RELEASE --- October 21st, 2004

Bruce Kushnick, Teletruth,
718-238-7191 Bruce () teletruth org
Kate Lynch, National Internet Alliance, Bway.net
 212-982-9800, info () nationalinternetalliance net

To read the filings:
 http://www.teletruth.org/BadDataMakesBadLaws.html

Bad FCC Data Results in Bad Laws -- And Harm to Broadband, Competition  
and
Customers.

Teletruth and the National Internet Alliance (NIA) filed three Data  
Quality
Act challenges and a Regulatory Flexibility Act challenge at the FCC as  
part
of our Triennial Review comments.

These challenges claim that the FCC's data on broadband and competition  
is
so seriously flawed that it has given the American public a distorted  
view
of broadband deployment and has harmed competition, competitors,  
customers,
the economy, and the public interest. Worse, this flawed data is being  
used
to create flawed public policies and regulations.
Here are highlights of what we filed in the documents and why they are
important.

Claim 1) The FCC has harmed the entire Internet Service Provider (ISP)
market by supplying erroneous, ancient data about the industry, and has
eliminated them from the entire process of rulemaking. The FCC has  
violated
both the Regulatory Flexibility Act and the Data Quality Act. These  
actions
and others have caused an estimated 6000 ISPs to go out of business,  
and has
blocked these companies from competing in broadband, thus restricting  
choice
for customers and innovation for the country.

Claim 2) The FCC's broadband (section 706) reports have given a  
distorted
picture of fiber-optic deployment in the US and harmed the economy. It  
has
left out thousand upon thousands of documents that demonstrate the phone
companies had committed over a decade ago to fiber-optic based broadband
deployments to homes, as well as wiring schools and libraries over a  
decade
ago. None of the promised networks have been built, and the US lost $500
billion annually from these missing networks.

Claim 3) The FCC has ignored the role of customers as defacto investors  
in
these missing fiber-optic broadband networks. Teletruth estimates that  
$120
billion was collected for advanced networks by the Bell companies that
customers have yet to receive. Now the FCC is giving exclusive rights to
monopolies for these same customer-funded networks.

Claim 4) The FCC has not properly examined the actual cost of local  
phone
service in the US -- which is the basis for the rates charged to  
competitors
(UNE-p). We contend that the FCC has not examined "cross-subsidization"  
---
i.e.; where customers pay unjustified local phone rates which are  
funding
other phone company products, such as long distance, DSL and even  
wireless.
Also, with the major expenses, such as staff and construction being  
slashed,
why haven't local phone rates dropped?

Claim 5). Currently there are numerous new proposed rules, including the
Triennial Review, "unbundling" and raising competitor rates, cable
forbearance, removal of line sharing, etc. that harms customers and
competitors alike --- and all justified by erroneous data. In fact, the  
FCC
is failing to follow the basic tenets of the Telecommunications Act of
1996 --- to bring competition, not stifle it.

Commissioner Michael Copps said of the current Triennial Reviews'  
proposed
order in his dissent: "The current Commission is on track to butcher the
pro-competitive vision of the 1996 Act. And it is sticking consumers  
with
higher telephone rates and fewer choices. The people who pay America's  
phone
bills deserve better." We agree.

Bruce Kushnick, Chairman of Teletruth states: "The FCC's Powell-Bush  
legacy
will prove to be the destruction of competition in wireline phone and
broadband services, and having directly helped to create the economic
recession in the United states. It also has directly harmed every small
telecom provider, as well as their clients. And with the series of  
proposed
wrong-headed decisions pertaining to the Triennial Review, it will now
finalize the process by eliminating all but the monopolies who own the
wires."

"It is one of the main reasons America is now ranked 15th and falling  
in the
world for broadband. It is the reason there will be fewer choices for
broadband and phone competition. We believe that the FCC action --or  
lack
thereof -- helped cause the telecom crash that crippled the economy,"  
adds
Kushnick.

Kate Lynch, President of the National Internet Alliance, and CEO of
Bway.net, a NY based ISP states: "The FCC has never cared about Internet
Providers. The FCC claims that they do not regulate ISPs and that their
decisions only 'indirectly impact' us. However, putting 6000 companies  
out
of business has been this FCC's legacy. They have shut ISPs out of  
broadband
by blocking ISP access to cable services, they have gotten rid of line
sharing, which is one way ISPs can offer DSL through a competitor, they  
have
blocked ISPs from using Bell wholesale DSL by allowing predatory  
pricing,
and they haven't enforced the laws on the books. And now, these new  
rules
will block competitors from using customer-funded fiber-based networks.  
It's
a true slap in the face of competition."

Background and More Details about the Filings:

Since 1998, Teletruth and its members, including New Networks Institute,
have filed over 14 comments, petitions and complaints pertaining to the
Bells' failed fiber optic broadband deployment, the lack of competitive
enforcement of primary laws that impacted small telecom businesses,
including ISP and CLEC issues, not to mention, the harms the FCC's  
decisions
have had and continue to have on every phone and broadband customer in  
the
United States.
Teletruth is an independent, customer alliance and a member of the FCC
Consumer Advisory Committee. For more information contact, Bruce  
Kushnick,
Teletruth, 718-238-7191 Bruce () teletruth org or see:  
http://www.teletruth.org

For a Teletruth annotated bibliography, including links to our previous
filings and other documentation on broadband and ISP issues,
see:http://www.newnetworks.com/Collected%20Broadband%20Information.htm

National Internet Alliance is newly formed organization, specifically
created by Internet Providers and state organizations. NIA supports  
Internet
competition and consumer choice on all platforms and all manners of
transmission, whether cable, dsl, satellite, wireless or any other  
means of
data transmission. We support wholesale, retail, and facilities based
competition. For more information contact Kate Lynch, National Internet
Alliance, Bway.net, 212-982-9800, info () nationalinternetalliance net or  
see:
http://www.nationalinternetalliance.org

------------------------------------------------------------------------ 
----

More Details on the Individual Filings:

1) Data Quality Act: 8 Year-old Data and the Internet Service Provider
Market:
http://www.teletruth.org/docs/TeletruthNIAISPnumbersDataQualityAct.pdf

Imagine reading a newspaper that quoted data from 1997 as being "the  
most
current". Even a high-school journalist would get a failing grade.

In our 2002 Triennial Review comments, we pointed out to the FCC that  
using
data from 1997 was too old to be able to make any kind of rational  
decision
about the harm their laws would cause independent Internet Service
Providers. Other data from the Small Business Administration's Office of
Advocacy was available at the time, showing 7000 ISPs. The FCC ignored  
it.

However, in August 2004, the FCC's current Triennial Review has the same
data from 1997 -- now 8 years old. We believe the use of old and  
erroneous
data violates the Data Quality Act, under which data from government
agencies are required to be accurate and reliable. In the other filings  
we
show that the FCC has eliminated the ISPs from the history of broadband  
as
well as almost all rulemakings -- more unreliable and biased data  
resulting
in bad analysis and bad laws.
We're asking the FCC to answer:

How many Internet Service Providers were there from 1997 through 2004  
and
how many companies did the FCC's policies help to put out of business?

Why didn't the FCC change its analysis to update 8 year old data in its
Triennial Review and how has it impacted every law the FCC has written  
or
will consider?

2) Data Quality Act 2: Complaint About the FCC's Broadband (706) Report
Infrastructure Held Hostage. -- Customers as Defacto Investors.
http://www.teletruth.org/docs/TeletruthNIA706Dataqualityact.pdf

By the mid-1990s, in exchange for massive financial incentives known as
"alternate regulations" or "price caps", the Bell companies promised to
deploy fiber to homes and offices, schools and libraries. By 2000,  
virtually
half of the US should have been rewired with fiber optic services. For
example, by 2004, Verizon, Pennsylvania was supposed to have rewired  
half of
all urban, suburban and rural areas with services of 45mbps in both
directions. This state agreement extends through 2015. However by 2003,
customers in PA paid an estimated $4 billion dollars -- over $1,000  
dollars
a household, for services they never received.

And this same bait-and-switch was promulgated in the majority of  
states, yet
the FCC neglected to include information on any of these deployments in
their broadband reports, nor have they examined the customer as a  
defacto
investor for these network services.

The FCC, for political reasons, also redefined 'broadband' as 200kbps in
both directions, while a decade ago, the state alternate regulations  
called
for 45mbps or higher in both directions. This decision to not hold the  
phone
companies accountable to higher speeds and the fiber-optic deployments
helped to put US innovation, jobs and the economy on hold.

Bad Decision from Bad Data: Last week the FCC ruled that the same  
companies
that were responsible for the failed deployment will now receive  
exclusive
use of any new fiber-optic networks they deploy, as well as other perks.
They will also be allowed to raise wholesale rates and/or eliminate
competitor access. The result will be less competition for all  
services, and
therefore higher prices and less choice.

Regulatory Flexibility Act and Data Quality Act: Part of "Unbundling"
(Section 251) Comments. What Does Local Service Really Cost? No One  
Knows
But Prices Keep Rising.
http://www.teletruth.org/docs/TeletruthNIACommentspdf.pdf

Our comments to the FCC include the previous items mentioned as well as  
a
Regulatory Flexibility Act challenge for ISPs, and the following  
material.

Regulatory Flexibility Act Challenge: It is now clear that the entire
Internet Service Provider industry has been erased from the FCC's  
decision
making process, both in terms of missing or unusable data as well as a  
lack
of inclusion in policy making. The Regulatory Flexibility Act requires a
government agency to include and do outreach to small businesses, none  
of
which was done in any of the FCC's current proceedings. We are  
requesting
the FCC redo the Triennial Review and all data referring to ISPs.

Data Quality Issues Surrounding Unbundling: The Bells have continually  
cried
that they are "losing money" from competition and yet the data tells a
different tale.

*     The Bells' "access line equivalents" are rising, not falling, and  
the
FCC numbers on competition are inflated and doesn't match Bell Annual
Reports.
*    The Bells are now allowed to offer long distance and Internet  
services
and large percentage of funding from these services seems to come  
directly
from local rate payers through illegal cross-subsidization.
*    Major savings are accruing from cuts in new construction, which are
down 50% since 2000, while employees-per-line is down 65% since 1984.
Despite this, local prices keep rising, not falling.
*    The FCC never fully investigated their own Bell Continuing Property
Record audits. Only 1/4 of the audits were completed, yet they found $19
billion of 'missing' equipment. The cost of equipment is the starting  
point
for the justification of ALL phone rates. Therefore we can assume that  
all
phone rates are significantly inflated.
*    There has been no cost justification to support raises in various
non-service items such as the FCC Subscriber Line Charge, which despite
consumer confusion is actually direct revenue to the local phone  
companies,
not an FCC tax. It was raised from $3.50 to $6.50 without cost support  
and
the FCC has plans to raise this to $10.00, not counting tax -- again,  
with
no cost support.

Next Bad Decision: The FCC is now planning on raising rates to  
competitors
or eliminating some competition all together. This data shows that the  
FCC
hasn't done its homework nor has accurate data to support their  
conclusions.


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