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from: New Networks Teletruth

Teletruth News Analysis: June 13, 2006
Verizon's FiOS, AT&T's Lightspeed - The Rise of the Crippled Networks.

Dear Senate: Investigate this:

America is 16th in broadband and basing our Nation's future on inferior products that may never show up will be bad for our economic growth and technological edge. More importantly - We already paid over $200 billion in excess fees? What happened to the money and our promised fiber optic future?.

Last week the House of Representatives made a giant mistake and granted the Bell phone companies national franchises (known as the "COPE" legislation) that will allow them to essentially pick and choose which neighborhoods they will wire, if they show up at all.

Verizon, AT&T, and BellSouth and their paid astroturf groups like Hands Off the Internet would like you to believe that the phone companies need more financial incentives by charging Ebay or Google more so they will roll out new services. --- Follow the money and you will uncover a dark truth.

The Senate should be addressing these two issues:

1) FACT: Customers already paid billions per state in 'extra fees" for open, ubiquitous, fiber optic, 45 mbps, high-definition video (in both directions) networks they never received. --- Where's all the money? In our article for Harvard's Nieman Watchdog Project, "Where's that broadband fiber-optic access?", we outline how 86 million households should already have been rewired with a fiber optic service, replacing the copper wiring to homes and offices. America paid over $200 billion in excess fees as well as tax and other financial incentives, and there is nothing to show for it.

http://www.niemanwatchdog.org/index.cfm?fuseaction=Ask_this.view&askthisid=186

The Bell phone companies don't need new financial incentives. Customers already paid $2000 per household and continue to be charged a de facto "Broadband Tax" for FiOS and Lightspeed - Follow the money.

2) Verizon's FiOS, and SBC's Lightspeed are inferior, crippled services that can't compete globally today and may never be fully deployed. America is 16th in broadband now, and it will get worse with the Bell companies' plans. These networks are inferior in speed and price to anything being offered overseas. FiOS compared to Asia. http://www.newnetworks.com/fiosvsasia.htm

Our economy has already been hurt by the lack of fiber-based broadband, and there is NO guarantee that these networks will even show up. America has become a third-world-broadband nation. There is now a Digital Divide between us and the rest of the world.

The Senate should conduct hearings about these two issues before it votes on any new financial concessions - Follow the Money and compare the US to the rest of the world.

(This material is from $200 Billion Broadband Scandal) http://www.newnetworks.com/broadbandscandals.htm

FiOS and Lightspeed: America's New Crippled Networks.

The World is Laughing at US Broadband

America is 16th in the world in broadband according to the International Telecommunications Union. Here's why.

First, the current networks America has been given are inferior products. In fact, DSL is the largest bait and switch in history. DSL travels over the old copper wiring and it can handle, on average, less than 1 megabit. It is incapable of handling high-definition TV. DSL is also asymmetric, fast only in one direction. Ironically, DSL was considered inferior in 1992 and every Bell company state and federal pitch claimed that it would harm our economic growth if we based on future on this 'limited' product.

Second, FiOS and Lightspeed are inferior products and can't deliver competitive speeds and we are being overcharged for what speed we get. Let's assume that these new fiber optic networks do show up. One has only to look at what is being promised to know we will never be Number 1 in broadband and technology with the Bells' current plans.

FiOS or Lightspeed can't compete with Asia's current services. FiOS is up to 30 Mbps in one direction and cost $199. Korea and Japan offer 100 Mbps in both directions for around $40.

Comparison Verizon's FIOS and DSL to South Korea and Japan

	Price	Top Speed	Upstream	Cost per Meg
FiOS	$199	30 Mbps	2-5 Mbps	$6.63
DSL (acg)	$18.	768K	128K	23.42
Korea	$38	100 Mbps	4-100 Mbps	$.34
Japan	$41	100 Mbps	35-100Mbps	$.41

In comparing the cost per-megabit, the US is $6.63 for FiOS, as compared to $.34 to $.41 cents in Korea and Japan.

DSL pricing per megabit is well over $23.42 per megabit. If this is the best we get, in 5 years America will be farther behind.

*Note: This $17.99 price is the advertised amount. However, it requires a year commitment as well as buying a bundle of services. To be fair, we should be using the standard $29.95 if you buy a bundle or $39.95 for ala carte. These prices do not include the US taxes and surcharges and other questionable fees, like the 'tax recovery charge' Also, 768K is the 'top speed', not the actual speed. There are also higher DSL speeds, but they are not advertised regularly and the cost/speed ratio is not much better.

AT&T's Lightspeed is Still Missing In Action

We can't compare Lightspeed because it hasn't even been deployed and its schedule continues to be delayed. More to the point, even the spending amounts are not close to the ball park to provide the services they claim they will be deploying.

See: "SBC's IPTV: Do the Math" http://teletruth.org/blog/?p=4

In the current "test", the company is offering 6 Mbps as top speed in one direction, and the plan does NOT call for replacing the copper wiring, but to bring fiber closer to the home. Thus, it is not expected to be able to go faster than 25 Mbps. Also, in June 2006, SBC (AT&T) is now claiming that it will roll out 'wireless' services as a replacement for competition --- backing out still further from their original announcements of 'light-speed'. And the wireless services are very slow and very expensive. According to Network World (5/15/06)

"The service, which will support as much as 1.5 Mbps downstream and as much as 256K upstream, will cost $50 to $80 per month, depending on the bandwidth options."

That's $65 a per-Mbps.

Some disparage Japan and Korea's networks by arguing that they are government run, but we argue that that would be better than what we have today- a duopoly with no constraints and no enforcement of contractual agreements. Others argue that these countries were smaller geographic locations, and therefore easier to wire. But remember that the U.S. had fifty deployment plans, one for each state. In terms of population, states are smaller than these countries and should have cost less. And remember that these costs were averaged over rural, urban and suburban distribution.

But here's the real kicker --- Singapore announced it will be giving their residential customers gigabit-speed services in the next few years. That's 1000 times faster than most DSL today. With America's inferior services at high prices how is America going to compete globally?

Definition of Broadband in the US? Two Cans and String.

If you really want to see the lack of a broadband plan for America, one has only to look at the FCC or even the new bills in Congress to realize we're screwed as compared to the rest of the civilized world. The FCC declared that anything over 200K is broadband ---1/5th of 1 Mbps. Ironically, this speed is incapable of 'high-definition video' in both directions, which was the standard for broadband in 1992, as well as the definition of 'advanced network services' in the Telecom Act of 1996.

With two cans and a string, America can say we lead in broadband connections, but it's a hollow statement because we're simply falling behind in technological growth.

Here's Teletruth's letter to Chairman Martin to fix the FCC's broadband analysis.

http://www.newnetworks.com/TeletruthBroadbandDQAmartin.htm

The Economic Harms of the Bells' Failed Deployment and Current Plans --- Five Trillion Dollars and Counting.

According to the Bell companies' own reports, $500 billion annually ($1/2 trillion) could be garnered if America had high speed broadband. Thus, America already lost $5 trillion since 1996, when deployments of fiber were supposed to be in full swing. A decade later, because we don't have the ability to keep up with any new developments in Asia or Europe, America will continue to lose its technological edge. This will include slower sales of technology, slower growth in new products, and technology will continue to be created in other countries with more vigor.

These countries are now moving ahead of the US in high-bandwidth applications. According to Business 2.0's article, "Why the future is in South Korea", 6/8/06

"the most popular services are homegrown. Cyworld, for example, is a social network owned by a subsidiary of SK Telecom, the country's largest wireless provider. To an American eye, the Cyworld service looks like a mixture of some of the hottest US properties: it's MySpace meets Flickr and Blogger and AIM and Second Life.

"Users have avatars that visit and can link to each other's "minihompy" - a miniature homepage that's actually a 3-D room containing a users' blog, photos, and virtual items for sale. Cyworld's digital garage sales include music, ringtones, clothes for your avatar and furnishings for your own minihompy.

"Cyworld has penetration rates that would make Rupert Murdoch, CEO of MySpace parent News Corp, green with envy: An astonishing 90 percent of South Koreans in their 20s use the service. Celebrities and politicians set up their own minihompies, and the way to get ahead in twentysomething Korean society is to found a popular Cyworld club, or chat room."

History of Broadband Predicts These Networks Will NOT Show Up As Advertised--- The Failure of the Mergers

Using history to predict the outcome of America's phone network upgrades is easy. The companies will never supply what they committed to in 1992, much less have ubiquitous competition or service.

Take SBC. When it merged with:

* Pacific Bell (California) it closed down the fiber deployments promised in that state - 5.5 million households were affected, and the $16 billion to be spent was never spent.
* http://www.newnetworks.com/cabroadbandpacbell.htm
* SNET (Connecticut) it closed down the $4.4 billion investment for 1 million homes by 2000.
* Ameritech, which promised 6 million households by 2000, it sold off all fiber deployments for 'chump change' in 5 states - Ohio, Illinois, Indiana, Michigan and Wisconsin. Remember Project Pronto, which was promised as part of the merger to spend $6 billion? Most of it was never completed.

Meanwhile, Verizon was supposed to spend $15.6 billion on 17.7 million fiber optic upgraded households by 2000. After the state deals were still drying off, NYNEX and Bell Atlantic merged and closed down 13 states' plans.

Here's a summary of the mergers, the money, and their failure to bring fiber optic broadband to America.

http://www.newnetworks.com/SBCVerizonmergers.htm

FiOS and Lightspeed a Ruse?

Verizon and SBC made their latest deployment announcements as part of their push to merge with MCI and AT&T, respectively. The companies promised to wire more homes only to curry favor, so that the FCC would approve the mergers. Therefore, these stated deployments may have already fulfilled their job.

Let us stress --- There is absolutely no guarantee that any of these services will be available, much less offered en mass. Indeed, SBC is still in testing stages as of mid-June 2006, and it is very doubtful they will achieve their announced deployments to 18 million homes by 2007. (changed to "19 million in 2008" as of June 2006.) Verizon also claims that delays in local franchise negotiations may also slow down deployment and that it might leave them behind schedule.

No Wireline Competition Between Siblings.

And all of the companies lied to regulators about competing with each other with wireline competition, which was the primary reason for the Ameritech-SBC and Bell Atlantic-GTE mergers to be granted. SBC promised 30 cities outside their region, Bell Atlantic promised 24 outside their region. It's clear that they both submitted false documents about their competition with each other.

Teletruth filed a complaint with the FTC over this deception. AT&T and Verizon gamed the regulatory system and were able to have the mergers completed in their favor while scamming the public interest.

http://www.newnetworks.com/prreleaseFTCcomplaint.htm

The National Franchises Screws Every State - Take the Case of New Jersey.

According to the 1993 New Jersey state order that granted the phone companies large sums of customers' money for upgrading the state with fiber, by 2010 the ENTIRE state is supposed to have been upgraded with 45mbps services, capable of high definition video, as well as open to competitors and ubiquitously deployed.

Here's the actual info from the 1993 New Jersey Order, including the timeline and commitments that are still on the books.

http://www.newnetworks.com/OpportunityNewJerseyFiber.htm

"Cable TV competition?" Under the current franchise agreements, the phone companies can essentially pick and choose where and when to deploy. A recently passed New Jersey bill would require the Bells to wire only 60 of the 526 municipalities in the next three years; and those deployments will likely focus on the wealthiest areas, worsening the "digital divide." In other states, equally squishy numbers are being presented, and the hype far exceeds the probable deployments.

And we need to stress a two things.

a) Open, Competitive networks were promised in New Jersey and the majority of the US.-- Customer funded these networks with excess fees.

b) Ubiquitous Networks --- Since EVERY customer paid for these new networks, including seniors and low income families, to schools, libraries and every small business. These networks were to be deployed throughout the state in rural, urban and suburban areas, rich and poor alike.

Here's a comparison of Verizon's FiOS and the Verizon, NJ commitments.

http://www.newnetworks.com/FIOSNJsummary.htm

Show Me the Money.

New Networks Institute's analysis of New Jersey, Pennsylvania, California, Massachusetts and other states showed that customers paid billions per state in extra fees and tax incentives --- about $2000 per household.

See: http://www.newnetworks.com/broadbandscandals.htm

Local phone customers are being forced to cross-subsidize an interstate information service. More alarming, SBC states that the money to build any new service comes out of the budgets for local phone service. What's happening is that they are simply playing a shell game with the already existing funding for maintaining and upgrading the networks.

"SBC now expects that three-year deployment costs for Project Lightspeed will be approximately $4 billion . . . Because a significant portion of capital expenditures for Project Lightspeed will replace and refocus ongoing spending for its current network, SBC expects incremental capital investment for this project to be relatively small."

Worse, the phone companies have seriously cut their wireline construction budgets and never put the fiber they promised --- that's fiber directly to the home or office, not somewhere in the ether of the network. In 1984, the Bells (with GTE) spent more on construction than in 2004, even though their revenue went up 128%. Their expenses have also been slashed --- they have 65% less people as compared to revenue than they had in 1984, the time of the Bells' birth.

In truth, their "exclusive, proprietary" interstate information product is being directly funded by customers.

The New International, Local, Trans-Competition Digital Divide Is Being Created --- US Against Them.

If these companies may or may not roll out new services, and if they may or may not roll out services in your neighborhood, and if you keep paying for the development and deployment of these new services, even though you may never get a thing for your money, ---- why is Congress considering any new plans? More importantly, there is no plan for America to become a serious broadband player.

Even if the Bells actually roll out something, it will never be competitive with what kids are currently using in Korea and Japan. --- 100 Mbps in both directions. The have and the have nots won't be simply rich and poor but a new class --- US as a third-world-broadband nation is upon us.

Ironically, even public interest and Consumer groups have fallen for the Bells' line that if you change laws they will build it.

History predicts that we can be fooled over and over again.

To read a detailed analysis of the materials presented:

http://www.newnetworks.com/broadbandscandals.htm

Bruce Kushnick, Teletruth

bruce@teletruth.org