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Verizon fiddled its figures to avoid wireline investments, claims report

Verizon has allegedly broken an agreement to upgrade its wireline networks to provide all users with FTTP (Fiber to the Premises) FiOS internet services, and has instead diverted these funds to wireless investments at the expense of small businesses, low income families and seniors, according to a report from US research firm New Networks Institute (NNI).

Verizon New York reportedly charged local phone customers and the wirelines state utility $2.8bn (80% of its entire capex) on building 5,515 cell sites between 2010 and 2012 – capex which had been originally intended for wireline investments within the state. This has left many areas in the state without fiber lines and only the neglected copper lines – giving users nothing but frustratingly slow broadband for the year of 2016.

In New York alone, Verizon Wireless recorded 2012 revenues of $7.6 billion, but the NNI research shows that it spent just 3% of its this on wireline capex – and the operator is now two years late on its promise to deliver FTTP to all households in the state.

The report states that Verizon juggled its finances so that its Special Access services were kept profitable while the expenses were siloed into its Local Services unit. These Special Access services (now Business Data Services) pertain to those which provide data connections for businesses, such as ATMs, retail outlets and cell towers. This is an area where competitive carriers and cablecos could generate new revenues from their networks, but smaller players such as Sprint and Level 3 Communications have accused the big boys of putting lock and key to the market and charging unreasonable sums for usage. AT&T has also been under investigation by the FCC surrounding these allegations.

Verizon is accused of underpaying for use of Special Access networks while simultaneously overcharging competitors such as Sprint by up to $1bn annually. Another report from the Consumer Federation of America (CFA) and the NNI back in April found that Verizon has been overcharging an estimated $20bn a year for Special Access services.

Verizon has spent huge sums on IoT acquisitions in recent months as it strives to be a wireless-first company and grab a foothold in the emerging smart city and connected car markets – in April it spent $1.1bn on Fleetmatics, followed by $1bn on Telogis, $4.4bn on AOL, and most recently some $4.8bn on the internet assets of Yahoo. How then, can the telecoms giant justify lesser investments into network upgrades which had been promised to its customers, as well as seemingly divert that money to alterative business ventures?

The agreement states that Verizon’s FTTP network would “pass all households” by June 30 2014. It was then granted an extension until November 14 but still failed to fulfill its obligations. The state of New York sent a letter to Verizon VP Monica Azare last week ordering the company to provide records to its provision of cable service available for a full investigation, Verizon has 30 days to respond.

Bruce Kushnick, executive director, New Networks Institute, stated, “Verizon has no serious plans to upgrade or even maintain the existing copper wires. A more troubling issue is that Verizon has diverted billions per state to build out its wireless networks by having the wireline state utility take over the capital expenditures budget. Verizon has left the majority of municipalities with a deteriorating copper network, which, depending on the state, should have been replaced with fiber optics. This has left most areas without direct, very fast broadband.”

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