Steven Cherry: Today’s show is about a country that, after a natural disaster, couldn’t restore phone service to some of its people for seven months. Do I mean Sri Lanka after the 2004 tsunami? Haiti and the 2010 earthquake? Nope, it’s the United States after Hurricane Sandy. In towns in New York and New Jersey, today, in May 2013, the incumbent carrier, Verizon, has not fully restored landline phone service and may never do so, breaking a century-old promise.
Back at the turn of the 20th century, the president of the American Telephone and Telegraph Co., Theodore Vail, offered up a new vision of telephony. In magazine ads he proclaimed: “One policy, one system, universal service.”
That seemed a fair deal. It was inefficient, at best, to have different phone company wires coming into the home. It would have been worse than inefficient to have many phone companies without interconnecting them—as if Verizon and Sprint and T-Mobile customers couldn’t call one another. So Vail offered for AT&T to be the universal phone company, and in exchange, he would also offer universal service in the other sense—that everyone, every household, every business, every individual, would be connected.
Those days are gone. Party lines and Princess phones are gone. Even the dial tone is almost gone. And soon, universal service may be gone.
My guest today is Bruce Kushnick. He’s the chairman of Teletruth and executive director of the New Networks Institute, an organization whose tagline is “Telecom and Broadband Research for the Public Interest.” He’s a lifelong telecommunications analyst and a tireless consumer advocate. He joins us by phone.
Bruce Kushnick: Thanks for having me.
Steven Cherry: Tell us about a meeting you had last month with the East 9th Street block association. This is in New York City’s lower Manhattan.
Bruce Kushnick: Okay, so, I’m in the middle of the East Village on East 9th Street, and it’s a bunch of old buildings, and I’m sitting in a large parlor in one of the old brownstones, and there is a group of people, all of whom are about to start screaming at me because they still don’t have phone service or they’ve had phone service only restored in the last month but they’ve been billed for all the months they’ve been out.
So as of October, I believe, 28, after Sandy, the phone lines on the whole street went dead. Now, you have to understand there were major complications in that area. I mean, there were cars that were sighted floating down the avenues, so this was definitely a major storm for New York City. However, six months later we’re sitting here, and we’re basically hearing from people who have no phone service restored at all, and they are also being billed, which is actually one of the things that annoys them more than not having phone service.
Steven Cherry: Yeah, and there were small-business owners in with the residents, and that they were screaming at you because they needed to scream at somebody, and screaming at Verizon wasn’t really doing them any good.
Bruce Kushnick: They were trying to mute their anger, so I went around the room, and there was one woman who had two lines and a DSL line, and all of those were out since October. They told her they were going to fix the lines in January, and they said it was going to be February, and then they basically, in about March, she never heard from them again.
But she spent weeks on the phone, hours being put on hold, and basically, as she pointed out, some of the people on that block do have service, but it’s very spotty who does and who doesn’t. But there was one small business on the block who lost about half of their business because their fax line went out, and they depended on orders coming in via fax. While an antiquated system, people still use fax machines.
Steven Cherry: So, really, Verizon in some ways is redefining what they understand universal service to be. And I guess to sort this out for people, let’s make clear there’s really three or four different services here: There’s plain old telephone service, the copper wire service that people have had for decades and decades; then there’s DSL, which is broadband service, which is piggybacked onto those copper wires; and then there’s wireless, which in this case is Verizon wireless; and then finally there’s the service FiOS, which is this newfangled optical-fiber network that even in Manhattan is largely unavailable. So what is Verizon telling these people in terms of those services?
Bruce Kushnick: Well, what happened was, is the people that are out, their basic copper wire was no longer working, and basically the unions told me before the meetings that basically Verizon’s current viewpoint is that they’re going to decline anyone who has a copper wire to fix it. The idea is that the old network and their new network, FiOS, basically is a cable service as well as a broadband service, and that is a fiber-optic wire. So the customers that are near FiOS are being told to go to FiOS. Unfortunately, the databases that the company has [don’t] talk to each other, so people who can’t get FiOS, even though they tried, called to say, “You know, my phone service is out. I’ll take FiOS.” And the answer was, “I’m sorry, it’s not available in your building.”
Steven Cherry: Yeah, and even in their databases it’s really just not widely available. Two years ago, I lived on the posh Upper East Side. I lived in the not-very-posh part of it, to be sure, but I couldn’t get FiOS, and I just checked, and it’s still not available there. If it’s not available there, then it’s really not very widely available.
Bruce Kushnick: The advocate’s office in New York last week basically claimed that Verizon had been inflating the numbers given to the state about the availability of FiOS. According to the advocate’s office, it’s 50 percent of houses are “passed.” Passed means that there’s a wire somewhere down the block or a couple of blocks away. It does not mean that the house has been wired. It just means that there’s a service that should be available. You should understand that the databases that the company uses have data from 20, 30, 40 years ago and have been transferred multiple times, and a lot of times there are mistakes in the databases as far as matching the person’s address and all those things.
Steven Cherry: Verizon—for customers that it’s not rewiring copper lines—Verizon is offering cellular telephony, and it has a HomeFusion box, which is kind of a wireless broadband. What’s wrong with these replacement services?
Bruce Kushnick: Well, there’s a whole litany of things, but let’s just take HomeFusion. HomeFusion is going to be their broadband box that they replace. You’re living in a suburban area; they don’t have FiOS; they’re going to give you this broadband box or they’re not going to give you anything.
If you have DSL currently on that wire, DSL basically costs about 30 or 40 bucks and is broadband and is over the same old copper wire, and there’s no limits on how long you could use it—known as bandwidth caps. If you were to use the broadband box HomeFusion, basically it starts at, I think, [US] $60, and after a certain point, you have to pay $10 per gigabit. So you could basically rack up hundreds of dollars by the substitute.
Steven Cherry: These same people, the ones in Manhattan, they could sign up for phone service from the local cable provider, which in Manhattan is Time Warner. What’s wrong with doing that?
Bruce Kushnick: Okay, you’re dealing with regular people. You’re not dealing with people who follow telecommunications, who have any idea of the services that are out there. You know, they really sort of tune out of the commercials, and so some of them had no idea that the cable company offered phone service—that was one. Two, some people hate the cable companies, period. They’ve had run-ins with them, and they’re just not happy with them. They don’t want to go to somebody they don’t like. And three, and way more importantly, so you get the package from the cable company at a promotional price. You have to buy the bundle, and it costs, you know, $89, and you get the first bill, and it comes in at $120 because of the things they didn’t tell you about, and then it goes up 50 percent after a year. And that really pisses people off, when you have a service, and then you get a bill and it’s 50 percent more. So in terms of the warm and fuzzy of these people, most of them were told that their wires were going to be fixed, and they were just waiting for that to happen.
At a certain point, some of the people on the block did go to cable. One woman asked about Vonage, and she didn’t know that it required a broadband service. One woman was holding a cordless phone and thought it was a wireless phone. So when you leave the world of telecommunications, and when you leave the world of people who care about these policies and all that stuff, you have the public. And the public has no idea what any of this stuff is, you know, DSL is broadband? What’s broadband? What does that mean? And so we’re sitting in the meeting and people are saying things like, “What is a bandwidth cap?” and “I can’t get my cellphone to work in my house. Why would I want to use cellphone service?” and it went on and on and on.
So from the point of view of the public, which is not the people that we know, the techies, these are people that basically just—it’s a utility: They want it to work, they were promised it would work, and when it went out, they were promised it would be fixed. That’s it. Now, in the case of Sandy, they are basically saying to places like Fire Island, which is in New York, basically they said, “We’re not going to fix the copper in the whole island, and we’re just going to give you all wireless.” And they just did this last week in an announcement in a place in New Jersey by the seashore, which is sort of a very upscale resort area during the summer. And basically they’re saying, “We’re not fixing the wires in your house, even if you have DSL.”
Now, you have to remember that there are small businesses that have DSL service or have fax machines or have ATM machines, and they require to have these wire lines. So in some areas, my feeling is that these people can’t do the services that they already have in place, and the company refuses to fix it, even though they’re a utility.
Steven Cherry: So for you, this is connected with a more long-standing critique of the incumbent phone carriers, particularly AT&T and Verizon. They promised to upgrade their entire systems to optical fiber, and in fact they’ve already been paid by us rate-payers to do so. Basically, you say we should all have FiOS or its equivalent by now.
Bruce Kushnick: Right. Let me give you one case study: Starting in 1992, the company Verizon went to many, many states and said, “Hi, change the laws. Give us a lot more money and let us use that money to do construction of a new information superhighway.” In New Jersey today, on state law on the books, there is a commitment that was supposed to be that Verizon would have 100 percent of their territory in New Jersey finished with a 45-megabit service in both directions over a fiber-optic wire, and the entire state was supposed to be done by the year 2010.
They collected an estimated $15 billion to go out and do these upgrades. In 2005, they actually started rolling out FiOS, but FiOS is probably less than 50 percent of the state, and FiOS is basically a cable service that’s being funded via these excess local charges. This happened in New York, Massachusetts, California, Illinois, Indiana. It happened in pretty much every state, because in the 1990s, these companies went and got all the laws changed to give them more money to basically build these networks.
Now, in New Jersey there’s a show cause order in 2012, because two little towns in the outskirts of New Jersey, Stow Creek and Greenwich, complained that their service was so bad and they never got FiOS. And right now there’s a holding pattern. The state basically has asked Verizon why they had not completed their commitments to have 100 percent of the state completed by 2010.[laughs]. Verizon has responded, saying, “Oh, we’ve done everything we’re supposed to be doing,” and the state just came back as of last week and says, “Give us a plan for how to fix these two towns at least.” And so that is in a holding pattern. But in virtually every state, everybody paid about $3000 to $4000 per household for this upgrade of their copper wire to a fiber-optic service.
Steven Cherry: And just to put that into context, the upfront charge for the Google broadband in Kansas City, and now Austin, and a town in Utah, the upfront cost is about $500, so that seems to be Google’s estimate for what it costs just to put this cable in the ground.
Bruce Kushnick: Right. Well, the actual cost of upgrading the utility and universal service, you have to remember it was basically all averaged, so you, the customer in the urban areas, are paying more to make sure that the customers in the rural areas basically still get service. And that whole model fell apart in the last five to 10 years, where now, basically, we have no idea what it costs to do the upgrades because they aren’t publishing any more data. We have no idea about their profit margins because they have stopped publishing the data on what’s happening in the state. And the FCC has stopped collecting any data pertaining to the business activities of the phone companies since 2007 [laughs], and the annual reports basically are about the whole company, so you have no idea about what happened either in a state or a federal [[unintelligible]].
And so getting back to our East 9th Street people who are sitting there with no service, many of those people should have already been upgraded to fiber based on just the franchise agreement for FiOS in the state of New York—I mean New York City—and they weren’t. And so we have no idea why, and that’s one of the questions that’s outstanding. Two, in areas where they’re not rolling out the fiber, in a state like New Jersey, where they have an obligation to do so, it becomes really questionable whether or not the wireless service is a replacement of the wire service that’s supposed to be there.
Steven Cherry: It’s all packets under the hood now, even if people think they’re using their plain old telephone service. It’s probably in the wires. It’s Voice over IP and packet-based. But it sounds like you reject the idea that we should redefine universal service in terms of broadband nowadays.
Bruce Kushnick: In 1992, my suggestion was that we have a universal broadband, that broadband was a universal service. I was on record talking about this two decades ago, and I have not ever changed my point of view. My point of view is that the wire was supposed to be upgraded to broadband. The speed on that wire, basically broadband, was supposed to be part of the package of what you were owed.
It wasn’t anything special. It was, “Oh, we upgraded your wire.” You know? “You had a wire in your house, okay. We upgraded it. Now it’s faster, okay.” So my feeling has always been that the idea that we should regulate these services or just phone service is ridiculous. We should basically have had it all along that we’re inclusive to all services.
The other part, which is very important, is that in 2004 or 2005, the FCC removed all regulations to allow competitors to come in and use these wires for their own services. And so all of these services don’t—you can’t just have, “Okay, I want this person for my phone service, this person for my cable service, this person for my Internet service, and by the way, they’re offering me this fancy box on my TV that hooks up to my gaming system.” That doesn’t exist today, because what happened was, they’ve reinforced these monopoly players who, one has a monopoly on the wire, one has a monopoly on the cable wire, and the phone companies have a duopoly kind of on the wireless side, because they control the access fees. And so my feeling about this is these networks were supposed to be open with the Telecommunications Act in 1996.
Steven Cherry: So that segues very nicely into my one last question, Bruce. President Obama’s head of the Federal Communications Commission, Julius Genachowski, stepped down recently. You’ve written critically about the man nominated to succeed him, Tom Wheeler. Now, Wheeler is a telecommunications veteran of 30 years. He’s an entrepreneur and a venture capitalist. He’s a policy expert, and he headed the television and cellular industries trade groups. What’s wrong with Tom Wheeler?
Bruce Kushnick: Tom Wheeler is also the head of the Technological Advisory Council. The Technological Advisory Council has turned into a very politically controlled group headed by AT&T, who basically have decided to close down the networks and use the FCC to basically “sunset the networks”—close them down. Tom Wheeler is the chairman of that group.
Now, my feeling has been that Tom Wheeler—I’ve been told that he’s a great guy by a lot of people, but my feeling is that he’s not going to confront the issues that need to be confronted, and he’s not going to take on his previous clients no matter what. And so he was the head of the wireless association at the time, where he basically, it added the termination fees, which everybody hates. It added made-up fees on the phone bill and made sure the phone bills were unreadable. That was the CTIA that he headed.
So my feeling is he’s not going to go into the FCC and be a reformer who says, basically, “We need to reopen the networks immediately. We need to make sure everybody has a fiber-optic service and it’s really fast, and we also have the wireless companies competing with the wired companies.” He’s not going to do any of that. And to me that’s the problem, why he’s not the right person. Regardless of his personality, he basically will not confront the incumbent companies that have taken over control of the FCC and say, “Hi, excuse me, from now on you’re opening your networks, sorry.” It ain’t gonna happen.
Steven Cherry: Very good. Well, Bruce, I’m sure the otherwise forgotten people of East 9th Street in Manhattan thank you for your advocacy, and I thank you for your lifetime of it, and thanks for joining us today.
Bruce Kushnick: Thanks, I had a great time.
Steven Cherry: We’ve been speaking with telecommunications advocate Bruce Kushnick about breaking an 80-year-old tradition and legal framework of universal service. For IEEE Spectrum’s “Techwise Conversations,” I’m Steven Cherry.
Photo: Eric Thayer/Reuters
This interview was recorded Wednesday, 8 May 2013.
Audio engineer: Francesco Ferorelli
NOTE: Transcripts are created for the convenience of our readers and listeners and may not perfectly match their associated interviews and narratives. The authoritative record of IEEE Spectrum’s audio programming is the audio version.