It wasn't in taxes or tax breaks, but the ISPs were given exemption to regulation on prices in exchange for deploying a fiber network they never deployed. This basically happened twice, which is why I talk about 400 billion when the link you gave only talks about the first 200.

https://www.natoa.org/events/BrokenPromisesGarcia.pdf

BTW the logic in your link doesn't make sense. The $200 billion number is "based on taking what ISP profits would have been had they been regulated as a utility", yes, but the only reason we didn't regulate them as a utility is they promised us the fiber networks!

Is there a way to have a discussion where we use words according to their ordinary meaning? You said "the government paid ISPs $400 billion dollars." As you acknowledge, money didn't change hands. So nothing was "paid" right?

The government deregulated prices in 1996 for the same reason we deregulated airline fares, truck tariffs, etc. The government wanted to get out of the business of price control. And it didn't just happen in the U.S., it happened all over the world.

Fiber was presented as a benefit that would result from increased capital investment following deregulation. And that happened to an extent--wireline capital expenditure almost doubled from 1996-2001. But after 2000, capital started moving to the fast-growing industry of cellular wireless, where the returns were better. So yeah, we didn't get as much investment in fiber as we expected. But we got huge investments in cellular. That's how free markets work--the government can't predict or direct where capital goes.

The 1996 telecom deregulation wasn't a bargain, where ISPs were allowed to raise prices in exchange for a "promise" to build fiber. It was a deregulation of the industry. It's fair to complain that maybe the benefits of deregulation were oversold. (I can also claim that projections about premiums reductions under Obamacare have been oversold!) I think the 1996 deregulation should have been paired with a preemption of state-and-local broadband construction regulation. (American municipalities regulate in a way that makes it expensive to build infrastructure, whether you're talking about broadband or subway tunnels.) In particular, the nearly universal requirement to agree to service an entire city in exchange for permission to service any part of a city vastly limits the competition that could have been enabled by deregulation.

Its fair to have a debate about the ultimate outcomes of the 1996 deregulation. But its deceitful to act like it was a planned government fiber-construction project where ISPs just "pocketed the money" and didn't build the infrastructure.

From Bruce Kushnick, himself:

"I've been tracking the telco deployments of fiber optics since 1991 when they were announced as something called the Information Superhighway. The plan was to have America be the first fiber optic country -- and each phone company went to their state commissions and legislatures and got tax breaks and rate increases to fund these 'utility' network upgrades that were supposed to replace the existing copper wires with fiber optics -- starting in 1992. And it was all a con. As a former senior telecom analyst (and the telcos my clients) i realized that they had submitted fraudulent cost models, and fabricated the deployment plans. The first book, 1998, laid out some of the history "The Unauthorized Bio" with foreword by Dr. Bob Metcalfe (co-inventor of Ethernet networking). I then released "$200 Billion Broadband Scandal" in 2005, which gave the details as by then more than 1/2 of America should have been completed -- but wasn't. And the mergers to make the companies larger were also supposed to bring broadband-- but didn't. I updated the book in 2015 "The Book of Broken Promises $400 Billion broadband Scandal and Free the Net", but realized that there were other scams along side this -- like manipulating the accounting."

Since Bruce Kushnick is one of the originators of this "$200 Billion Broadband Scandal" claim, I'm not sure what simply quoting him does for this discussion. We all agree that there are people making this claim; what seems dubious is that the claim is valid.

You might want to read one of the trilogy of books we wrote on the subject, the first published in 1998, the latest published in 2015, or the collection of research reports we published as New Networks and now the IRREGULATORS, our consortium of lawyers, forensic auditors and other analysts, the last book, http://irregulators.org/wp-content/uploads/2017/05/BookofBro... and our library of research http://irregulators.org/our-work-reports-filings/

Moreover, the books and research not only use the expertise of our gang (or which some of us have been working together for a few decades) but, we quote primary research, such as annual reports, state and federal filings by AT&T et al, etc, much of which are hidden in plain sight, such as the Verizon NY 2019 Annual Report, which is the financial report of the primary telecommunications state-based public utility-- and ironically most reading this don't even know that there are still state public utilities left. http://irregulators.org/wp-content/uploads/2020/06/Verizonny...

The $200 billion broadband scandal was published in 2005 and that was based on examining the state-based commitments for fiber upgrades and the changes in state laws that gave the companies billions per state to do the upgraded-- i.e., rate increases and tax breaks.

The most recent work uncovered that the accounting has been manipulated in the utilities and caused the networks to appear unprofitable --- and we're preparing to take legal actions in multiple states-- it's about $20 billion annually in the US. https://bit.ly/3mQUWgf

As a former senior telecom analyst to the telcos 1982-1994--we knew were the skeletons were buried...so, we didn't just 'wing it', and the books detail our claims. So while others may follow in our footsteps... we've been at this for decades with actual documentation to substantiate our work. to see the latest, I post at medium.

https://kushnickbruce.medium.com/

See Rayiner's link upthread, to a thread several years ago that quotes your analysis directly and, to my mind, pretty convincingly refutes it.

My point on this thread is simply to remind people that we already knew going into the discussion that you believe there was a $200 billion broadband scandal. Since the point of the thread itself is to debate whether that's true, simply restating your premise doesn't move the discussion forward.

What would be neat is if you could click through Rayiner's thread, read it, and then rebut that.

(Here's the link: https://news.ycombinator.com/item?id=7709556)

>The ISP's never got "$200 billion" in the 1990's. That's a total made up number, based on taking what ISP profits would >have been had they been regulated as a utility, and calling everything over that "money given to ISPs." >The premise of deregulation was that it would lead to increased infrastructure spending. And it has: the late 1990's and >the 2000's saw massive investment into cable and wireless. People assumed at the time the money would go into fiber, but >demand exploded in wireless so investment went there instead.

let's start with this-- The reference to ISPs. In the 1990's, the largest group of Internet service providers was not the incumbent phone companies, but entrepreneurs-- by 2001 there were 9335 independent ISPs and they handled the majority of the traffic-- it was only after 2004-2005, when the FCC killed the right of competitors to use the copper wires for line sharing did this definition change-- and what is now AT&T (then SBC) stole the business from the ISP.

Second, I never said anything about ISPs -- as, well, I was a research analyst for the competitors-- the ISP associations, like the Texas ISP association, TISPA, or CISPA, or the Competitor associations like ALTS or Comptel. And we filed to protect the ISPs from the harms caused by those who controlled the wires. We filed at the FCC, we were working with Congressmen Nadler to create the "Broadband Bill of Rights" and created a small ISP summit with the Small Business Administration -- Read our impact study.

https://newnetworks.com/smallbusinessimpactstudy.html

Let me address this quote--its hard to know where to start. In 1991, when the info highway was proposed by the Clinton-Gore ticket, the telephone companies were still state utilities, controlled by holding companies. They were regulated, and the profits were regulated. They received alternative regulations in almost every state from 1992-1995. -- i.e., PA, CA, IA, OH, NY, NJ, KY, TN-- all had primary state-based public utilities and all had state laws changed.

And the investments were supposed to replace the existing copper wire with fiber. And laws were changed to pay for these fiber build outs. And phone rates went up, and profits went up, but virtually nothing was built; and there were others besides us tracking the amount of money collected for these utility networks. They were NOT free market companies but utilities, like water, gas, electric or roads---

So, Pacific bell (CA) claimed it would spend $16 billion and have 5.5 million households done by 2000 All of Verizon NJ. 100% was to be done by 2010-- with fiber capable of 45 mbps in both directions, starting in 1996, All of CT was to be done by SNET, and spend 4.4 billion -- completed by 2007.

And cable? Wireless? They were and separate subsidiaries and it is illegal to subsidize these other lines of business out of the state utility budgets--it is known as 'cross-subsidies'.

Since I was actually a consultant to the companies when all of this was going down... I had a front row seat.

Think of this as a highway plan-- you pay a contractor to build a highway and they charge the state billions, which in turn turns into additional taxes... here, the local rates and other charges were applied to customer bills as prices should have went down when there were staff cuts.

Where did the money go? As documented, they lost over $16 billion as a group overseas, and they wanted to go into the long distance market-- which was separate, but was very profitable

So, according to this, the companies were ISPS and not utilities, wrong. They were allowed to cross-subsidize all lines of business-- wrong, and there were no commitments to build out the fiber as part of these utilities-- wrong.

And might as well finish this:

1) That the internet and mobile booms are unrelated to deregulation and should not be factored into the analysis. Of course, that's ludicrous.

2) providers of the infrastructure underlying those boom industries to depreciate infrastructure and invest in new infrastructure faster than before?

The book is about the wired infrastructure of the state utilities -- a fact that the commentor appears to not understand, and the 'deregulation' that was granted was based on the utilities who control the wired infrastucture to not lie to the public and not charge them for other lines of business that are supposed to be paid for by INVESTORS, not the utility customers.

Ironically, most of the wireless networks were subsidized, which shouldn't have occurred because, well, starting in 2010, the telcos started to divert the funding to wireless -- not legal in most states, to fund wireless, instead of upgrading the cities and rural areas. -- See, utilities are based on serving the territory they cover... So, Verizon and AT&T took billions and moved them to these other lines of business but then left the copper to deteriorate and not upgraded to fiber..

And that is 'ludicrous that the critic doesn't understand telecommunications laws, or even examined the details of the financials for the state utilities -- or the consequences that occurred.

The internet occurred because we, and others, spent years get the Telecom Act passed so that the small ISPs could do what they did.

2) That 1970's-style rate-regulation doesn't have an adverse impact on capital investment.

More crap. the investment under this "1970's" regulation, not referred to as "Title II", and the manipulation of the accounting was used to allow the companies' other lines of business to cross-subsidize and not build out the states with fiber and not even maintain the networks, especially in rural areas.

We wrote an entire report on the current Verizon NY 2019 Annual Report financials and cross-subsidies

http://irregulators.org/wp-content/uploads/2020/08/REPORTVer...

I'll be glad to answer questions-- but it's not 200 billion... counting the cross-subsidies we uncovered over the last decade, it's over 1.1 trillion; The overcharging from changes in state laws which were based on commitmenets not met since 1993 is eclipsed by the massive cross-subsidy scheme underway playing out, today in the state utilities -- and yes, PA, CO, CA, NY, MA, all have primary state public utilities... like AT&T California or Verizon MA

Thank you for this comment. You haven't sold me, but I'm sure you've sold other people reading this thread. I read your two cites as well. I have two small points in response.

First: I ran tech operations (as employee #2) at what became Chicago's most popular independent ISP, in the mid-to-late 1990s, and had a similar "front row seat" to that sector. And I'll say right now that the claim that "deregulation killed the independent ISP" does not at all ring true. Economies of scale is part of it, but so was consolidated billing, coax Internet, "triple play" packages, and wireless. Also, the market just consolidated; even among the indie ISPs, by the end of the 90s, everyone was doing roll-ups.

Further, while I loved my time in independent ISPs, I'm confident that as a consumer, I'm far better served by AT&T than I was by any independent ISP I've used. My service is faster, more reliable, less expensive, and simpler than it was in the '90s in Chicago and San Francisco, or the early 2000s in Ann Arbor. Honestly: even Comcast did a better job than most of the indie ISPs I used.

Second, while the additional detail you've provided here is interesting, you really haven't engaged Rayiner's central argument, which is that however many billions of dollars you're saying telcos were "given" to build fiber, you're just counting dollars in their prices that you think are unreasonable. Which is not what people people on HN typically mean when they cite this "200 billion dollar scandal".

> >"deregulation killed the independent ISP" does not at all ring true. Economies of scale is part of it, but so >was consolidated billing, coax Internet, "triple play" packages, and wireless. Also, the market just >consolidated; even among the indie ISPs, by the end of the 90s, everyone was doing roll-ups.

We were the survey firm and did the analysis for multiple ISP associations, and we worked with the indie ISPs and CLECs, as well as with Small Business Administration's Office of Adovcacy. In the 1990's, at least, there was no triple play. the cable companies had not offered voice, or even broadband with any seriousness. AT&T was an indie and started bundling local and long distance, and wireless wasn't even on the radar as a broadband service.

And we filed complaints with the FCC, AG and state commissions because about 40% of the orders placed by an independent didn't go through -- harming the ISP but also pissing off their customers https://newnetworks.com/baadslscrewisp.htm

And in 2001, we wrote an impact study, quoted by SBA about the lack of FCC enforcement, and the fact that the wired companies were stealing the ISP customers, that the orders weren't going through, that it took weeks to get orders, that there was preferential (illegal) treatment of the companies' own ISP,

https://newnetworks.com/smallbusinessimpactstudy.html

(these links still work....) And how bad was it for those seeking justice from the regulators? Dave Robertson, the head of the Texas ISP Association, recounted his recent meeting with Chairman Powell and senior staffers at the FCC Enforcement Bureau.

"The meeting was Tuesday May 8th. In a nutshell, all the "bad acts" submitted to them to date have resulted in exactly "ZERO" dollars in fines, and little delay in their 271 approvals for the Bells to jump into the long distance market. We asked for something blatant as handwriting on a wall as to the future of the complaint process as we are approaching it. We got it. WE SHOULD EXPECT NOTHING FROM THE INFORMAL COMPLAINT PROCESS. We should expect nothing from any complaints we have submitted to date.

"A couple of weeks ago we met with a senior person in the ENFORCEMENT BUREAU. After a one-hour meeting and receiving some heartfelt empathy for the plight of ISPs and the consumers who are being victimized by the illegal, anti-competitive behavior, I suggested that our best move might be to just jump out a window. He suggested we might want to consider throwing a chair out of the window first, so we wouldn't get cut on the glass as we jumped."

So, yeah, wireless and the triple play? -- had the networks been open, would the independent ISPs used the networks to offer these other services? AT&T and MCI at the time were large enough, as was AOL and other ISPs like Earthlink could have, probably would have.

I agree there was consolidation -- but, when the FCC got rid of line sharing and refused to address the litany of charges against the telcos who controlled the wires, -- but worse, the companies lied about deployments and took the money --didn't upgrade their networks to fiber as paid for by local phone customers --- we were put on a path where those who control the wires killed off most of the competition.

>Second, while the additional detail you've provided here is interesting, you really haven't engaged Rayiner's >central argument, which is that however many billions of dollars you're saying telcos were "given" to build >fiber, you're just counting dollars in their prices that you think are unreasonable. Which is not what people >people on HN typically mean when they cite this "200 billion dollar scandal".

Arrgh. While we did track price increases, which shouldn’t have happened as they were based on supposedly using the extra cash to upgrade their aging copper infrastructure --- we didn’t use price increases for our overall calculations

We examined multiple states' plans as well as the data that the FCC collected, as well as other groups that since stopped including NARUC, BEllCORE, and state and federal filings by the companies.

but-- I'll play... The incumbent utilities are regulated, because they control critical infrastructure, get use of the rights of way, and had requirements to deploy fiber--based on their own filings and commitments made.

READ THESE: we quoted other analysts Here’s testimony by ETI about Verizon PA fiber plans and monies collected – (ironically funded by AT&T against Verizon,-- before the networks were closed and AT&T and MCI were put up for sale and AT&T was taken over by SBC http://www.teletruth.org/docs/LLS%20PA%20Senate%20Testimony%... This is a scathing review of the first 5 years of the Verizon NJ ( Bell Atlantic – 1997) by the New Jersey consumer advocate. https://web.archive.org/web/20160429003841/http://www.rpa.st...

It’s clear no one has read the original source materials – We covered a) depreciation, b) return on equity, c) dividends paid d) extraneus deductions charged to the state, e) growth in lines, minutes, revenues, expenses, corporate operations expenses, marketing, employees, etc –

So, as a group the telcos took $25 billion in tax deductions when they claimed that they were replacing the copper… didn’t do it. The state freed their profits so nationwide it went from 12-14% Return on Equity to 29% on average—but they were still monopolies and no direct wireline or wireless competition. And again, this was supposed to be used for fiber. The overcharging, then was comparing the commitments against the excess billions the companies-state utilities- got from the changes in state laws was supposed to be used for construction, not buying companies overseas.

And when $200 billion was written, no telco had done the work but all got billions. FiOS and U-Verse were announced in 2004 specifically to close the networks—claiming it was harming investments – when, we, the people, were the investors, which the FCC, etc never recognized.

Thank you for taking the time to respond to this, I have learned quite a bit from this thread.