How the Phone Companies Are Screwing America: The $320 Billion Broadband Rip-Off

Since 1991, the telecom companies have pocketed an estimated $320 billion --- that's about $3,000 per household.

This is a conservative estimate of the wide-scale plunder that includes monies garnered from hidden rate hikes, depreciation allowances, write-offs and other schemes. Ironically, in 2009, the FCC's National Broadband plan claimed it will cost about $350 billion to fully upgrade America's infrastructure.

The principal consequence of the great broadband con is not only that Americans are stuck with an inferior and overpriced communications system, but the nation's global economic competitiveness has been undermined.

In a June 2010 report, Organization for Economic Co-operation and Development (OECD) ranked the U.S. 15th on broadband subscribers with 24.6 percent penetration; the consulting group, Strategy Analytics, is even more pessimistic, ranking the U.S. 20th with a "broadband" penetration rate of 67 percent compared to South Korea (95 percent), Netherlands (85 percent) and Canada (76 percent). Making matters worse, Strategy Analytics projects the U.S. ranking falling to 23rd by year-end 2010.

But these are just overall statistics. Today, people in Japan, Korea, Europe and other countries get broadband services that are 100-mbps services in both directions for what we pay for inferior, Asymmetric Digital Subscriber line (ADSL), while in Hong Kong companies have started to offer 1-gigabit speeds.*

Part of the reason for this is these countries have sunk more fiber optical cable into the ground and connected more homes to the next-generation grid. According to the OECD, the U.S. ranks 11th with only 5 percent fiber penetration, compared to Japan (54 percent), Korea (49 percent) and European OECD countries (11 percent).

Another reason for the woeful state of U.S. broadband is that we have one of the slowest networks in the world. According to the technology company, Akamai, the U.S. ranked 22nd globally in average connection datarate speed, averaging only 3.8-mbps in Q-4 2009. In comparison, Korea's average datarate was nearly three-times faster (11.7-mbps), Hong Kong more then double (8.6-mbps) and Japan was at 7.6-mbps. A surprise to many, Romania had an average rate of 7.2-mbps and Latvia clocked at 6.2-mbps.

Screwed

Grand cons regularly screw Americans. Millions bet the lottery that never pays off; millions go to Las Vegas and Atlantic City hoping for the big score and leave with empty pockets; and millions bet big-time on a housing run-up and lost big, big time. Hustlers offer a zillion get-rich schemes over TV and the Internet that people accepted either out of naivety, greed or desperation. But one of the greatest -- and little reported -- scams perpetuated on the American public is the broadband con.

The scam was simple. Starting in 1991, Verizon, Qwest and what became AT&T offered each state -- in true "Godfather" style -- a deal they couldn't refuse: Deregulate us and we'll give you Al Gore's future. They argued that if state Public Utility Commission (PUCs) awarded them higher rates and stopped examining their books, they would upgrade the then-current telecommunications infrastructure, the analog Public Switched Telephone Network (PSTN) of aging copper wiring, into high-speed and two-way digital optical fiber networks.

State regulators, like state politicians, are seduced by the sound of empty promises -- especially when sizable campaign contributions and other perks come their way. Hey, what are a few extra bucks charged to the customer every month for pie-in-the-sky promises? And who cares about massive tax breaks, accelerated depreciation allowances and enormous tax write-offs? The promises sound good on election day and nobody, least of all the voter, reads the fine print.