BRUCE KUSHNICK: In Korea and Japan, you can get 100 megabit services in both directions for about $40.
RICK KARR: That's 100 times as fast for the same price. The U.S. had a chance to start building Internet connections like that back in the early 1990s.
BRUCE KUSHNICK: It was, actually Al Gore may not have invented the Internet, but he really was a proselytizer for new fiber optic networks. That was 1992-93 time frame. And essentially all the phone companies then basically said, "We'll step up to the plate and we'll do this wiring plan." None of that ever happened.
RICK KARR: Kushnick and his colleague, Tom Allibone, are telecommunications muckrakers who call themselves "Teletruth." They're in the process of filing lawsuits against several regional phone companies. They allege that the baby bells promised fiber-optic connections nationwide but didn't deliver.
BRUCE KUSHNICK: By the year 2006, our research shows that 86 million households should have been wired with fiber, i.e. the majority of the United States. Had they just kept the, the eye on the ball and done this work, America would not be in the situation we are in today which is inferior services for high costs.
RICK KARR: Why didn't the network get built? I mean, they made all these promises, it sounded like it really was the information superhighway that we heard about in the 90s, why didn't it get built?
BRUCE KUSHNICK: The reason why it didn't get built is because none of the regulators stepped up to the plate and held the phone companies accountable.
RICK KARR: Phone companies are regulated in part by the states. Kushnick and Allibone say that back in the nineties the phone companies offered to invest billions to build fiber optic networks if the states let them take large tax deductions and raise the price of basic services.
BRUCE KUSHNICK: Call waiting, call forwarding, caller ID cost about a penny to offer. They charge $5.30. All of that is profit to them. Under the old regime they would have to return all the extra money. They wouldn't be allowed to keep these profits.
RICK KARR: Under the old regulations, the phone companies were required to pour those profits back into their networks - in other words, to keep improving their infrastructure.
TOM ALLIBONE: Phone companies historically were regulated as a public utility. And the format or the type of accounting system that was utilized in the public utility industry was something called rate of return. One of the reasons or ways to promote competition was to do away with rate of return regulations and give the phone companies the ability to make unlimited profits, that's really what it was all about.
BRUCE KUSHNICK: You ask people, "Did I ever pay for a fiber optic network?" They go, "Well I don't know." And the answer is this: well you paid for it, you don't even remember it. And the regulators, even though it's on the books, a lot of the regulators, oh, I hate to say this, but basically they were too close and cozy with the phone companies.
RICK KARR: The regulators he's talking about are state utility commissioners. They were supposed to make sure the phone companies kept their promise to connect millions of Americans to the information superhighway at 45 megabits per second. In New Jersey, for example, the phone company promised 5 million of those connections by last year.
RICK KARR: Right now, today, how many houses, right now today, how many homes in New Jersey actually can get this kind of 45 megabit service?
TOM ALLIBONE: Well actually, zero. I mean, no one can get 45 megabit, it doesn't exist. The only thing that comes close is in a commercial type of environment you know, for very specialized types of applications. But, there's no such thing in a residential consumer marketplace.
RICK KARR: According to Teletruth, phone companies took $25 billion in tax write offs while revenues soared 128%. But they didn't build the fiber network they promised.
BRUCE KUSHNICK: So, with all this cash cow, what do you do with the money? They should have said, "Why don't we build the best network we can and therefore it'll basically, the infrastructure, and basically make our infrastructure the best in the world." And they didn't do that. They basically took the money and ran.
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