State-by-state basis. Pennsylvania paid them $2.1B for fiber that never happened:
In 1994 Verizon (then Bell Atlantic) struck a landmark deal with the state of Pennsylvania. The deal provided Verizon with hefty financial incentives if they met certain broadband rollout criteria. It's estimated that those financial incentives over the years clock in somewhere around $2.1 billion dollars.
As part of that agreement, Bell Atlantic agreed to have 20% of the state broadband wired by 1998, and 50% by 2004. By 2015, broadband would be run throughout the state to the majority of Verizon's customers. It's important to note that this wasn't DSL they were talking about...but 45MB/s symmetrical fiber service right to the door of homes and businesses, ambitious and impractical for certain, but nonetheless included in the language of the agreement. [1]
Where does the $2 billion come from? It starts on page 4 of the document.
> Customers paid for a network they will never receive. We estimate that the Company received $2.1 billion from this deregulation, including an additional $1.5 billion in extra tax deductions the Company received from excessive write-offs of the still existing networks.
He gets into the real numbers starting on page 23.
The $2.1 billion is Kushnick's usual fabrication: pick a "rate of return" typical for regulated monopolies, and call all profits above that number post-deregulation as "money given to the telephone company."
Page 28+ gets into the tax angle. The basic premise of his argument is that Bell Atlantic took an unjustified accelerated depreciation on its copper phone network. He paints this as a scam: they took the write-off on the basis that they were going to replace it all with fiber, then failed to do so.
However, that wasn't actually the accounting justification for taking the write-offs.
> In such markets, the Company does not believe it can be assured that prices can be maintained at levels that will recover the net carrying amount of existing telephone plant and equipment, which has been depreciated over relatively long regulator-prescribed lives.
In other words, the accelerated depreciation was to compensate for the fact that once regulated prices were gone, the telephone plant would become less valuable. It was not predicated on replacing that plant with fiber.
At best we're talking about Bell Atlantic taking depreciation deductions faster than they should have. It's certainly not equivalent to Pennsylvania writing it a $2 billion check for fiber that was never delivered, or even giving them $2 billion in tax deductions for fiber that was never delivered. Maybe this accelerated depreciation was not proper. I'm not a tax expert. But neither is Bruce Kushnik.
In this one particular case, yes. But not that they did not receive indirect remuneration (rate concessions) in exchange for unfulfilled broadband promises, possibly far exceeding $2B. I'm not sure why my comment was downvoted, as the article in the Inquirer shows that such promises were indeed made by Bell Atlantic.