By Louis Marinaccio

Years ago, in the days of Ma Bell and her Baby Bells, when ‘the telephone company’ was a monopoly, the baby bells would have to go before the state PSC when they wanted a rate increase. They would have to justify their need for an increase. I remember this would infuriate the public and consumer watch groups. They contended that a lot of New York Telephone’s expenses were charges by AT&T, and ultimately it was really one company. New York Telephone was a subsidiary of AT&T after all.

This got me to thinking. We all know that 95% of the wireless network is built and maintained by telecom (wire line); imagine the size of that network. Their must be millions of trunks that make up Verizon’s wireless network that are owned by Verizon. What if telecom, theoretically, could charge wireless for these trunks, the same way Verizon charges AT&T, or Sprint, or T-Mobile, or whomever?

After all, in the unlikely event that Verizon would spin off the land lines to their own company, all of the massive wireless infrastructure, all of those trunks, all the fiber, all the muxes inside and out, would go with it.

This from an article from 247wallst.com, commenting on the Goldman Sachs report about a Verizon Vodafone merger.  Shame on Them… Proposing A VZ & Vodafone Merger

And then there’s this tidbit from Verizon’s third-quarter Form 10-Q:

Net cash provided by operating activities during the nine months ended September 30, 2011 decreased by $3.6 billion compared to the similar period in 2010 primarily due to inventory purchases for wireless devices and higher pension plan contributions.

I bet that a lot more of the 3.6 billion was for wireless devices than the authors of this article might imagine. It seems that telecom is bearing the brunt of the expenses to build the wireless network, and wireless is reaping all the benefits. If indeed this is how they do the accounting, then it serves them well. It makes the bottom line of wireless look better, and it comes in handy when justifying concessions by the unions.

The article in 247wallst.com is really worth reading.