Thursday, September 17, 2009


Verizon throws 18 states under the progress train

I am a happy Verizon FIOS fiber-to-the-home customer in Connecticut, I admire the long view Verizon took to build its FIOS infrastructure, and I appreciate the substantial punishment that Verizon took from Wall Street until it became obvious that FIOS would be a huge success.

But Verizon is not building FIOS in all of its territories!

Verizon is unloading land lines in eighteen states because they don't want to keep building FIOS there. It would be a huge commitment of Verizon's money and time to give these states FIOS. In fact -- and this, I believe, is THE key issue -- the financial benefits of deploying FIOS in these states probably would not accrue until after the current crop of senior Verizon executives retire. Almost certainly, Verizon bean counters have calculated that their books -- and, most importantly, senior management bonuses -- would look better in the short term if they spun out states that are harder to fiber up.

In other words, Verizon is sacrificing the long-term interests of their customers, the best interests of eighteen of our United States, and the long-term interests of their shareholders on the altar of the quick buck.

The first Verizon spin-outs are already deep in doo-doo trouble. Hawaii Tel is bankrupt. FairPoint Communications, which acquired Verizon land lines in Maine, New Hampshire and Vermont was just hauled before an unprecedented joint meeting of the ME, NH and VT PUCs for non-performance only seven months after their Verizon deal closed. The FairPoint CEO is talking Chapter 11 only seven months after the deal closed. (Note: Seven months is a picosecond in telco planning time. In other words, anybody who had looked when the deal closed would have known exactly what the situation would be in seven months. I wonder who told what to who . . . and in return for what?)

A recent article on the Maine-New Hampshire-Vermont joint PUC hearing on FairPoint's problems cited
. . . widespread e-mail problems in February and March, and continuing regionwide service problems such as bills issued after service was canceled and months-long waits to get new phone lines . . .
FairPoint's operational problems even affected customers trying to complain to Vermont regulators. According to John Burke of the Vermont Public Service Board,
“For the first three business hours of the day today, if anybody tried to call the Public Service Board, they got the following message: ‘You have dialed a nonworking number, please check this number and try it again.’ ”
Here's another article on the ME_NH_VT joint PUC hearing.

There's an $8.6 B deal in the works to spin Verizon landline assets to Frontier in some 14 states; Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin, plus some California assets. But this deal is stalled in Ohio because regulators see what's happened in Hawaii, Maine, Vermont and New Hampshire.

This situation has only been reported regionally.

The State Journal (WV), in a recent, quite comprehensive article, explains the big picture like this:
. . . the payoff for Verizon is it cannot only make money selling off its assets, but it can take advantage of a federal tax loophole that allows tax-free mergers between companies. The smaller companies are left saddled with debt and, as a result, can't make the necessary upgrades to existing infrastructure, turning off customers and ultimately leading to work force reductions as dissatisfied customers turn somewhere else.
The State Journal quotes Keith Fulton, president of Verizon West Virginia saying that the land line business . . .
. . . is a declining business for many.
Another 'paper, the Dayton (OH) Daily News, reports Phone merger of Frontier, Verizon should be rejected, counsel says. The article says that the Ohio Consumers' Council cites
. . . the lack of consumer benefits and potential pitfalls . . .
of the merger, and says
The lack of specific benefits for consumers fails to make this merger in the public interest.
A current Google News search returns regional stories but ZERO significant national coverage of Verizon's "throw rural America under the train" strategy.

This video is another good piece. [I could not get an embedded version working.]

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There's actually a bigggg fight coming, which is not being discussed in DC --- The strip-mining of the Verizon utility assets by Verizon, the competitor--FIOS --- as David points out, they've been dropping territories, and this has been going on post-GTE mergers.

But there's a more sinister play --- The entire utility that remains is in jeopardy, not to mention the places that won't get upgraded.

--- The utility vs the deregulated monopoly – Today, Verizon claims FiOS is a competitor to Verizon’s utility service, yet the deregulated business is now strip-mining the Public Switched Telephone Networks (PSTN) and ‘cross-subsidizing’ the broadband/cable business – i.e., not upgrading the utility, but draining its assets. In fact, Verizon’s FiOS removes the copper wire, thus, the utility property is harmed.

Implications: There’s been a major shift from upgrading the utility to now creating a separate, competitive company which does not have the obligations of the utility but gets its perks. The PSTN was open to competition and is supposed to be ubiquitous, wiring everyone. If America is really building “infrastructure” and the utilities are ‘critical infrastructure’ to serve the state, shouldn’t the FCC investigate this shift?

The other implication: America’s infrastructure is now in the hands of companies that not only failed to deploy previously, but do not have the obligations to do the entire state, nor open the networks, even though they receive most of the utility perks. AT&T now controls 22 states and Verizon controls 10 states, as well as the GTE and Alltel territories. However, combined they only have 4.1 million upgraded TV homes. Verizon has said that FIOS will only go to 70% of their properties, thus many areas of Verizon’s territories won’t be upgraded, (even though customers are paying for it.). AT&T’s U-verse is worse as it is an inferior, copper-based product. This means that the infrastructure in AT&T’s 22 states is in jeopardy. If these companies don’t build, who will build the infrastructure for the state?

And then to top it off -- Verizon is actually able to get the state regulators to harm anyone on the PSTN by raising rates to use to pay for FIOS ---

New York State Department of Public Service, June 2009

“We are always concerned about the impacts on ratepayers of any rate increase, especially in times of economic stress,” said Commission Chairman Garry Brown. “Nevertheless, there are certain increases in Verizon’s costs that have to be recognized. This is especially important given the magnitude of the company's capital investment program, including its massive deployment of fiber optics in New York. We encourage Verizon to make appropriate investments in New York, and these minor rate increases will allow those investments to continue.”

These were not minor -- Verizon's raised it's basic local rates 90% since 2004.

And there are many customers that depend on the PSTN -- including Seniors, who don't use broadband, may not be on the internet, and don't use wireless phones, like say, 20 somethings.

I would argue that FIOS is nothing more than an upgraded PSTN, which was supposed to be happening in ALL of the Verizon territories as they received billions per state to do the build outs of the PSTN, not a separate company... maybe it's time to take back the utility.
"AT&T’s U-verse is worse as it is an inferior, copper-based product. "

Actually U-verse uses a fiber optic line, they're old DSL lines where copper based. So you're wrong.
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