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Verizon Is 'Killing the Copper' and Is Now Denying It

06/11/2015 01:48 pm ET | Updated Jun 11, 2016
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"Cut the copper off," said Lowell McAdam, Chairman and CEO of Verizon Communications, speaking at the Guggenheim Securities Symposium, June 21, 2012:

And then in other areas that are more rural and more sparsely populated, we have got LTE [Verizon Wireless] built that will handle all of those services, and so we are going to cut the copper off there. We are going to do it over wireless. So I am going to be really shrinking the amount of copper we have out there, and then I can focus the investment on that to improve the performance of it.

The next two headlines say it all: The Communications Workers of America (CWA), the largest telecommunications union, claims that Verizon isn't fixing the land lines or upgrading the networks and has filed in multiple states to get more documentation and investigations going about these issues.

Yet Verizon claims they aren't abandoning the lines.

  • "Verizon's Biggest Union Claims Carrier Isn't Fixing Broken Landlines," Wall Street Journal, June 9, 2015
  • Verizon's media department should really read their own CEO's statements before they open their mouths in the press. As the opening quote revealed, CEO McAdam and other Verizon senior management have said over and over and over that the company is "shutting off the copper" -- with the subplot being to force customers onto Verizon Wireless' inferior and expensive wireless services.

    Yet, according to RCR Wireless, Verizon is denying that they have a plan kill the copper:

    Verizon flatly denied union accusations that neglect of its landlines is impacting customer service in the Northeast. According to The Wall Street Journal, the Communications Workers of America claims that Verizon is abandoning its legacy network in certain places, resulting in lower quality of service for landline customers.

    "There is zero factual evidence for such a bold statement," said Raymond McConville, media relations manager at Verizon. "This is very typical of them, leading into a contract negotiation. They're trying to make some claim that we're ignoring this part of the business, or abandoning this part of the business, and it simply isn't true."

    Maybe Verizon should also read the petition by the New York State Attorney General's Office before the company claims that there is "zero factual evidence" that the company is abandoning the copper networks. The New York State Attorney General goes into detail about declines in service quality and the diverting of the construction budgets meant for the utility, now going to pay for Verizon's wireless rollouts.

    But most importantly, the issue isn't just that the aging copper networks are being shut off or are not being properly maintained. The real issue is that Verizon failed to properly replace the states' legacy copper utility infrastructure with a fiberoptic wire, yet it charged customers for the upgrades via rate increases over the last two decades. On top of this, about 50 percent of customers will never get what they paid for, while 80 percent of New York's municipalities aren't getting upgraded. The insult on top of injury is that these same people and communities are put upon with a master plan to shut off the wires completely and force these same customers onto more expensive wireless services, which is the plan currently in place in Pennsylvania and New Jersey, as we've pointed out.

    And you know the situation really stinks when the only other option for broadband may from one of "the most hated companies of America" -- the cable companies, or nothing.

    Kill the Copper, Cut the Copper Off, and Shrink the Copper-- Because It's a Pot of Gold

    Let's rip apart Verizon's statements -- with Verizon's own statements, shall we?

    Lowell McAdam, CEO, speaking at the Guggenheim Securities Symposium on June 21, 2012, says "killing the copper" is a "pot of gold":

    We have got some work to do in New York and New Jersey there that are frankly pretty backward compared to the rest of these states, so we have got some work to do there. But the vision that I have is we are going into the copper plant areas, and every place we have FiOS, we are going to kill the copper. We are going to just take it out of service, and we are going to move those services onto FiOS. We have got parallel networks in way too many places now, so that is a pot of gold in my view.

    At the September 2012 JPMorgan analyst conference, McAdam said moving the customers to wireless makes the company more profits:

    And in many areas we're also taking customers that aren't performing well on copper and we're moving them over to the wireless technology. So that improves our cost structure significantly and streamlines all those ongoing maintenance costs.

    Lowell McAdam, speaking at the Citi Global Internet Media and Telecommunications Conference in January 2013, said that Verizon's new "mantra" is "You will not fix copper":

    When we had the impact of Sandy, our mantra was "You will not fix copper." So if copper got into any kind of a damaged situation and FiOS was in the vicinity, or we could run FiOS down an adjacent street and get into there, we would cut the copper out of service.

    And why do it? Well, upselling -- that is, having the customers buy more products from the companies' own affiliates:

    Now what is the reason we want to do that? Well, when a customer goes even to FiOS digital voice, they very quickly see the difference on copper, and we have seen the ability to sell up.

    Sense a pattern? It's: Kill the copper in rural areas and replace it with wireless because doing so makes more profits. Kill the copper in FiOS areas because they can upsell the customer and make more profits.

    Diverting the Construction Budgets

    But here is the glitch: Customers, it appears, have been paying for everything via diverting the construction budgets of the state utility to do work for Verizon Wireless and FIOS cable TV.

    But don't take my word for it. I give you a quotation from New York State Attorney General Eric Schneiderman. In a response to an inquiry by the New York State Public Service Commission and the New York State Attorney General's Office about capital investment, Verizon stated that in 2011 the company spent over $1 billion. The Attorney General claims this is misleading, as the money has been shifted to fund Verizon Wireless and FiOS TV:

    Verizon New York's claim of making over a "billion dollars" in 2011 capital investments to its landline network is misleading. In fact, roughly three-quarters of the money was invested in providing transport facilities to serve wireless cell sites and its FiOS offering. Wireless carriers, including Verizon's affiliate Verizon Wireless, directly compete with landline telephone service and the company's FiOS is primarily a video and Internet broadband offering.

    Therefore, only a fraction of the company's capital program is dedicated to supporting and upgrading its landline telephone service. Moreover, this investment in sustaining wireline service has declined steadily even when compared to the number of telephone lines in service, such that the dollars per access line budgeted for 2012 is one-third less than the investment per line for the 2007-2009 period. Thus, even when one accounts for the reduced number of customer lines. Verizon has significantly cut its capital investment in its wireline business.

    There is a long list of caveats to these findings, but based on the New York State Attorney General's analysis over the last few years, these findings are a red flag.

    This next excerpt is from the table of contents of the "Petition of Attorney General Eric T. Schneiderman to Modify the Verizon Service Quality Improvement Plan," filed April 25, 2012, which was before the Sandy storm of October 2012.

    It specifically details a decline in every part of the maintenance of the existing copper infrastructure used for phone service or DSL, with the gist of the petition detailed in the headings.

    2015-06-11-1434044412-3657950-VerizonAG2012.png

    Moreover, the New York State Attorney General's Office states that this decline in service quality has been caused by cuts in staff as well as a focus on the wireless business, including the construction budgets for the fiberoptic wires to the cell towers, among other issues.

    The New York State Attorney General writes that:

    Verizon is reducing staff and focusing on wireless:

    Rather than meet its obligations to provide wireline telephone customers with minimally adequate telephone service, Verizon is continuing to drastically reduce its workforce with the result that the company cannot meet its customers' repair needs in a timely manner. Verizon's management has demonstrated that it is unwilling to compete to retain its wireline customer base, and instead is entirely focused on expanding its wireless business affiliate.

    Verizon shifted investment to wireless, and it is harming the wireline business:

    Maintaining a reliable telephone network and performing timely repairs to customers' telephones requires both preventive maintenance of the outside plant and an adequate workforce to respond to trouble reports as they are received. Verizon has chosen instead to spend the bulk of its investment and manpower on expanding its wireless business. Left to its own choice, there is every reason to expect that Verizon's service quality and network reliability will continue its downward slide to even greater depths. Rather than invest in the workforce and network improvements to maintain reliable telephone service and perform timely repairs, the company has relentlessly downsized and avoided upgrading its wireline network.

    Verizon is focused on wireless and is uninterested in their core wireline business:

    Verizon's own actions have demonstrated a disinterest in continuing to compete for wireline customers or invest in traditional telephone service. Instead, the company's resources and management focus is concentrated on its wireless affiliate, to the detriment of Verizon's wireline customers.

    In conclusion, Verizon's spokesperson Raymond McConville, their media relations manager, said, "There is zero factual evidence for such a bold statement."

    Ray, we can keep going all day. Maybe you should retract your statements and apologize to the CWA and the public?