CWA Calls for Regulators to Investigate Verizon's Refusal to Invest in Landline Upkeep

Verizon told FCC it spends less than one percent of the average phone and DSL customer’s rate on upkeep of the network

Legislators Join Call to Investigate Verizon

WASHINGTON- The Communications Workers of America (CWA) today announced it is filing letters with telephone regulators in six states and Washington, DC calling on them to open investigations into the deterioration of Verizon’s copper landline networks.  In July, Verizon admitted in a letter to the FCC that it had only spent $200 million over the last seven years to maintain its copper landline network in eleven states and the District of Columbia.  

The $200 million investment is less than one percent of the amount phone and DSL customers pay Verizon for service, which means the average customer is financing wireless and fiber expansion, rather than the upkeep of the network they rely on.

In light of the new evidence presented by CWA to regulators, scores of legislators across the region joined the call for renewed investigation into Verizon's abandonment of the copper network.

“Verizon pulls in more than a billion dollars in profits each month.  $200 million represents less than half a percent of the $50 billion Verizon spent on its wireline network from 2008 to 2014 and less than one percent of what they charge the average voice customer,” said Dennis Trainor, Vice President of District 1 and Ed Mooney, Vice President of District 2-13 of the Communications Workers of America. “We support Verizon’s expansion of FiOS, but the company also has a legal obligation to provide safe, reliable service over its traditional landline network.”

To put the $200 million in perspective:

• $200 million represents 0.39 percent of the $50.7 billion Verizon spent on its wireline network from 2008 to 2014. Nearly 100 percent of Verizon’s wireline investment was spent to build its fiber network.[1] CWA supports Verizon’s FiOS expansion. But where Verizon has refused to deploy its all-fiber FiOS network, Verizon has the statutory obligation to maintain its copper plant to provide safe, reliable service. (Verizon spent $59.9 billion on its wireless network, 2008-2014.)

• The $200 million that Verizon spent over the past seven years on its copper network amounts to an average of $28.6 million a year per year across its entire landline footprint.

• CWA estimates that Verizon currently has upwards of eight million retail customers on its traditional copper landline network.  (Verizon no longer publicly reports this number.) Using this figure, Verizon’s annual spending on its copper network amounts to about $3.50 a line per year for poles, cables, wires, pedestals, terminals, batteries, and other plant and equipment needed to build, maintain, repair, and service its copper network. (This is a conservative estimate since Verizon had many more copper customers in earlier years.)

• Across the Verizon landline footprint, residential and single-line business customers pay between $300 and $370 a year for basic voice service and about $400 a year for DSL service.  Even using our conservative calculations, Verizon spends less than one percent of the rate it charges for basic voice service and less than half a percent of the rate it charges for a voice/DSL bundled service on the upkeep of its copper network.

• Verizon spent $200 million over a seven-year period on a copper network that covers the vast majority of the population in eight states -- New York, Massachusetts, Rhode Island, New Jersey, Delaware, Pennsylvania, Maryland, Virginia, plus Washington, D.C., and parts of California, Texas, and Florida. (Prior to 2010, the Verizon footprint included an additional 4.8 million lines in 14 additional states.) 

CWA’s letters also point to Verizon’s peer to peer online forums and recent FCC filings by Verizon customers alleging that the company is neglecting copper facilities and lines. Frontline Verizon employees are also chiming in, saying that they’ve seen firsthand how Verizon’s policies, procedures and inadequate investments have led to the virtual abandonment of the copper network and is keeping quality services from paying customers.

These letters come after a series of worker led protests and rallies throughout the Northeast calling on Verizon to negotiate a fair contract with its employees. Verizon makes $1 billion in profits every month and has refused to bargain constructively with its 39,000 employees over the terms of its contract, continuing to insist on the ability to outsource more jobs, increase health care costs by thousands of dollars a person and slash retirement security.

Background

39,000 workers are currently working without a contract at Verizon.  Fortune Magazine ranked Verizon the 15^th largest corporation in America in 2014, with revenues of $127 billion, profits of $9.6 billion, and market capitalization of $198.4 billion. Verizon had profits of $28 billion over the last five years, and paid its top five executives $249 million during that time. 

On July 21^st, Verizon reported profits of $4.4 billion in 2Q2015 on revenues of $32.2 billion. This came on top of $4.2 billion in profits in 1Q2015, which means Verizon has made $1 billion in profits every month for the last 18 months. The company also reported that during the first six months of 2015 it has paid out over $9.3 billion to shareholders in dividends and stock buybacks, an increase of almost $5.8 billion over the first half of last year. In the Wireline division, Operating Cash Flow rose to 23.5%, and operating income doubled, from 2.6% to 5.3%. FiOS continues to expand and succeed, now constituting 79% of Verizon consumer revenues on the wireline side, and achieving penetration rates of 35.7% for video and 41.4% for internet in markets where it is competing.

Verizon has not significantly moved off its outrageous initial bargaining demands, made on June 22^nd, which includes the following proposals:

• Completely eliminating job security and gaining the right to transfer workers at will anywhere in the company’s footprint.
• Increasing workers’ health care costs by thousands of dollars per person, despite the fact that negotiations in 2011-2012 have cut the company’s health care costs by tens of millions of dollars over the life of the past contract.
• Removing any restrictions on the company’s right to contract out and offshore union jobs.  This comes on top of Verizon’s outsourcing of thousands of jobs in recent years.
• Slashing retirement security.
• Reducing overtime and differential payments.
• Eliminating the Family Leave Care plan, which provides unpaid leave to care for sick family members or care for a newborn.
• Eliminating the Accident Disability Plan, which provides benefits to workers injured on the job.

CWA is also negotiating for about 100 Wireless technicians in New York State and 75 retail employees in Brooklyn and Everett, MA.  Verizon’s Wireless operation is even more profitable than Verizon’s wireline operations.  Yet Verizon is not offering major improvements in the technician’s contract and is refusing to negotiate a new contract including major wage and benefit improvements for the retail employees in Brooklyn and Everett, MA.

A damning audit of Verizon’s FiOS rollout in New York City found that Verizon has failed to meet its promise to deliver high-speed fiber optic internet and television to everyone in the city who wanted it.  During its negotiations for a city franchise, Verizon promised that the entire city would be wired with fiber optic cables by June 2014 and that after that date, everyone who wanted FiOS would get it within six months to a year.  The audit found that despite claiming that it had wired the whole city by November 2014, Verizon systematically continues to refuse orders for service.  The audit also found that Verizon stonewalled the audit process. 

In addition, rates for basic telephone service have increased in recent years, even as Verizon has refused to expand their broadband services into many cities and rural communities, and service quality has greatly deteriorated. Verizon’s declining service quality especially impacts customers who cannot afford more advanced cable services, or who live in areas with few options for cable or wireless services.

In 2005, New York’s Public Service Commission (PSC) eliminated automatic fines for Verizon’s telephone service quality failures, reasoning that “competition” would improve services.  Instead, service quality plunged. In the 3rd quarter of 2010, Verizon cleared only 1.2% of out of service complaints within 24 hours, almost 79 percentage points lower than the PSC’s 80% requirement.  Rather than reverse course, the PSC changed its measurements, cutting out 92% of customers from service quality measurements and consolidating 28 repair service bureaus into 5 regions.  On paper, terrible service quality was almost miraculously transformed. In reality, service quality continued to decline. 

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[1] Verizon Communications Inc., SEC Form 10-K, various years.