Does Verizon want to abandon copper landlines to focus on wireless & FiOS?

Ever since Verizon bought out Vodafone to take 100% ownership of Verizon Wireless, the largest U.S. wireless carrier has taken steps to divest its wireline operations to free up focus for its more luctorative wireless business.  This past March, Verizon sold its wireline operations (including FiOS) in California, Florida and Texas to Frontier Communications for $10 billion.  This May, Verizon bought AOL for $4.4 billion in cash, a deal aimed at advancing the telecom giant’s growth ambitions in mobile video and advertising.

On June 9th, the WSJ reported that Verizon’s largest union, The Communications Workers of America (CWA), claims the company is refusing to fix broken landlines.  CWA is accusing the carrier of abandoning its copper landline networks in portions of the northeastern United States.  It says that Verizon isn’t making necessary repairs and instead is pushing customers in parts of New York, Delaware, Pennsylvania, New Jersey, Maryland, Virginia, and Washington, DC. toward wireless home phone service.

CWA, which represents about 35,000 Verizon employees, announced intentions to file Freedom of Information Act (FOIA) requests to pull up data on Verizon’s maintenance of legacy networks. The dispute comes as Verizon and the union are about to enter negotiations later this month for a new contract.

“As a public utility in these states, Verizon has a duty to maintain services for all customers. But we’ve seen how the company abandons users, particularly on legacy networks, and customers across the country have noticed their service quality is plummeting,” Dennis Trainor, CWA vice president for District 1, said in a statement.

“Verizon is systematically abandoning the legacy network and as a consequence the quality of service for millions of phone customers has plummeted,” said Bob Master, CWA’s political director for the union’s northeastern region.  Mr. Master said the union’s interests are aligned with those of consumers. Many customers want to keep their copper landline phones because in the event of a power outage the lines will keep running, while wireless and fiber phone systems will stop working as soon as the batteries die, according to Mr. Master. [Of course that’s correct, because copper phone lines have power feeding from the 48v dc battery in the telco central office that runs for several hours/days after a regional power failure).

Caption:  Are copper phone lines for the birds?

Verizon spokesman Rich Young countered those remarks by saying that the CWA’s allegations are aimed at pressuring the carrier in advance of the contract negotiation talks and he denied the union’s claims.  “It’s pure nonsense to say we’re abandoning our copper networks,” Mr. Young told the WSJ.   Mr. Young said the company is investing in its copper network, and it only offers Voice Link, which delivers service over Verizon’s cellular network, as a temporary replacement while repairs are being done. About 13,000 customers have decided to keep the Voice Link service, Mr. Young said.

Spending on Verizon’s wireline network has declined. In the last year, the company invested $5.8 billion on its wirelines (copper and fiber), a 7.7% reduction from the year before. Mr. Young attributed the drop in spending not to reduced maintenance but to a slowdown in its FiOS build out.

In the wake of Hurricane Sandy, Verizon’s copper lines on parts of the East Coast were damaged. The carrier drew criticism from organizations like AARP for planning to turn off those legacy networks in favor of offering wireless Voice Link technology.

Verizon has expressed a desire to shut off its copper line system in the future in favor of cheaper wireless and higher-speed fiber network access technology. In addition to being faster and in some cases cheaper to build, those technologies face fewer regulations than services delivered over copper infrastructure. AT&T Inc. has also said it wants to eventually shut off its copper network.  That’s despite advances in DSL technology like “vectoring” which mitigates interference and thereby increases upload/download speeds.

Verizon has about 10.5 million residential landline voice customers, about half of which are on copper. In the past few years, the company has moved about 800,000 people off its copper network onto its newer, fiber-to-the-premises based FiOS access network. 

In it’s 1st Quarter 2015 earnings report, Verizon noted a 10.2% year-over-year increase in FiOS revenues with 133,000 FiOS Internet and 90,000 FiOS Video net additions. Total FiOS revenues in the 1st quarter were $3.4 billion.  Verizon has a total of 6.7 million FiOS Internet and 5.7 million FiOS Video connections at the end of the 1st quarter 2015, representing year-over-year increases of 9.4% and 7.9%, respectively.  

Clearly, Verizon is not abandoning FioS, but is not saying much about maintaining its existing copper wire plant.  It’s not correct to conclude that Verizon wants to focus soley on wireless as they see a good business in offering FiOS based triple and quadruple play service bundles to residential customers.