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Premium
join:2009-04-29
Parkville, MD

Just 2 simple copper wires

If the phone company can't maintain a simple pair of copper wires coming to the home what will they do when newer but more complex and costly forms of service become less profitable?

It's not that they really want to dump copper they want to dump customers. Apparently they are inconvenient for them.
rradina

join:2000-08-08
Chesterfield, MO

Re: Just 2 simple copper wires

I don't think they want to dump the customer. They'd be happy if they could continue providing POTS analog voice to millions of customers for $100/month. What they don't like is being classified as a monopoly service and being told how much profit they can make.

Whether this is good or bad for the consumer depends on where it goes. If, as Karl suggested, they end up pushing more and more customers to cable and cable eventually realizes they have no competition, will rates skyrocket or will cable VOIP get classified as the new voice monopoly and regulated? I believe cable VOIP regulation is a natural outcome along the lines of when scientists successfully splice crow genes with a pig.
CXM_Splicer
Looking at the bigger picture
Premium
join:2011-08-11
NYC
kudos:2

Re: Just 2 simple copper wires

While they certainly wouldn't want to lose revenue generating customers, I think you are a little off on the number... copper is very expensive to maintain.

And I hear they have spliced spider genes into goats so I wouldn't give up on regulated VoIP just yet. When you get right down to it, it really should be regulated; arguably for cost but at least for quality/down-time issues (cell service too IMO).
rradina

join:2000-08-08
Chesterfield, MO

Re: Just 2 simple copper wires

So you are claiming that essentially doubling the rate that a closely regulated environment allows is still not enough to make a profit -- even though they are reporting financials to regulators that show a profit?
CXM_Splicer
Looking at the bigger picture
Premium
join:2011-08-11
NYC
kudos:2

Re: Just 2 simple copper wires

I think you are confusing Landline with POTS. Verizon certainly reports profits from Landline to regulators, but the POTS portion of that is almost definitely in the red... thats why they are so eager to dump it. Back in the days when POTS was the only option and everyone had a line, they were able to turn a profit even being regulated. Now, the only reason Landline is profitable is because of Verizon Business (FIOS is only now starting to break even). It is from all those expensive (but cheaply maintainable) data circuits.

POTS *could* still be profitable but the copper plant is in such bad shape from neglect that they are spending a fortune just to keep it on life support.
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If Romeny hates the 47% so much, why is he always raising the percentage??
rradina

join:2000-08-08
Chesterfield, MO

Re: Just 2 simple copper wires

That doesn't make any sense. FIOS isn't regulated, is it? Wireless isn't regulated, is it? If not, those profits aren't included.
CXM_Splicer
Looking at the bigger picture
Premium
join:2011-08-11
NYC
kudos:2

Re: Just 2 simple copper wires

Please post these POTS only profits that Verizon reports to regulators.
rradina

join:2000-08-08
Chesterfield, MO

Re: Just 2 simple copper wires

I find it quite unbelievable but after nearly 30 minutes of searching and reading, I couldn't find what revenue and expenses are considered when local rates are set. I do recall that many years ago (early 90s), SBC tried to eliminate Yellow Pages revenue from revenues used to set rates and the Missouri PUC didn't allow it then. I think a lot has changed after the 1996 reforms which allowed wholesale access and schemes to reimburse ILECs when CLECS (VOIP/cellular) terminate calls on their networks.

I did fine an interesting March 2012 paper that seems to support my assertion that revenue and expenses derived from different LOBs are not included in setting rates. Consider this excerpt:

The movement of assets also impacts the accounting of ‘access lines’. Verizon and those quoting the phone companies claim a dramatic decrease of phone lines in recent years. When these numbers are examined, it becomes clear that the companies are only using a subset of their total lines, known as “switched ” access lines. This accounting leaves out whole categories of other active lines, such as ‘special access’ (e.g. alarm circuits), or business services, such as Centrex, or data and broadband services, such as DSL or FiOS, thus making it appear that there are massive declines in phone lines. In fact, the FCC’s most recent data showed that ‘switched’ access represented only 34% of total lines, with special access and other lines representing the majority of lines and they have been increasing, not decreasing.

The ‘secret’ is that when a service is ‘deregulated’ or joined in a bundle with another service, it gets redefined as no longer a ‘switched’ access line and is moved into another subsidiary/affiliate and the revenues goes into another bucket, NOT the public-based-utility networks. We also add that other industry analysts estimate that over 40% of all switched access line losses were due to removing a line when DSL, which travels over the same copper wire as the phone call, made the second or more lines superfluous.
The paper's chief concern is recent Verizon reported losses that allowed it to make a huge profits without the commensurate tax burden.

»www.newnetworks.com/Verizonshellgame2012.pdf
rradina

join:2000-08-08
Chesterfield, MO
I have no idea if this paper is right but they certainly make a lot of assertions that lead me to believe the whole industry is broken and I wonder what the real cost are:

The wireless- only issue is directly related to the tax issues as we will show the wireless
networks appear to be a) dumping expenses or getting free advertising or other perks from
the wireline utility, b) not paying their fair s hare back to the utility for network usage as other
competitors would (thus lower revenue) and c) may even have the construction budgets that
were supposed to be upgrading the state -based networks move to the wireless companies —
i.e., local phone customers funding the wireless networks, which in some states violates basic
state laws.


But the plot thickens as AT&T stated that in 2010, it was now using a different method of
‘inter-segment’ accounting where the “Wireless segment, as a purchaser of network, IT and
other services from the Wireline segment, experienced a reduction in cash operating expense
…with the net result being increased operating margins” i.e.; the company is goosing to
make the wireless division more profitable while it makes the ‘wireline’ division – less
profitable. And all of this reshapes the public policy division of that ‘worthless’ wireline
network.
rradina

join:2000-08-08
Chesterfield, MO
Heck, just read the whole paper. So far I'm only half way through it and I stopped because I need to find a counterpoint to this paper. I need the other side's story to see how objective this paper is because it really paints Verizon as a very manipulative (nicest word I can offer) empire.
CXM_Splicer
Looking at the bigger picture
Premium
join:2011-08-11
NYC
kudos:2

Re: Just 2 simple copper wires

I greatly appreciate your posting that link! Like you, I have only read through a portion of it but there are things in there I have been saying in this forum for a while only to be told they are illegal ergo impossible.

I agree that it tends to suggest that POTS line profits are not as low as stated and that they may not be in the red as I have claimed. Unfortunately, as you have noted, there are no documents which show it either way and I would tend to think if Verizon could produce documents to show POTS in the red, they would.

I will say that:

-The number of POTS subscribers IS down as more and more people switch to cable, FIOS, or wireless only.

-The copper plant is in such a state of disrepair that it requires constant attention.

-The number of technicians have been reduced to about 50-60% of what they were 10 years ago through attrition & layoffs (by my admittedly limited observation) which, when you consider it with the previous point, means LOTS of overtime to keep everything working.

-POTS has always been (well for the last 50 years at least) subsidized by the 'business end' of the company which generated the vast majority of the profits until wireless recently took that position. Yes, the business end is also regulated and included in 'wireline'.

-They have recently made changes to accounting in Enterprise (large business circuits, IOW $$$$$) to further separate it from POTS. These changes are unfolding right now within the company and will cause another 'drastic decline' in POTS profits. In fact, I should probably contact the author of that paper to tell him exactly what is happening... it looks like he would be very interested. (For instance, maintenance costs of existing business circuits are now kicked back to a department still included with POTS)

Realistically, I don't think residential POTS can stand on its own as a product, the profit margins are too low (I still say in the red). Even when business POTS is included, I think it would need to be priced well over $100/line for Verizon to be 'happy' with it. I do not think, though, that they should be allowed to abandon POTS since so many (mostly elderly and small/medium businesses) still rely on it. I believe without a semblance of doubt that Verizon is deliberately killing off POTS at the behest of Wall St. because it is subsidized (such an ugly word to them unless they are getting the subsidy) by more profitable aspects of the business.

Thank you again for the link and for the thought provoking discussion.
--
If Romeny hates the 47% so much, why is he always raising the percentage??