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Unions Ramp Up Opposition To Verizon/Frontier Deal
Running ads criticizing Verizon's use of tax loophole
by Karl Bode 08:51AM Thursday Oct 22 2009
With the problems faced by Fairpoint and Hawaii Telcom after integrating Verizon's unwanted DSL networks, Verizon's even more ambitious plan to offload an even bigger chunk of rural customers to Fairpoint is getting added scrutiny. The $8.5 billion deal, if approved, would infuse Frontier (which currently has 2.3 million customers) with 4.8 million new residential and small-business phone lines across 14 states, 1 million broadband connections, and 11,000 former Verizon employees.

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Unions, who obviously don't want the new company to fail or cut back on infrastructure investment or jobs, have started pushing harder to get the deal scrapped. The Communications Workers of America is running this ad in West Virginia that complains about Verizon's favored tactic of using Reverse Morris Trusts.

The tactic allows Verizon to offload networks to smaller companies willing to eat a heaping spoonful of debt, while Verizon gets huge tax write offs worth hundreds of millions of dollars. Frontier, meanwhile, is busy trying to convince people they're not Hawaii Telcom or Fairpoint:
quote:
"Our biggest challenge is really getting people to understand who we are," said Steven Crosby, senior vice president of public relations for Frontier. More specifically, that they're not Hawaiian Telcom Communications or FairPoint Communications, two companies that recently bought up Verizon land lines in Hawaii and New England...Frontier is telling Verizon customers it's been in the telecommunications business for 70 years -- and it's not going to drop the ball if the deal goes through next year.
Of course Fairpoint said many of the same things, and is still saying the same things as they're teetering toward bankruptcy. Whatever the result, consumers are getting the short end of the stick in these deals. Either they stay with Verizon, who has no interest in upgrading rural America to better service, or they get acquired by a smaller company so loaded by debt that it can't afford to upgrade rural America to better service.

Regulators could force Verizon to sell these properties the old fashioned way -- but then Verizon could just choose to hold on to them and decide to treat them as second class markets unworthy of investment.

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battleop

join:2005-09-28
00000

Let me fix that for you...

Unions, who obviously don't want the new company to fail or cut back on infrastructure investment or jobs, i.e. revenue.....

ArrayList
DevOps
Premium
join:2005-03-19
Brighton, MA

Re: Let me fix that for you...

yea that looks more like it. i'm sure that they would love more job security(infrastructure investment)

cdru
Go Colts
Premium,MVM
join:2003-05-14
Fort Wayne, IN
kudos:7
said by battleop:

Unions, who obviously don't want the new company to fail or cut back on infrastructure investment or jobs, i.e. revenue.....
The parts that you struck out though go towards the jobs. If the company fails, that's definitely going to cut back on jobs. If the company doesn't maintain the network, or let it deteriorate technologically, that too can result in the loss of jobs. the union may be focused primarily on jobs/pay/benifits, but the other issues are of concern too.

spewak
R.I.P Dadkins
Premium
join:2001-08-07
Elk Grove, CA
kudos:1
Reviews:
·SureWest Internet

Frontier

"Regulators could force Verizon to sell these properties the old fashioned way -- but then Verizon could just choose to hold on to them and decide to treat them as second class markets unworthy of investment."

The second part of the sentence above, quoted from the article is exactly how Frontier already treats their subs. As unworthy of investment. Now for the $64 dollar question as to why? Lack of competition!
--
The weekend is here, grab a can of beer!
tmc8080

join:2004-04-24
Brooklyn, NY
Reviews:
·Optimum Online
·ooma
·Verizon FiOS

how low will Verizon go?

Verizon already sold out from under 20% of their subscriber footprint in mostly rural and bad ROI areas, all the while creeping into AT&T's gilded cage,ahem i mean footprint out west and down south (Texas comes to mind as a prime example). I really don't care how many jobs verizon ultimately keeps ,but;

The most important thing is Verizon better step up it's competition and service customers properly or it won't be able to keep them, as cable won't play dumb forever, eventually they will have to give docsis 3.0 the proper investments and competitive offerings or risk anti-trust class action pretty soon.
No longer can a duopoly keep milking pitiful offerings as less for more without some consequences. After all, what do they think they are? Banks, the Auto industry, Healthcare Insurance companies?!

cdru
Go Colts
Premium,MVM
join:2003-05-14
Fort Wayne, IN
kudos:7

Re: how low will Verizon go?

said by tmc8080:

all the while creeping into AT&T's gilded cage,ahem i mean footprint out west and down south (Texas comes to mind as a prime example).
Can you point to any significant sized areas that actually have duoploy of ILECs? I know that there have been reports of a few neighborhoods or smaller towns that might have sections serviced by both AT&T and Verizon, but statistically I don't think those service areas are even statistically and financially relevant in the big picture.
nasadude

join:2001-10-05
Rockville, MD
Reviews:
·Verizon FiOS
said by tmc8080:

....
No longer can a duopoly keep milking pitiful offerings as less for more without some consequences. After all, what do they think they are? Banks, the Auto industry, Healthcare Insurance companies?!
well, of course they will keep milking things and offer as little as they can for the highest price they can get. With little or no competition, customers must choose between something or nothing. with broadband really becoming a necessity (in my opinion), people just grit their teeth and bend over.

this will not change until there is real competition, just like health care costs won't get any better unless there is real competition.

ArrayList
DevOps
Premium
join:2005-03-19
Brighton, MA

after

what the ceo of Verizon said the other day in the net neutrality piece its obvious what is driving this entire thing.

n2jtx

join:2001-01-13
Glen Head, NY

USF

It makes me wonder why Verizon gets USF subsidies if the whole intent was to subsidize rural America. Perhaps the FCC should yank those subsidies from Verizon and give them to whatever company takes over the rural installations. I hate the whole idea of the Universal Slush Fund but at the very least it should go to those companies that endeavor to support the areas it was intended for.
--
I support the right to keep and arm bears.
lesopp

join:2001-06-27
Land O Lakes, FL

Re: USF

The USF also subsidizes high cost areas, so by whatever federal government philosophy or congressional philosophy they employ (lying, cheating, stealing), they keep it as a revenue stream.
patcat88

join:2002-04-05
Jamaica, NY
kudos:1

1 edit
The answer is to kill USF payments for POTS, and have USF only pay out for broadband with POTS reliability and availability. Voice is just data. If the telco then tries to abandon POTS, the state PUC with universal service laws will come asking questions, from pressure from politicians who are feeling heat from senior citizens in the boondocks
Sammer

join:2005-12-22
Canonsburg, PA
said by n2jtx:

It makes me wonder why Verizon gets USF subsidies if the whole intent was to subsidize rural America. Perhaps the FCC should yank those subsidies from Verizon and give them to whatever company takes over the rural installations. I hate the whole idea of the Universal Slush Fund but at the very least it should go to those companies that endeavor to support the areas it was intended for.
The USF subsidies for the acquired lines do go to the acquiring company and these deals definitely reduce the amount of USF cash Verizon receives. Many Verizon lines are already considered neither rural nor high cost so they don't receive any USF subsidies. One of the problems for the acquiring company is even those Verizon lines they acquire that are subsidized will continue to receive the second lowest (AT&T's is lower) USF subsidy per line. Of course AT&T still receives more USF cash than any other phone company because they have such a huge number of lines.
lesopp

join:2001-06-27
Land O Lakes, FL

1 edit

Real competition would be nice

This is an area where we need real change, we (the people) should force a divestiture of the last mile by requiring "last mile" providers only provide "last mile" goods and services.

Voice, video and internet services are not last mile goods or services.

scooper

join:2000-07-11
Youngsville, NC
kudos:2

Re: Real competition would be nice

said by lesopp:

This is an area where we need real change, we (the people) should force a divestiture of the last mile by requiring "last mile" providers only provide "last mile" goods and services.

Voice, video and internet services are not last mile goods or services.
Say what ?!?!

That's EXACTLY what "Last Mile" services are. That and the transport medium they ride on.
lesopp

join:2001-06-27
Land O Lakes, FL

1 edit

Re: Real competition would be nice

Sure they are now, but its only because they are all homogenized into service offerings by a telco and/or a cableco both with a strangle hold on your information flow, that's the point of divestiture. With access to the last mile any voice, video or internet provider can reach you with their product. Based on the Vonage model I say this spurs competition and has brought down voice prices for those willing to try the newer technologies. Or are you're saying Vonage is a last mile service?

alchav

join:2002-05-17
Saint George, UT
Reviews:
·ooma

Re: Real competition would be nice

said by lesopp:

Sure they are now, but its only because they are all homogenized into service offerings by a telco and/or a cableco both with a strangle hold on your information flow, that's the point of divestiture. With access to the last mile any voice, video or internet provider can reach you with their product. Based on the Vonage model I say this spurs competition and has brought down voice prices for those willing to try the newer technologies. Or are you're saying Vonage is a last mile service?
Do you even know what you are talking about? The Telcos brought you the Last Mile, and they opened up the Internet to the world. The Telcos started with Voice, and then came Internet and Video. The Cable Companies came in later with Video, and then expanded to Internet and Voice. Both of them laid out good money to bring us these Services, and yes there was some perceived abuse. That's why back in 1986 Judge Green broke up AT&T. Competition is open, they just have to use the Infrastructure for the Last Mile that these Companies paid good money.
lesopp

join:2001-06-27
Land O Lakes, FL

Re: Real competition would be nice

Thanks for the unnecessary revisionist history lesson.

To some people, even in this day and age, the telcos bring only POTS and cable isn't available. At first the telcos didn't even see the need for, or envision profitability in, the internet. This is evident today where we see Verizon dumping rural areas because of lower profitability.

In the days before DSL, I recall setting up POPs in various BBN data centers in response to demand left unfilled by the telcos. Don't make them sound as if they have the best interest of everyone in mind, they don't. The truth is they are corporations and are required to put investor interests first and not the interests of we the people.

When you say they laid out good money are you including funds spent on bribes and lobbying? Are tax breaks factored into the "good money" equation? What about property rights being trampled upon for right-of-way easements?

It was actual antitrust abuses and not perceived abuses that lead to the 1986 divestiture, hence the phrase "revisionist history".

I am saying divest them of the last mile facilities and infrastructure in the same way AT&T was forced to split off the original 7 baby bells with a separate company for long distance.

alchav

join:2002-05-17
Saint George, UT
Reviews:
·ooma

Re: Real competition would be nice

said by lesopp:

Thanks for the unnecessary revisionist history lesson.

I am saying divest them of the last mile facilities and infrastructure in the same way AT&T was forced to split off the original 7 baby bells with a separate company for long distance.
How do you think this will be done? Who will take care of this Infrastructure, and who is willing to pay for it? I know just give it away, but that is impossible. Communities and Cities will have to run their own Fiber. Then the cost to Install and Maintain is back to the people where it belongs, I have said this for many years.
scooper

join:2000-07-11
Youngsville, NC
kudos:2

One wonders how "eager" Verizon would be..

One wonders how "eager" Verizon would be to go through these divestures WITHOUT the RMT incentive...
EPS4

join:2008-02-13
Hingham, MA

Re: One wonders how "eager" Verizon would be..

It's a decent question- I mean, they would still probably want to dump the rural areas, but they'd probably instead just look for the buyer willing to pay the most money. (The question is, who is that? May even be Frontier, in this case- is at&t really interested in Verizon's cast-offs? Does Qwest have the resources? And you can keep going from there- CenturyLink just finished an expensive merger...) So maybe there wouldn't be a deal after all.
WhatNow
Premium
join:2009-05-06
Charlotte, NC
Reviews:
·Time Warner Cable

Re: One wonders how "eager" Verizon would be..

Most of the areas were GTE and they had a terrible reputation. The plan only works when you have areas that make a lot of money to make up for the losses in the rural areas. The reason the Bell System had good plant was the long distance profits paid for a lot of extras other phone companies could not afford. The spun off areas will never have the funds to upgrade their internet unless the Government Fed, state, or local gives / loans them the money to install fiber. It is hard to do upgrades when you can not afford to even maintain the current POTs plant. There are two reasons the customers are too far apart and the other reason is the many of the customer can not afford a lot of extras and many times even just dial tone.
EPS4

join:2008-02-13
Hingham, MA

Re: One wonders how "eager" Verizon would be..

Indeed. The Bell System was deliberately set up to overprice long distance so that local service could be propped up. (I remember seeing it noted somewhere that in the decade after the breakup, long distance prices went down while local prices went up, which makes sense)

But don't forget, the sale does cover some non-rural areas as well- some of those places in Washington and Oregon that are being sold even have FiOS, I believe. (Same with the Northern New England sale, southern NH in that case)

Nope

@rr.com

Frontier-Verizon deal not a good idea

Frontier says it's different because it's been in the telecom business 70 years.

Big whoop.

Hawaiian Telcom has been in the telecom business 126 years.

The main problem for Hawaiian Telcom and FairPoint is that the decision makers who pushed the deal did not understand that it is not possible to take the data from 80-100 Verizon systems and begin processing it with non-Verizon systems. Not in 1 month. Not in 6 months. Not in 12 months. If you succeed in doing it flawlessly with just one system in 6 months or 12 months you're doing fine. It's impossible to do it with 80-100 systems. The decision-makers have no idea of the problems inherent in that task.

If government authorities let the Frontier-Verizon deal go through, it is a certainty that Frontier will go down the same path as Hawaiian Telcom and FairPoint. There is no question about it.

Beyond the system issues, which will bring Frontier to its knees if the deal goes through, it should be considering the bigger question, namely, why buy a landline business that is well on its way to becoming obsolete, even if it stays in Verizon's hands? Ten years from now any landline customer base that Frontier acquires from Verizon today will shrivel to half or even a quarter of its current size, even absent accelerated customer defections due to inevitable system problems. The migration away from copper landlines to wireless is a worldwide phenomenon. There is nothing that Frontier can do to stem the tide.