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Why Customers Should Care. The Verizon Communications Workers of America (CWA) members are correct in worrying about the future. In the last two decades, there's been over a 50% decrease in the number of employees-per-line, while there's been a 100% increase in the Bell companies revenues. And construction in Verizon is down over 53% in the last three years. However, there's an another dark side of this discussion that no one wants to talk about --- How customers are being affected by staff cuts and slashes in construction budgets. Everyone knows that service has been declining and prices have been increasing, but the real scam is that instead of reinvesting in the networks and staff, Verizon is using the profits to fund excessive executive compensation and pay for massive overseas losses from bad investments. Some customer examples? When I called Verizon to pay my phonebill over the telephone, I was told that it would cost an additional $2.50 to use a credit card because Verizon was using another company to take credit card orders. With $67 billion in annual revenues, 227,000 employees, as well as a global presence that extends to the Americas, Europe, Asia and the Pacific, you would think that Verizon could take its own credit card payments over the phone. When a customer's phone service died last year, he found out that even though we live in a 24-7 world of the Internet, Verizon is closed on Sundays. ---- And let's not talk about the hassles once he wanted service restored. See: http://www.teletruth.org/About/newsletter/SexliesVerizon.htm When a customer called his Internet Service Provider in New York City to order DSL, she was told that there wasn’t enough copper in her building to give her service. To read about the issues surrounding DSL and broadband see: http://www.newnetworks.com/PRISPPETITIONS.html And you would think that a strike of workers at Verizon would cost customers more money --- "They'll just raise our rates to pay for keeping staff". The slap in the face is that even though there's been over a 50% cut in the employees per-line since Verizon formed in 1984, the prices of services have continually increased. In fact, phone rates have nothing/little to do with the actual cost of service because of a number of regulatory-bam-boozles known as "Deregulation". Ironically, this "deregulation' was granted because Verizon promised to upgrade everyone’s home and office to a fiber-optic service. In Pennsylvania, Verizon charged customers hundreds of dollars for fiber-optic upgrades they will never receive. Half of the state should have been rewired by 2004, including rural and suburban and urban areas equally. See: http://www.newnetworks.com/Libertybellstolen.htm Every Verizon state has a failed broadband story to tell. See: http://www.newnetworks.com/tellthetruthverizon.htm The truth is that this proposed strike is at the heart of what has turned into a nightmare at Verizon. A continuous stream of letters from workers and customers to Teletruth has convinced us that what should really be happening isn't simply a strike by Verizon staffers, but maybe customers should also go on strike. With a take-the-money-and-run mentality, good staffers are being replaced with inexperienced ones or there aren't enough staffers to do specific jobs. The network is a mess. It is based on 100-years old copper wiring and parts of it are crumbling. The construction budget has been slashed and critical upgrades have not been done. In some parts of the New York City, there isn't enough copper wiring to offer broadband or even second lines. But what should annoy the reader is ---How can Verizon continually cut staff and services, but continually raise rates and make more profits -- profits which have gone, not to upgrades in the networks, but to pay for overseas losses and other global concerns, not to mention the debt they incurred from these ventures, excessive compensation for senior management, and funding their other competitive businesses, including offering DSL or their long distance service. The network and its staff are essential, monopoly facilities for wireline phone services that are required to work at maximum performance for the good of the Public Interest. And while the hype is that there’s competition, the reality is Verizon is still a monopoly and still a utility. Verizon is now saying, we're a private company and we can do what we want --- screw the customers and our staff. Teletruth believes that there should be more staff and a better training program, with real upgrades, not those mentioned in the press releases only. From the customer perspective, there should be 24 hour-7 day-a-week repairs, prices should be based on costs and not some kind of voodoo economics, and when a customer has a problem, they should be compensated--- with cash for their time and effort they spent without service or from the frustration that there aren't enough workers and construction budgets to fix the problems. When you hear the members of the Communications Workers of America complain about "job security" while Verizon says "we need "flexibility", the undiscussed message to customers should be --- Verizon is cutting staff to make more money and give us inferior services. And this harms both the workers as well as us. Imagine trying to do a job when there’s not enough people to cover the work, or upgraded network equipment to supply the ordered services. And if Verizon is going to keep cutting staff and construction budgets, every customer should be asking -- Why aren't prices continually falling? If it's not going to pay for staff and new construction, why aren't we getting refunds or the services we were promised? Let's present some details: (Created for Teletruth by New Networks Institute)
According Verizon's own quarterly reports, Construction Expenditures on local phone services have been cut 53% in the last three years and total staff has been cut 16%. (This is for the entire Verizon company. Staff cuts for local phone services have had much deeper cuts than the overall number.) In a report in 2002, CWA showed the entire situation is in serious decline in New York, both in terms of Verizon previous staff cuts and construction budgets being slashed. See: http://newnetworks.com/cwareportaugust2002.htm On the staff side: "In May, (2002) Verizon New York, Inc. (Verizon) announced that it would reduce its work force by more than 2,000 non-management employees. This reduction in force could include the layoff of all or some of these workers as early as September 2002. This downsizing occurs after Verizon had already reduced its force by approximately 3,000 workers through early retirement and attrition since the end of 2001. Thus, after the latest cuts, Verizon will have reduced its non-management workforce by almost 5,000 workers or 15.5% over an eight-month period and by 6,780 or 20% over a 20-month period." These staff cuts are on top of a series of reductions over the last two decades. In fact, there has been over a 50% drop in employees-per-line since the Bells took over local phone service. These new cuts put the networks in serious jeopardy for not only broadband but also phone services. To see more information on staff cuts throughout the Bell System see: http://www.teletruth.org/docs/unauthbiobook2.pdf The CWA makes the observation that these cuts impact everything from our phone network security to the ability of Verizon to adequately handle competitors. "The critical issue facing consumers, businesses, the general public and the PSC is that this particular reduction in force entails a significant decrease in the construction, maintenance, monitoring, testing and rehabilitation of the company’s infrastructure. The major consequences of these actions include the following:
It gets worse because the condition of the network itself is now put into question due to large cuts in construction expenditures. "In 2002, Verizon has cut its construction budget significantly. In the first half of 2002, Verizon reduced its capital expenditures by $803 million or 56% compared to the first half of last year. Verizon also has transferred many workers out of construction across the entire state. In many instances, Verizon has halted construction work." What's really ironic is that Verizon was granted various increases in rates over the last decade and under 'Alternate Regulations", which does not look at the companies' profits. Staff cuts and construction cuts make Verizon more money. We also need to reemphasize that Verizon has been making various claims about rolling out and upgrading the networks to fiber-optics. These promises have proven to be nothing more than ways to increase their profits by gaming the regulatory system -- promise them fiber and they'll give you more money. To read Verizon's fiber-optic track record see: http://www.newnetworks.com/tellthetruthverizon.htm Instead, we have a situation where the lack of new construction is harming DSL services. There isn't enough copper wiring to fulfill basic orders. (Communications Workers of America, August 29th, 2002) "Verizon does not supply enough clean copper pairs to enable technicians to properly install new customer lines or replace defective pairs on existing customer lines. Instead, Verizon utilizes a "short term" technological fix called an AML or DAMLs." AML/DAMLs cannot support DSL service. Also, competitors seeking to provide DSL to Verizon’s voice customers via line sharing cannot do so where an AML/DAML exists on a customer’s loop. Use of these temporary fixes therefore interferes with CLEC efforts to compete with Verizon in the DSL market." Bell Profits? You're Being Charged For Losses Overseas, Excessive Executive Compensation And Funding DSL And The Bells' Entry Into Long Distance And Wireless Services. For a report on the Bell company’s profits, see: http://www.newnetworks.com/profitreport2002.htm Local phone service is still one of the most profitable services in America. The exhibit below highlights findings from a Florida Public Service Commission report comparing the actual cost of various calling features to the price paid by subscribers. The Florida Commission found the profit margin on Bell South's Call Waiting feature to be 48,680%. Caller ID, which cost the customer $7.50 per month, had a 3,264% profit margin.
Source: "Report of the Florida Public Service Commission on the Relationships Among the Costs and Charges Associated with providing Basic Local Service, Intrastate Access and other Service by the Local Exchange Companies in Compliance with Chapter 98-277, Section (2) 1 Laws of Florida, February 19, 1999." In New York, Call Waiting is $5.30 while Caller ID is $7.99. Many states, including New Jersey, still charge for Touch-tone service, a service that cost $0 to offer. Ironically, instead of reinvesting this money in bringing to the public the Fiber-optic future that was promised, or even being able to get someone to fix your phone on a Sunday, what we have is an elaborate three-card-Monty game, where the profits from local phone service goes out of the states and into paying for a host of other items. Competition and a Loss of Lines? Where? Verizon keeps informing people of the harm they have via competitors and that they have been losing lines. --- It’s a shame that they haven’t looked at their own Annual and Quarterly reports. Voice Grade Equivalents went up 10% over the last three years. Meanwhile, Competitive lines known as "UNE-P and Resale Lines" are only 5 million, about 3.6% of the total Verizon lines. In fact, Dividends paid to shareholders have continued to rise. (Using Second Quarter Data)
We’re not the only ones who use
the Voice Line Equivalent data --- As Verizon states:
Executive Compensation: Senior Management Gluttony While Verizon is cutting staff and benefits, there's been Senior Management Gluttony - As a group, Verizon, (the merger of Bell Atlantic (NYNEX) and GTE) had the highest group pay and salaries and options with 6 executives getting $194 million in salaries and almost 15 million shares of stock, valued at $424 to $1.1 billion - This includes two CEO’s (GTE Charles Lee and Bell Atlantic’s Ivan Seidenberg.) From http://www.newnetworks.com/prcompensation2002.htm (In the thousands)
Recently, the Communications Workers of America posted their own stats about their bosses. See: http://www.cwa-union.org/verizon/exec_comp/ Foreign Losses and Write-offs And where's all the money going? Since 1999, Verizon has taken almost $25 billion dollars in write-offs, with the majority of this for mostly overseas and other investment losses. For some details about their spending see http://www.teletruth.org/docs/ForeignBellinvest.doc
For example, in the second quarter of 2002, Verizon took a $1.4 billion write-off for their investment in Compania Anonima Nacional Telefonos de Venezuela (CANTV).
In 2003, the company wrote-off almost a billion dollars for losses from Iusacell, they took a $3.5 billion dollar write off for old equipment, and $1.2 billion dollar loss from changes in devaluation of some of their holdings. The irony? --- These losses lowered the amount of money Verizon paid the Federal government. In 2002, Verizon only had a 26.1% tax rate, with a $2.1 billion dollar tax benefit. Pay Off Debt? And where is all the money that Verizon makes going after it bought various failed overseas properties that lost billions? Verizon took major loans and is now having to pay off their enormous debt. --- This $8.6 billion dollar charge was in their second quarter report, 2003.
Illegally Funding DSL and Long
Distance Services --- Based on an upcoming report,
it is now clear that Verizon has not been paying its fair
share of competitive service and has been allowed to fund
DSL through customer local phone service rates. In a recent
Complaint filed in Pennsylvania, Teletruth found that $60
million dollars of customer-funds went to improperly pay for
DSL rollout, which is defined by the FCC as a competitive,
Long-Distance-Information service that is not regulated by
the state. And it is clear this practice was not restricted
to Pennsylvania. See: Pressure on the Workers -- and Falsification of Data. The problems encountered by the CWA have been documented and discussed for years. For example, In November 2000, the CWA released a report, "Service Quality & Service Quality Reporting at Verizon - NY." This report, requested by the New York Public Service Commission to examine service quality issues, is part of the ongoing Alternate Regulation plan that governs Verizon's local phone services. Here is a litany of documented harm. Here is some information taken directly from the report: http://www.newnetworks.com/pressslccomplaint.htm
Recently, the Public Service Commission decided to start an audit of the Service Quality Issues and suspend raising rates until the company improves service. (Docket 03042/02C0543;00C1945) See: http://www.teletruth.org/docs/servicequalitydoc13376.pdf "In response to concerns about the quality of telephone services provided by Verizon New York Inc. (Verizon), the New York State Public Service Commission voted today to initiate a service quality proceeding that will include an independent audit focusing on the adequacy of Verizon’s long-term service quality improvement efforts. Further, the Commission decided to direct Verizon to file tariffs suspending the company’s pricing flexibility and to file a service improvement plan that envisions attainment of all five service quality objectives in the second year of its current regulatory plan, the Verizon Incentive Plan (VIP). In short, besides backing the CWA in fixing the current worker problems, Customers may want to strike to have the money for local phone service be worth the fees we pay and not fund overseas losses, excessive executive compensation or funding other Bell services. To repeat, Teletruth believes that there should be more staff and a better training program, with real upgrades, not those mentioned in the press releases only. From the customer perspective, there should be 24 hour-7 day-a-week repairs, prices should be based on costs and not some kind of voodoo economics, and when a customer has a problem, they should be compensated--- with cash for their time and effort they spent without service or from the frustration that there aren't enough workers and construction budgets to fix the problems. And if Verizon is going to keep cutting staff and construction budgets, every customer should be asking -- Why aren't prices continually falling? If it's not going to pay for staff and new construction, why aren't we getting refunds or the services we were promised? Bruce Kushnick, Chairman, Teletruth, http://www.teletruth.org Executive Director, New Networks Institute, http://www.newnetworks.com |
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