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Verizon Strike Exposes Broader Shifts in Telecom Labor Conditions

The effects of labor outsourcing and the end of landlines undergird the Verizon strike by CWA and IBEW union members.

The strike by 36,000 Verizon workers — represented by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) — is about to enter its second month.

When the Verizon workers first walked off the job on April 13, the strike quickly became a campaign issue as Democratic presidential candidates Bernie Sanders and Hillary Clinton joined the strikers’ picket line. Now, as the strike drags on, both sides of the labor issue are digging in for a long bitter struggle.

As the national media attention focused on the presidential contest shifts from the East Coast to the West Coast, the striking Verizon workers have disappeared from the corporate media stage.

“The unions are the canary in the coal mine. The fate of the unions is also the fate of America’s broadband future.”

CWA members and supporters are planning to rally on May 25, outside a meeting of the New York State Procurement Council in Albany, and call for the State of New York to refuse to grant any new contracts to Verizon. The state currently has over $311 million in existing contracts with the company, according to the CWA.

What’s behind the Verizon strike — and why should Americans care? The strike has a deeper structural level, pointing to the remaking of Verizon as a corporation and workers’ prospects for a “middle-class” life, as well as the fate of communications’ future in the United States.

“The ideology of the 1% is that they can do whatever they want, even if it doesn’t make sense,” CWA District 1 strike mobilization coordinator Peter Sikora told Truthout. “It’s part of the 1%’s war on workers.”

According to Bruce Kushnick, a telecom analyst with the New Networks Institute, “The unions are the canary in the coal mine. The fate of the unions is also the fate of America’s broadband future.”

The Big Squeeze

The corporate media have identified some of the key issues in the strike — wages, medical and retirement benefits, and outsourcing. But this is just the tip of the iceberg.

In 2011, 43,000 Verizon workers struck; in 2016, 36,000 are on strike. What happened to the missing 7,000 workers, 16 percent of the workforce? Their disappearance is part of the big squeeze, the outsourcing of labor costs to maximize profit.

Verizon workers see the writing on the wall and wonder when their jobs will be outsourced. Rightfully suspicious, Verizon employees ask why the company does not temporarily increase local staffing to meet demand requirements or distribute heavy volume calls to other nearby — and unionized — centers.

Wireline vs. Wireless

The striking Verizon workers are principally assigned to what is known as the “wireline” business: an operation ostensibly separate from the new and more profitable wireless business. Wireline is a shrinking part of Verizon’s business and includes two sectors:

1. Good old copper wire, dubbed “POTS” for “plain old telephone service,” upon which communications services operated during the last century; and

2. The new optical fiber networks like Fios, the wireless towers and Verizon’s network excess capacity that it sells to third-party service providers.

Verizon is moving aggressively to shut down its copper infrastructure and “migrate” customers to wireless services. In 2012, Verizon chief financial officer Fran Shammo laid out the company’s long-term scheme to investors: “The fact of the matter is Wireline capital — and I won’t get the number but it’s pretty substantial — is being spent on the Wireline side of the house to support the Wireless growth. So the IP backbone, the data transmission, fiber to the cell that is all on the Wireline books but it’s all being built for the Wireless Company.”

The shift from wired to wireless service has been underway for nearly a decade and has had the gravest consequences for customers in rural areas where service is terrible. The consequences of this transition are profound because it shifts the user to inferior and unregulated service (wires remain regulated), cuts the number of unionized employees (wireless workers are mostly non-unionized), charges higher rates and increases corporate profits. It is also part of the company’s “broken promises” strategy.

Verizon chief executive Lowell McAdam recently announced that the company will introduce the next-generation 5G wireless network services, or, as one analyst reports, “speeds 200 times faster than the 5 Mbps [megabits per second] generally available today on Verizon’s LTE network.” If you believe this, I’ve got a bridge for you.

Broken Promises

In June 2015, New York City Mayor Bill de Blasio issued a scathing report evaluating Verizon’s failed citywide fiber optic service (Fios) implementation. “Broadband is a key component of this Administration’s fight to create opportunity and sustainable economic development in every corner of the five boroughs,” he said. “As I’ve said time and again, Verizon must deliver on its obligation to the City of New York and we will hold them accountable.”

Under a 2008 agreement with the city, Verizon committed to extend the Fios network to every household across the five boroughs by June 30, 2014.

“Through a thorough and comprehensive audit, we have determined that Verizon substantially failed to meet its commitment to the people of New York City,” the city found.

Karl Bode, writing in DSLReports in 2012, noted, “Verizon’s strategy has been to upgrade key markets with Fios, sell a large chunk of unwanted markets, then fill in what’s left with either mobile or fixed LTE services that cost less to deploy and support for numerous reasons.” He added: “There might be a day where Verizon singles out some areas where it just doesn’t make sense to leave customers without upgrades — like Boston — but it’s pretty clearly not happening anytime soon.”

Kushnick reveals in his study The Book of Broken Promises that Verizon is playing a shell game of overpromising and underdelivering in New York and throughout the East Coast strike region. In New Jersey, it promised in 1993 that by 2010, it would replace its aging copper network with fiber capable of 4.5 Mbps in both directions; in Pennsylvania, in 1995, it promised to have the state completely upgraded by 2015; in Massachusetts, it promised to start its conversion in 1996. For each state, by 2015, Verizon had passed somewhere around 40 to 50 percent of state homes, regardless of previous commitments. In Pennsylvania, in 2009, it promised to delivery 4G LTE downstream at speeds of 100 Mbps, but in 2015, it provided services at about 10-12 Mbps.

When the strike broke out, Verizon CEO Lowell McAdam announced: “Just yesterday, we [Verizon] announced a $300 million investment to bring fiber to the city of Boston, which will make it one of the most technologically advanced cities in the nation and expand broadband access for its residents.” Missing from McAdam’s self-serving statement was any mention of Verizon’s previous commitments to have 330,000 fiber optic lines installed in Massachusetts by 2000, including Boston.

Follow the Money

Verizon is a very profitable company — and its customers are paying for it. It reported 2015 revenues of $131.6 billion and $17.9 billion in profits. In 2015, Verizon sold off $15 billion of its assets and bought back $5 billion of its stock — all to goose the stock price and increase the bonuses of top management.

Its solid performance was based on a series of clever financial and business practices:

  • It shifted more customers from regulated wireline services to unregulated wireless services;
  • It periodically secured rate increases for the delivery of inferior wireless services;
  • It successfully failed to fulfill ostensible “promises” to upgrade its networks;
  • It successfully underpaid its taxes; and
  • It underpaid and outsourced its workforce.

In support of the striking Verizon workers, the Sanders campaign noted, “From 2008 to 2013, while Verizon made over $42.4 billion in U.S. profits, it received a total tax refund of $732 million from the IRS.” The campaign added, “Verizon’s effective U.S. corporate income tax rate over this six-year period was -2 percent. In 2012, Verizon stashed $1.8 billion in offshore tax havens to avoid paying U.S. income taxes.”

Kushnick argues that since 2003, Verizon has used clever dodges to avoid paying its fair share of New York State taxes. “Based on the Verizon NY annual reports, the losses are staggering, and there has been no public outcry, even though these losses were used to raise rates multiple times,” he noted, detailing this as follows:

Checking the Verizon annual reports, then, and using the statement made by Verizon, that the company spent $3.4 billion from 2008 to 2013 – which is six years, that means Verizon paid about $1/2 billion a year on average.

However, Verizon is a large company and its [New York State] revenues were $659 billion for these years, as told by the annual reports. Verizon, therefore, paid an effective tax rate of 1/2 of 1%.

Kushnick notes, “While taxes are based on profits, when a company can manipulate the accounting, examining the ratio of revenues to effective tax payments is more revealing of the true amount of taxes paid — or not paid.”

Breakup and Utility

In 1984, Ma Bell, the original AT&T telephone monopoly, was broken into seven regional “Baby Bells.” Three decades later, and following numerous acquisitions and mergers, Verizon and AT&T are a virtual duopoly controlling the nation’s shrinking wired phone services and growing wireless services, broadband and internet, including a growing portion of streaming cable television services.

As Verizon’s Fran Shammo announced in 2012, the company long planned to kill off its wireline business and force customers to use inferior wireless services. Equally troubling, the company long delayed and, finally, stopped building out its optical fiber network, Fios. This combined strategy, while extremely profitable to Verizon management and shareholders, poses significant challenges to US telecom users and the nation as a 21st-century postmodern society.

Much of the debate between Clinton and Sanders has been over whether the country needs to once again break up the banks. An equally compelling question is whether it’s time to once again break up Big Telecom? Has Verizon, along with AT&T, become simply too big to regulate or meaningfully compete against? Has its short-term drive for profit and market control, along with its efforts to become a media conglomerate (e.g. Verizon’s acquisition of AOL and rumors of its interest in acquiring Yahoo), turned this corporate behemoth into the next-generation AT&T?

Equally critical: Is the telecom network a 21st century version of the 20th century highway network and the 19th century railroad network? Not unlike the earlier railroad and highway systems, the underlying telecom network was built with enormous federal, state and local — thus user and taxpayer — financial support. This long history raises a fundamental question: Is the underlying network of today’s telecommunications a public utility, a public good, an enabling technology or an asset of a private, for-profit, trans-media conglomerate?

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