Verizon Says Competition Spurs Investment in New York
Verizon spends hundreds of millions more than it makes on its New York network annually, it said Monday, defending itself in a state probe. The Public Service Commission is investigating the quality of Verizon’s legacy copper services and the telco’s willingness to make upgrades to copper in areas where it hasn’t rolled out fiber. In written testimony in docket 16-C-0122, the telco urged the PSC not to impose new regulations, claiming competition remains strong in the state and continues to provide incentive for the company to provide good service to customers.
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The New York PSC is mulling whether to change Verizon’s service quality improvement plan (SQIP), which was adopted in 2010 after the commission gave it low marks for timeliness-of-repair performance. The Communications Workers of America asked for the Verizon probe (see 1603230044). The carrier faces similar questions in Pennsylvania (see 1607180020), Maryland (see 1607140027) and New Jersey (see 1607280026).
Verizon loses “about a billion dollars annually in New York,” said the company, summarizing redacted net income figures. From 2008 to 2015, capital spending exceeded cash flow from operations by $4.8 billion cumulatively, with an average shortfall of $600 million per year, it said. “Verizon has consistently paid out more -- and, in many years, substantially more -- cash in support of its investment in its telephone plant in the State than it received from operations.” Verizon spent $9.5 billion in capital in New York since 2008, with more than $1 billion in 2015, it said. The spending included $3.5 billion to deploy fiber in New York City, it said. The company’s capital spending for copper totaled $1.7 billion from 2004 to 2015, and copper network expenses were $8.5 billion over the same period, it said. To sustain that level of investment, “Verizon has been forced to substantially increase its borrowings from affiliated companies,” the company said. The company's level of notes payable to affiliated companies increased to $8.2 billion in 2015 from $2.8 billion in 2008, it said.
Verizon’s decision not to further expand its fiber footprint in New York “does not provide any sound reason for modifying the SQIP,” it said. Verizon’s fiber plans weren’t a factor in the creation of the SQIP, it said. Citing increased telecom competition, the PSC adopted the SQIP to reduce the number of service quality reporting requirements, while still requiring Verizon to report monthly on timeliness of repair and other items. “Verizon has strong market incentives to provide good service quality to all of its customers, including core and non-core, and the Commission, through the SQIP, has correctly relied on competition, choice, and market incentives to control service quality for non-core customers,” it said.
Verizon said telecom competition increased after the SQIP. The company’s access line losses aren’t slowing much, and even if they were, the PSC should attribute that to Verizon's providing better service than competitors, the company said. “The Instituting Order makes a fundamental mistake in viewing a customer’s decision to remain with Verizon as somehow outside of the normal workings of competition, as a market failure, or as evidence of an inability to change carriers,” Verizon said. “The reality is that choosing to stay with Verizon is just as valid an exercise of customer choice as choosing to move to an alternative provider. … In short, whatever success Verizon has in retaining customers should not be interpreted as proof that no effective competition exists in the market.”
The telco instead blamed “businesses challenges” for service issues experienced in New York. “Verizon faces business challenges with respect to the provision of regulated telecommunications services in New York as a result of having to make necessary expenditures and investments to compete, while at the same time managing a decline in demand and revenues associated with competition, and incurring the significant fixed costs associated with providing service over a mostly copper network,” it said. “In such an environment, Verizon’s failure in some cases to meet regulatory service quality performance standards -- or even customer expectations -- is certainly not the result of any lack of incentives. Verizon has a strong financial incentive to compete to retain current customers.”
Verizon denied its network or service quality deteriorated since the SQIP, saying it provided “excellent and steadily improving service quality.” The company dismissed public statements to the contrary as “anecdotal evidence” that “should not be allowed to override the highly detailed data on service quality metrics that is provided in this testimony.” The anecdotes come from a “self-selected group” that “does not constitute a balanced or complete or representative picture of the overall quality of service provided by Verizon,” it said. CWA lined up the witnesses while representing union workers striking against Verizon on the East Coast, it said.
A CWA spokesman slammed the company. "It's sad that Verizon opts to question motives rather than face facts,” he responded. “Every day, our members in the field witness Verizon's policy of systematically disinvesting in high quality phone service for copper customers. They see the jerry-rigged repairs and the refusal to replace corroded infrastructure. It's time for Verizon to stop throwing up smoke screens and start making the investments that will ensure that every New York telephone consumer gets the high-quality service they need and deserve.”