Verizon closes the books on a turbulent 2000

By Michael Martin
NW200 Newsletter, 02/12/01

The year 2000 was not a banner year for Verizon, the telco giant formed by the merger of Bell Atlantic and GTE. Not only did the service provider disappoint some investors with its fourth-quarter and year-end earnings results, but Verizon also generated a cascade of complaints about subpar service from consumer and business customers over the course of the year.

After reporting its year-end earnings earlier this month, Verizon's stock was downgraded by Credit Suisse First Boston and the company's stock price fell 6% in a day.

Credit Suisse cited slow revenue growth and higher than expected expenses as the reason for its downgrade. Verizon's fourth-quarter revenue growth of 6.9% was below Credit Suisse's target of 7.1% and less than the 8.4% growth in the company's expenses.

Verizon's financial woes may have come as welcome news to many of the company's dissatisfied customers.

The Verizon division bearing the brunt of customer wrath is its DSL unit. Like all the other major incumbent local exchange carriers and competitive local exchange carriers, Verizon's DSL business boomed in 2000. Verizon finished 2000 with around 540,000 consumer-class asymmetric DSL lines installed, more than 500% growth over its 1999 year-end subscriber base.

Unfortunately, the company's service reputation didn't grow along with its DSL lines. Dissatisfied DSL users slapped Verizon with a class action suit for failing to deliver adequate DSL service in 1999, and just recently a second group of irate users filed another suit.

Both suits claim Verizon doesn't deliver on its DSL promises, which the complainants say include an always-on connection and minimum speeds that aren't being met.

Verizon officials openly concede that there have been problems with the company's DSL rollout. They blame it on the fact that DSL is a new technology and say that Verizon never promised uninterrupted service.

But the lawsuits say the real reason Verizon is having so much trouble with its DSL service is that the provider is heavily promoting DSL without building adequate network and technical resources to actually implement the technology in a timely and stable manner.

The second suit seeks to stop Verizon from adding new DSL customers until the company can serve its existing customer base with uninterrupted access.

The latest volley fired at Verizon comes courtesy of the New Networks Institute, a research firm that investigates the so-called Baby Bells created by the breakup of AT&T.

The institute helped host a meeting in NYC called Infrastructure Held Hostage: Fixing New York's DSL Problems. Since the discussion was focused on New York, Verizon came up frequently in attendee's complaints about lengthy installation waits and service disruptions.

Verizon's problems haven't been limited to consumer and telecommuter DSL customers. Some business customers in Verizon territory are complaining that they have to wait up to six months for new T-1 lines. (www.nwfusion.com/archive/2000/112695_11-20-2000.html)

Verizon is blaming the lengthy waiting periods on higher-than expected demand. The company says some of its central offices and fiber routes are full and customers will have to wait until new facilities are built out.

In Verizon's defense, all four of the former Baby Bells seem to be having problems with installation delays in some areas. SBC in particular has received criticism for its performance in the former Ameritech territories.

And Verizon recently took a step to improve its service to business customers in New York's Silicon Alley. Verizon created a Silicon Alley Advocate's Office, which will assist companies that are having problems with the installation of high-bandwidth services such as T-1 lines. One important item to note though, is that the office will not get involved in DSL cases.

Verizon appears to be starting 2001 on an aggressive note. Last week, the company unveiled a global network plan that will allow Verizon to better serve multinational customers based in Verizon territory.

Also last week, the company announced plans to cut 10,000 of its 260,000 jobs worldwide and to reduce overtime and outside contract work in an effort to curb expenses. Neither the network or layoff news seemed to have much effect on Verizon's stock price, which was holding steady at around $53 in trading last Thursday.