Verizon FiOS is coming to Fire Island.

Verizon Communications has thrown in the beach towel attempting to convince residents of popular tourist destination Fire Island to accept its wireless landline replacement Voice Link as the company’s sole landline service option.

After telling customers for months it did not make financial sense to restore copper service or bring its fiber optic network FiOS to Fire Island, Verizon senior vice president of national operations support Tom Maguire today reversed course.

“In today’s competitive marketplace it’s all about making sure you can take care of customers because if you don’t they can go someplace else,” Maguire told Newsday. “Interestingly on Fire Island, there is no place else, so we listened to our customers. It was pretty apparent that we wanted to do something beyond Voice Link and the wireless network, so we think that fiber is the best course.”

Verizon customers on Fire Island have told Stop the Cap! all summer they felt abandoned by Verizon, stuck using a wireless landline replacement service they claimed worked poorly or not at all at times. Customers also loudly complained that Verizon was effectively forcing broadband customers who depended on Verizon DSL to the much more expensive Verizon Wireless broadband service with a very small usage cap. Many attended meetings sponsored by elected officials or the Public Service Commission to decry Voice Link and demand Verizon offer the same quality service its landline network used to provide.

Maguire told the newspaper the company will now deploy its fiber network FiOS on Fire Island, offering residents new options for telephone and broadband service. The 600 customers on Fire Island with Voice Link will be able to keep the wireless service or switch to FiOS fiber.

Reached for comment, Verizon tells Stop the Cap! its fiber service will not include FiOS TV because Verizon does not have franchise agreements with the many municipalities on Fire Island, and their primary concern is getting the fiber network engineered and constructed.

Schumer

Fire Island residents have made it clear to Verizon their biggest concern is Internet access, not television, and Verizon FiOS will be able to deliver faster Internet speeds unavailable from DSL.

Verizon expects to begin construction in October, although it has already started preliminary design work for the new fiber network. Verizon expects to have the fiber build complete by the beginning of the 2014 summer season on the island.

Sen. Charles Schumer (D-N.Y.), who has been carefully monitoring the Voice Link issue, released a statement welcoming Verizon’s decision.

“By installing fiber-optic cables on the island, Verizon will not only make the system as good as it was before, it will be making it better,” said Schumer. “Fire Island residents will now have greater access to high-speed Internet – a necessity in the modern age – and reliable voice service. Verizon deserves credit for listening to our concerns and changing course.”

In a June guest article written for publication on Stop the Cap!, Maguire wrote it would cost Verizon from $4.8 million to more than $6 million to restore landline service. Maguire argued it made no economic sense to commit to a multimillion dollar investment with no guarantee that residents of the island will sign up for Verizon service.

“That’s probably why Verizon is the sole provider on the island,” Maguire noted in the piece. “None of the companies we compete with in other parts of New York offer services on the island.”

Today’s decision represents a complete reversal of the company’s earlier views, but one that is welcomed nonetheless by residents on Fire Island reached by Stop the Cap! this afternoon.

“We’re very glad this is now over and behind us,” said Verizon customer Shari who has toughed out the summer with cellphone-only service.

“I can’t wait to return Voice Link, which has been a real pain,” said Thom.

Both customers tell Stop the Cap! they intend to sign up for Verizon FiOS the moment it becomes available.

Verizon Voice Link – Not good enough for New York, says our source.

A well-placed source in Albany tells Stop the Cap! Verizon’s Voice Link, a wireless landline replacement,  is unlikely to be approved as a sole landline offering in New York State.

“With mounting evidence supplied by Verizon itself in response to staff requests and increasing pressure from local, state, and federal politicians hearing the concerns of more than 500 New York residents that have opposed Verizon’s proposal or who have complained about the quality of service provided by Voice Link over the summer, it is increasingly clear the service in its current form will fail to meet the Public Service Commission’s standard for basic voice service,” the well-informed source tells Stop the Cap!

“It is important to recognize that the PSC’s primary concern is providing an equivalent voice service that has the reliability required to reach emergency personnel and deliver ancillary services the disabled community depends on,” said the source. “While the Commission is unlikely to reject Verizon Voice Link as an alternative, optional service, the Commission cannot and signaled to our office it will not ignore the consensus from real Voice Link users complaining the service is not well received and reliability issues have persisted all summer.”

Verizon has attempted to place Voice Link in the homes of residents on the western half of Fire Island as its sole service offering for landline service, while in other communities upstate the company claims it offers Voice Link as an optional service for customers with line problems or for those requesting seasonal telephone service.

The source tells us the sticking point for regulators is Verizon’s request to offer Voice Link as its sole service offering, denying requests to repair existing landline service, as has been the case on the western half of Fire Island since Superstorm Sandy damaged much of the infrastructure on that half of the island almost one year ago.

Verizon officials claim the costs to re-establish wireline copper phone service on the island do not make financial sense based on the small number of customers served, and the company adds there is no business case for upgrading to fiber service either. But residents and some local officials claim Verizon has exaggerated the amount of damage, and many customers in the affected area still have intermittent service, but cannot get Verizon repair crews to repair trouble on partly functional lines.

The PSC has received more 650 comments to date about Verizon Voice Link — all negative — and has also heard from New York politicians who are strongly opposed to Verizon’s efforts to curtail landline service in the state. Our source tells us some of those politicians were moved by constituents who placed calls over Voice Link to officials in Albany and Washington to let them to hear the actual voice quality of the service. The source tells us the quality of those calls were often plagued with audio anomalies and breakups.

Last week, the Commission requested Verizon send a functional Voice Link unit for internal testing, but that request may now be a formality, according to our source.

“I think the decision is mostly made at this point,” said the source. “It is pretty clear the PSC is signaling to complaining politicians and through its repeated requests for information from Verizon it is unconvinced by Verizon’s arguments that claim there is a necessity to replace landline service with wireless Voice Link, and the company also did itself no favors when its executives previewed plans to abandon landline service in favor of wireless in unprofitable areas even before Sandy struck,” the source tells us. “Verizon isn’t stupid, so it is likely the company will offer something different before their request is turned down.”

Verizon said this afternoon it had no comment on Stop the Cap!’s report.

With total ownership of Verizon Wireless now assured, Verizon Communications plans to begin “tree trimming” assets in its portfolio that cannot match the profitability of its wireless business.

Verizon CEO Lowell McAdam told CNBC he has already communicated with Verizon’s executive team about the direction Verizon will take after it buys out Vodafone’s ownership interest in Verizon Wireless. One potential target for sale: millions of Verizon’s rural landlines that cannot hope to match the revenue an average cell phone customer delivers the company.

Verizon’s wireless assets now represent the company’s biggest generator of sales and profit, accounting for two-thirds of 2012 revenue and almost all of its operating income.

Where Verizon chooses to invest is largely dependent on what kind of return the company can expect. So far, the best returns have come from Verizon Wireless.

“I think there is no better way to deploy our capital then to invest in a [wireless] asset that today generates more than $80 billion in annual revenue, provides a 50% margin, generates significant cash flows and is uniquely positioned for future growth and profitability,” McAdam told investors Tuesday on a conference call announcing the purchase of Vodafone’s stake in Verizon Wireless. “Beyond the financial benefits, there is simply no better asset that fit seamlessly into our portfolio and our strategic beliefs. Our growth strategy has three basic elements: connectivity, platforms and solutions. We are very bullish on the growth outlook for the U.S. wireless marketplace.”

McAdam made it clear to CNBC’s Jim Cramer the company is not so bullish on its declining wireline business, which includes landlines, DSL, and even FiOS — the company’s fiber optic network:

Jim Cramer, CNBC: “[Under former Verizon CEO Ivan Seidenberg, Verizon] took areas that really weren’t growth areas and sold them to Frontier and other players. Would you be able to get rid of some of your underperforming landline businesses to be able to increase [Verizon’s] growth even further?”

Lowell McAdam, Verizon: “That is a possibility. […] If you talk about opportunities here, now that we have One Verizon, […] we are going to trim some limbs around the tree here. Things that aren’t performing will not be a part of our portfolio so we can invest in things that will drive the kind of growth we are excited to be able to tap here.”

McAdam

The trimming has already started in New York and New Jersey, where Verizon is moving forward with the introduction of a less expensive wireless landline replacement called Voice Link, now optional for some customers but could eventually be Verizon’s sole landline service offering in certain areas if state regulators approve.

Verizon calls the service an improvement for customers dealing with repeated service calls to fix troublesome landlines. Upkeep of Verizon’s copper networks has proved costly to the company, especially as it continues to count landline customer losses. The company argues providing wireless phone service is pro-consumer, providing a bundle of calling features and unlimited local and long distance calling at the same price Verizon charges for basic, no frills landline service. Local officials and residents using the service complain it is inadequate and unreliable.

“Voice Link is an innovative solution for a specific segment of Verizon’s voice-only customers that delivers reliable voice service using our trusted and reliable wireless network,” said Verizon spokesman John Bonomo. “Unlike copper-based service, it is less likely to fail during an adverse weather event because of our wireless networks’ resiliency.”

Analyzing the market value of Verizon’s buyout of Vodafone’s part ownership in Verizon Wireless and accounting for net debt reveals Verizon’s wireless operations are worth $289 billion, with  Verizon’s current 55 percent share worth about $159 billion. In contrast, Verizon’s wireline operations including landlines, business broadband, and FiOS are worth just a fraction of that — $24 billion, according to Bloomberg News.

Kevin Roe, an analyst at Roe Equity Research LLC in Dorset, Vt. values the wireline business at about $21 billion based on his estimates, while Spencer Kurn of New Street Research LLC puts the implied value of the unit at about $26 billion.

Verizon’s top rated fiber service FiOS has brought the company higher earnings and is deemed a success, but its total revenue remains insufficient to offset Verizon’s continued landline losses as customers drop home phone service and DSL. From a business perspective, that explains why Verizon is eager to invest billions in its high return wireless business while leaving further expansion of its fiber optic network on hold.

Revenue from the wireline unit totaled $39.8 billion last year, down from $50.3 billion in 2007, data compiled by Bloomberg show. During the same period, Verizon’s wireless revenue surged 73 percent to $75.9 billion.

“Clearly, wireless is going to be worth a lot more” than Verizon’s other businesses, Chris King, a Baltimore-based analyst at Stifel Financial Corp., told Bloomberg in a phone interview. Wireless is “where the growth is going to be coming from. There’s a bigger market opportunity going forward.”

McAdam has brought his enthusiasm for the wireless business to his role as Verizon CEO and its priority shows as he predicts even larger earnings in the future. McAdam told investors only 64 percent of Verizon Wireless customers use smartphones. Verizon wants to convert the remaining 30 million basic phone customers to higher-priced smartphone service as quickly as possible. Getting customers to switch to 4G-capable devices is also lucrative for Verizon, because its LTE network can more efficiently handle data at a lower cost. Only one-third of Verizon customers now use 4G LTE devices.

Embracing consumption based billing for wireless data is perhaps the biggest potential revenue generator of all as customers consume more data and begin connecting more devices to Verizon’s network.

Platforms including machine to machine and in-car connectivity “create even greater opportunities to drive increased usage,” McAdam said. “We also see many opportunities with Internet and cloud-based services. The digital economy is moving to mobile first on everything, which means there are many growth opportunities to pursue.”

AT&T has boosted the maximum available broadband speed for its U-verse Internet offering to 45/6Mbps service in 40 cities across 15 states.

The broadband speed boost is part of AT&T’s Project Velocity IP (VIP), a three-year plan to expand U-verse’s capabilities and coverage into more communities within AT&T’s local landline service areas.

Most of the funding for Project VIP is being directed into expanding AT&T’s profitable wireless 4G network, but about $6 billion will be spent upgrading AT&T’s aging copper wireline facilities.

A big priority for AT&T is to retire copper-based distribution networks and replacing that wiring with fiber optics. U-verse depends on a significant amount of fiber to provide enough bandwidth for its television, phone and broadband service. But unlike Verizon FiOS, which delivers a fiber connection straight to the home, AT&T still relies on traditional copper wiring into the home.

Until AT&T replaces that copper with fiber, top broadband speeds are unlikely to keep up with its biggest competitor — cable broadband.

AT&T’s says the 45Mbps speed boost represents an incremental upgrade and plans further speed increases to 75Mbps.

In more rural areas, U-verse will rely on IPDSLAM technology to increase speeds up to 45Mbps. AT&T eventually hopes to further bump download speeds to 100Mbps.

For the most rural communities within its service area, AT&T hopes to offer service exclusively over its wireless network, eventually scrapping rural landlines altogether.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/KTAL Shreveport U-verse Coming to Louisiana 8-23-13.mp4[/flv]

KTAL-TV reports AT&T’s upgraded U-verse could soon be coming to Shreveport, La. as part of Project VIP, which may give Comcast some much-needed competition in the Ark-La-Tex region. (3 minutes)

Waiting for Comcast and Verizon to offer cutting edge broadband to 620,000 Baltimore city residents and businesses appears to be going nowhere, so the city is hiring an Internet consultant to consider whether to sell access to its existing fiber network.

Baltimore officials spent at least a year trying to convince Google to launch its fiber network in the city only to be bypassed in favor of Kansas City, Austin, and Provo, Utah. Local unions and community groups have also attempted to embarrass the local phone company by publicly protesting Verizon’s lack of interest in expanding its fiber optic network FiOS in Baltimore. Comcast has proved a disappointment for many, with the latest technology going to other cities well before Baltimore gets improved service.

Baltimore’s Board of Estimates voted to spend $157,000 to hire Magellan Advisors to produce a cost-benefit analysis of expanding the city’s current fiber infrastructure to deliver better Internet access.

“I’m paying more here for lesser service, so I think one of the things we want to try to do is look at that, look at what [current companies] offer and try to incentivize people to offer more,” Baltimore’s chief information officer Chris Tonjes told the Baltimore Business Journal. “In the short term, we’re going to do a study. In the medium run, we’re going to try to renegotiate the cable franchise agreement. In the longer run we want to make it more profitable for providers to come in here and offer the expanded service.”

Like many cities, Baltimore already owns and operates its own fiber ring, built with public funds to support the city’s public safety radio system. Like many municipal institutional fiber networks, Baltimore’s fiber ring is underutilized. Public safety and other institutional users often use just a fraction of available capacity. Despite the fact such networks are often oversized, they are rarely controversial because they do not typically compete with commercial providers and are usually off-limits to the public.

As Baltimore prepares to update their existing fiber infrastructure, Magellan will study the implications of leasing excess capacity to third-party providers that can sell broadband access to private businesses and individuals. Even Comcast and Verizon would be welcome to lease capacity.

Neither company has shown much interest, and the proposal received a strong rebuke from Maryland Sen. Catherine Pugh (D-Baltimore City):

Pugh

For the most part, municipally-built broadband networks have the economic chips stacked against them and, where tried, have saddled local taxpayers with a mountain of debt and half-built networks that are then sold at fire-sale prices to vulture investors. Taxpayers in Provo, Utah, for instance, spent $40 million to build a relatively small and modest network only to sell it for $1 a few years later because they underestimated the massive costs of operating, upgrading and maintaining it.

But Provo is just the latest exhibit in a long pantheon of such failed initiatives that include Groton, Conn., ($38 million taxpayer loss) and Marietta, Ga., ($35 million taxpayer loss). Cities as large as Philadelphia, New York and Chicago and as small as Lompoc, Calif., and Acworth, Ga., have also tried and failed to launch their own broadband networks — or simply gave up.

Pugh’s editorial, published in both the Wall Street Journal and The Baltimore Sun, failed to disclose Pugh has received political campaign contributions from both Comcast and Verizon. More importantly, Pugh did not bother to mention she is the president-elect of the National Black Caucus of State Legislators, a group with close ties to both Comcast and Verizon Communications.

Among the “member corporations” of the NBCSL — companies who “weigh in” on the policies promoted by the group: AT&T, Comcast, CTIA – The Wireless Association, the National Cable & Telecommunications Association, Time Warner Cable, and Verizon.

Among the NBCSL’s roundtable members: AT&T, Comcast, Time Warner Cable, and Verizon

For the fourth consecutive year, Verizon hosted its Black History Month open house at the Reginald F. Lewis Museum in downtown Baltimore. This year, among Verizon’s special guests: Maryland Senator and president-elect of the National Black Caucus of State Legislators Catherine Pugh. Comcast has also opened its checkbook to the NBCSL. Among the contributions — $50,000 to form the “NBCSL/Comcast Broadband Legislative Fellowship” to “increase efforts to conduct research and develop solutions regarding broadband adoption among African Americans.”

Opening up a competitive, lower-priced broadband alternative owned by the citizens of Baltimore is not one of Pugh’s favored solutions to be sure.

The NBCSL has been more than a little preoccupied with the business agendas of its corporate members. The group’s glowing endorsement of the Comcast-NBCUniversal merger was so positive, Comcast continues to present the group’s submission urging approval of the merger on its website. In 2011, the NBCSL signed on to the campaign to get government approval of the now-dead merger of AT&T and T-Mobile USA, claiming it was in the best interests of African-Americans. Just this month, Time Warner Cable quoted the group’s comments on the dispute between the cable company and CBS on its website.

Stop the Cap! has refuted claims that public broadband is a financial failure in the past. Read our fact check here.

Although Comcast has been the dominant cable provider in Baltimore for years, its monopoly status is “de facto” only, because federal law prohibits exclusive cable franchise agreements. That being said, no other well-known cable provider will agree to offer service in competition with another. Overbuilders — small private entities that have business plans that depend on competing with incumbent operators, are few and far between. For most Americans, the only cable competition comes from satellite providers or the phone company. Satellite television lacks a broadband option and Verizon’s local broadband infrastructure is limited to providing DSL service.

Tonjes

Tonjes hopes the possibility of a public broadband alternative might shake up the city’s broadband landscape, but not every neighborhood is now passed by the city’s fiber ring.