A sweeping deregulation measure sponsored by Verizon Communications would end the telephone company’s obligation to provide landline service and remove state-mandated customer quality of service standards in Massachusetts.

House Bill 2930, “An Act modernizing telephone regulation and encouraging economic growth,” introduced by Rep. Stephen L. DiNatale (D-Fitchburg) is succinct:

SECTION 1. Chapter 25C of the General Laws, as appearing in the 2010 Official Edition, is hereby amended by inserting after section 7 thereof the following sections.

Section 8. Notwithstanding any other general or special law to the contrary, the department shall have no jurisdiction, general supervision, regulation or control over wireless service, including mobile radio telephone service, or radio utilities.

Section 9. Notwithstanding any general or special law to the contrary, subject to the provisions of section 10 of this chapter, no provision of this chapter, Chapter 25 or Chapter 159, 8 and no regulation, order or settlement or portion thereof adopted pursuant to any such provision, shall apply to any telephone company (or a common carrier offering telephone service) in any municipality for which the company or carrier certifies to the Office of Consumer Affairs and Business Regulation that there are at least two providers offering voice telephone service to retail residential customers in that municipality using any technology, including but not limited to wireless voice service and VoIP service.

Section 10. Nothing in sections 8 or 9 of this chapter shall be construed to affect or modify:
a. the authority of the attorney general to apply and enforce chapter 93A or other consumer protection laws of general applicability;
b. the department’s authority under sections 18B and 18H of Chapter 159, concerning enhanced 911 service, and under section 15E of Chapter 166, concerning telephone relay service;
c. the rights or obligations of any carrier under 47 U.S.C. § 251 or 47 U.S.C. § 252; or
d. the department’s authority to administer the federal Lifeline and Link-up programs or the Connect America Fund.

SECTION 2. Sections 11, 12, 12A, 13, 14 and 15 of Chapter 166 are hereby repealed.

The measure was discussed at a hearing this week before the Legislature’s Energy & Telecommunications Committee. Verizon argued its company is still regulated as if it was a monopoly, with reporting requirements and customer service mandates that do not apply to its competitors in the cable or wireless industry.

DiNatale

“We have to answer a customer’s call within x number of seconds,” said Verizon spokesman Phil Santoro. “If we don’t, we get penalized. No other company that provides phone service has to do that. They’re all regulations that were formed when we were a monopoly, and they haven’t been changed.”

Verizon lobbyist Joe Zukowski told the Boston Business Journal Verizon is required to respond to repair calls within a 24-hour window, something not required of its biggest competitor Comcast. Verizon has to report its annual finances and various customer metrics governing response times and outages to state regulators. Verizon also has to offer landline service anywhere in its service area across most of the state, while cable companies can pick the places they wish to serve.

DiNatale regularly supports Verizon’s legislative initiatives. In 2012, he proposed a bill to amend state law to remove the authority of the Department of Telecommunications and Cable to regulate the wireless industry, deferring instead to federal regulations that industry representatives said would level the playing field.

DiNatale suggested Massachusetts could be left behind if the legislature didn’t adopt the measure. Rep. Randy Hunt, a Sandwich Republican, asked if Massachusetts had missed out on any innovations in technology because of overregulation. Zukowski suggested a Massachusetts legislature hostile to business interests would make the company think twice about expanding its 4G LTE network in the state. By November, the bill was effectively buried in a legislative maneuver and by June 2013, Verizon announced it largely completed its 4G LTE upgrade, regardless of the bill.

DiNatale’s latest bill includes last year’s wireless oversight ban as well as forbidding the Department of Telecommunications and Cable from regulating Verizon in any part of the state where at least one provider of any kind offers competitive service.

Despite DiNatale’s attempt to ban state regulation of wireless service,  Sen. Karen Spilka (D-Ashland), argued at Tuesday’s hearing for (S 1617), “The Cellphone User’s Bill of Rights,” that would require clearly published prices and service policies, monitors the quality of cell service in the state, and limits all cell contracts to 12 months.

“Many people don’t have landline phones anymore. However, as wireless subscribership increases, so do complaints about the contracts and services,” Spilka told the committee.

Zukowski suggested that rural areas will still be covered by regulation where Verizon maintains a monopoly. But the legislation eliminates regulation from any part of the state where even one competitor promises to provide service. AT&T Mobility alone would give Verizon an effective way out of regulatory oversight, because AT&T claims it already provides solid service to the majority of the state.

AT&T Mobility claims its competing cell service is available across almost the entire state of Massachusetts. The areas boxed in red are the only significant parts of the state without claimed coverage by AT&T.

There are only about three dozen or so towns in the state with no cable voice service, and even fewer with significant sections that have no cell phone service, all in the sparsely populated rural central and western parts of the state.

Other key components of this and another bill Verizon is supporting this term:

• Verizon would end its commitment to provide universal service in the state. Under the terms of the bill, Verizon could also justify ceasing rural landline service and offer an alternative such as Voice Link, a wireless landline replacement not subject to state oversight;
• Verizon would not have to report finances and customer service metrics and would no longer have to meet mandated customer service standards;
• State authority to compel reliable E911 service without any charge to the calling party and mandates regarding service for the disabled are weakened or eliminated;
• Elimination of a requirement providing Verizon customers with 10 free directory assistance calls per month, unless the customer is certified as elderly or disabled;
• Impose clear terms that wireless service is off-limits to state regulators.

The bill is co-sponsored by: Rep. Stephen Kulik (D-Worthington), Sen. Anthony Petruccelli (D-East Boston), Rep. Kathi-Anne Reinstein (D-Revere), and Sen. Sal DiDomenico (D-Everett).

Or maybe not.

A New York hedge fund manager wants Outerwall, Inc., operator of Redbox movie kiosks, to sell, spinoff, or shutdown a streaming movie service that has failed to compete effectively with Netflix.

Redbox Instant by Verizon has proven not to be much of a threat, said JANA Partners’ co-founder Barry Rosenstein. The hedge fund controls a 13.5 percent stake in Outerwall, Inc., (formerly Coinstar) best known for its change counting machines and Redbox DVD rental kiosks.

Some analysts predict JANA Partners will attract several other shareholders disenchanted with the disappointing earnings results.

Michael Pachter, an analyst with Wedbush Securities, told his clients the group will likely force Outerwall’s management to focus on cash generation. The alternative is a forced sale of some or all of the company’s businesses.

Redbox Instant is 65% owned by Verizon, and could eventually be owned outright by the phone company or shut down. Outerwall entered the video streaming venture with Verizon to cut the company’s dependence on Redbox kiosks, which provided 87 percent of 2012 revenue (with Coinstar coin-counting kiosks and other vending machines covering much of the rest).

Netflix has de-emphasized its DVD by mail rental service in favor of a less-costly online video alternative. Redbox still depends primarily on customers visiting a nearby kiosk to exchange DVD rentals.

In September, Outerwall reported disappointing results and predicted earnings per share would be as much as 40 percent below expectation. Shares plummeted 20 percent after the earnings predictions were made.

Most of the problems are from “heightened promotional discount activity,” which translates: an excess of coupons and promo codes that attracted new customers that never spent much. Expect the company to curtail promotions and focus instead on profitability.

Also on the hedge fund’s chopping list: Seattle’s Best Coffee-branded “Rubi” coffee kiosks in grocery, drug and mass merchant stores. It seems there isn’t much interest in on-demand, fresh ground coffee selling for $1-1.50 a cup.

If “follow the money” is a maxim in business, then it should come as no surprise Verizon favors the making the bulk of its investments and expansion in its enormously profitable wireless business.

Verizon Wireless earned the company $12.9 billion in operating profits during the first six months of 2013 while landlines and Verizon’s fiber optic network only delivered $87 million. That inconsistency may help explain why Verizon FiOS expansion is stalled while Verizon throws enormous sums into its 4G LTE wireless upgrade project.

The average Verizon Wireless bill is now over $150 a month. FiOS customers pay an average of over $150 a month as well, but Verizon’s costs to reach its smaller customer footprint are higher. Revenues for basic landline service are considerably lower than either wireless or fiber service.

With wireless providing a virtual ATM for Verizon Communications, the New York Times notes it is unsurprising that Verizon wants to buy out its European partner Vodafone, which owns 45% of Verizon Wireless. Once the $130 billion transaction is complete, Verizon will keep wireless profits all to itself as it continues lobbying for permission to decommission rural landlines and encourage those customers to use its vastly more profitable and almost entirely unregulated wireless network instead.

Exactly 100 years after Verizon predecessor AT&T/The Bell System voluntarily agreed to be a regulated monopoly provider of telephone service, Verizon Wireless and AT&T have successfully established unregulated wireless networks that serve most Americans with cell service and wireless data at prices that would be shocking to people 20 years ago.

That bi-monthly visit from your local utility’s meter reader may eventually be a thing of the past.

Verizon Communications is moving rapidly to establish itself as an “end to end smart grid solutions provider,” providing utility smart meters for gas, electric, and water service that communicate over Verizon Wireless’ cellular network.

“We’re in the midst of a pilot right now, and what we’re piloting is more than the meter data management — we have a meter-to-cash system that includes an advanced metering infrastructure partner as well,” said Ernie Lewis, industry partner with Verizon’s global energy and utility practice.

Verizon hopes to capitalize on forthcoming smart meter adoption, replacing current mechanical meters for natural gas, electricity and water with new electronic meters that have two-way wireless communications capability with the parent utility. Smart meters can offer customers time of day savings for running high consumption appliances during off-peak hours, automatically deliver meter readings to the utility without having to dispatch an army of meter readers to customers’ homes, and support pay-per-use billing that turns the power off when your prepaid account is depleted.

Verizon will manage the potential data demands of such services through cloud networks, potentially through its acquired subsidiary Terremark. Verizon already operates its own energy and utilities enterprise solutions business.

Verizon’s moratorium on further expansion of its fiber to the home service will continue for “the next couple of years.”

Verizon FiOS won’t be coming soon to a home near you, unless that home is inside a community with a standing agreement with the phone company.

Verizon CEO Lowell McAdam made it clear to attendees at Tuesday’s Goldman Sachs 22^nd Annual Communacopia Conference his priority continues to be investing in the company’s highly profitable wireless business, while the company’s wired infrastructure is being targeted for more cost cutting, especially in areas designated to see existing copper infrastructure decommissioned. As for expanding FiOS into new communities, McAdam said he instead preferred to concentrate on improving market share and profits for the next few years in areas already getting the fiber optic service.

McAdam noted John Stratton, president of Verizon Enterprise Solutions, has been hard at work pruning Verizon’s wireline products and services targeted to business and government customers.

“I think [he] killed about 2,000 products this year, and we have taken 350 systems offline last year,” McAdam noted. “I think we are already at 250 this year. That sort of discipline gives you the ability to streamline your infrastructure.”

For residential customers, Verizon has two sets of offerings: one for customers served by FiOS fiber optics, the other for customers unlikely to see fiber upgrades indefinitely.

Inside Existing FiOS Service Areas

“We are doing some major technology shifts within FiOS to make it more efficient,” McAdam said. “We’re going to concentrate there for the next couple of years.”

McAdam’s signals to Wall Street were loud and clear: no more FiOS expansion into new communities for now.

McAdam

Instead, Verizon will focus on improving existing service in several key areas:

• Verizon has almost two million optical terminals that McAdam says were active at one point and are now sitting idle, suggesting FiOS has won and lost nearly two million customers since launching, either because the customer switched providers or moved away. McAdam said he wants to improve Verizon FiOS’ product set enough to attract those customers back. He noted with the terminals and cables already in place, the capital costs to win back a former customer are near zero;
• Verizon is introducing a new terminal this fall. Verizon’s FiOS Media Server “eliminates the requirement for coax, once you get into the optical terminal in the basement or wherever in the house,” McAdam said. “That slashes the installation time, and therefore makes the product a lot more profitable for us going forward. It eliminates set-top boxes, it is all IP-based going forward.”
• Verizon will continue to expand Verizon FiOS, particularly in New York City where it has a commitment to offer service.

Verizon FiOS has managed to build a much larger market share than its nearest neighbor, AT&T U-verse. McAdam claimed Verizon FiOS has achieved a 39 percent market share in broadband and around 34 percent on its television service so far. McAdam’s goal is to boost that to 45 percent. In areas of Texas where Verizon first introduced its FiOS fiber optic service, the company already has a penetration rate above 50 percent for broadband and 50 percent for television, demonstrating room to grow market share. AT&T’s U-verse TV penetration rate is 20.1 percent.

For Those Unserved by FiOS

Verizon’s 4G LTE Broadband Router with Voice

Except for Fire Island, N.Y., there are no significant announcements of FiOS expansion. Instead, Verizon has focused on investing to improve its wireless 4G LTE cell networks with the hope existing landline customers will consider switching to higher-profit wireless service. An attempted trial of Verizon Voice Link, intended to be an entry-level wireless replacement of landline service, failed badly on Fire Island due to an avalanche of complaints about poor quality reception, dropped and incomplete calls, and lack of support for data.

Now Verizon is back with a new offering, its 4G LTE Broadband Router with Voice ($49.99 2-yr contract with $175 early termination fee/$199.99 month-to-month).

“Securely connect wired and wireless devices to the 4G LTE network, and connect your landline phone to make calls,” Verizon’s website says. “Combine voice and data on a Share Everything Plan for added savings.”

The device can function as both a wireless landline replacement and router for data. The unit includes three Ethernet ports and Wi-Fi to share your connection. A landline phone or cordless phone base station can be plugged in as well.

Verizon charges an extra $20 a month for Home Service Monthly Line Access on Share Everything Plans, which covers your telephone service. Customers get unlimited local, long distance, call forwarding, call waiting, three-way calling, and voice mail. 911 is available, but Verizon disclaims any responsibility if you cannot reach an operator. The device also supports TTY-TTD calling.

Verizon claims users can expect 5-12Mbps downloading and 2-5Mbps uploading on Verizon’s 4G network, assuming there is solid coverage where you use the device. Usage caps apply. A backup battery keeps the service running for up to four hours of voice calling in the event of a power outage.

McAdam admitted the thing that keeps him up most at night are regulatory issues. He particularly called out Europe, which he believes is hostile for investment. But Europeans pay considerably less for wireless service than North Americans pay, and often have more choices due to competition and regulatory oversight.

“I think the beauty of the ’96 Telecom Act was that it was such a light touch on broadband and mobile,” said McAdam. “And that is — and I sit in Europe talking to investors all the time — that is the biggest difference between the U.S. and Europe.”

To head the FCC off from pursuing any additional regulatory oversight, McAdam claims he reluctantly approved Verizon’s lawsuit against the government on Net Neutrality.

“We have had to take some positions, frankly, that we didn’t want to take,” McAdam said of the lawsuit. “It opened the door for them to get into price regulation of broadband. And I think that is not their charter, and I think it would be a mistake for the U.S. economy and certainly the telecommunications ecosystem.”

[flv width=”488″ height=”300″]http://www.phillipdampier.com/video/Verizon 4G LTE Broadband Router with Voice 9-25-13.flv[/flv]

Verizon Wireless’ latest 4G LTE router supports wireless landline service and 4G data.  (1 minute)