Looking for new revenue opportunities

More than half (52 percent) of all U.S. consumers say Internet service is their home’s most important utility, according to a survey conducted by Verizon Communications as part of their Verizon FiOS Innovation Index project.

But Verizon’s research surveys go well beyond simply identifying who loves Internet access. Verizon’s real interest is identifying so-called “borderless consumers,” — customers who are seeking a seamless online experience and connectivity both inside and out of the home.

The convergence of wired and wireless broadband networks is a potentially enormous money-maker for Verizon, especially if you happen to be a Verizon Wireless customer.

“As the borderless consumer segment continues to grow, so will the need to identify, understand and anticipate what consumers truly want in their increasingly connected lives – today and in the future,” said Eric Bruno, vice president of FiOS strategy and development for Verizon.

Fran Shammo, Verizon’s chief financial officer, has previously told investors that monetizing data usage goes beyond text messaging and web browsing. The next frontier for enhanced revenue will come from the machine-to-machine segment. As consumers strive for a more connected future, enabling wireless connectivity for home appliances, automobiles, medical equipment, and other devices will create new revenue streams for the company.

Verizon’s new research surveys help the company target its future marketing to consumers most likely to be living the “borderless lifestyle.” Are you? Here are some key attributes:

• Above average income: Most are college educated, own their home, and nearly half earn $75,000 or more annually, so they can afford higher broadband bills;
• They are 18-34: Generation X and Millenials grew up in an increasingly connected world. Baby boomers are not far behind, but seniors are;
• Women somewhat outnumber men in their need to remain connected;
• You already have a computer, smartphone, or tablet and are connected to high speed Internet. Most of you want faster speed, if you can get it.

Verizon’s study becomes murkier over the issue of cord cutting. Verizon found that video streaming continues to drive Internet traffic growth, but at least 89% still prefer watching shows on their televisions. Verizon defines that as live TV, DVR, or on-demand from “TV/Cable service.”

But they did not ask whether consumers are watching more or less television provided by their cable, satellite, or phone company or if a larger proportion of viewing now comes from Netflix or other streamed content. That is a key indicator of whether a customer is gradually shifting viewing habits, which could ultimately make it easier to dump cable television.

With 90 percent of those surveyed looking forward to the day when every connectable device in their house can seamlessly interconnect and work together, Verizon’s potential revenue opportunities are enormous, if customers use Verizon Wireless for connectivity and not free Wi-Fi. Machine-to-machine wireless traffic can boost profits without costing the company much, especially under Verizon Wireless’ new Share Everything pricing. The impact of short data exchanges likely from home appliances and other similar devices is expected to be negligible. The profits from charging at least $10 a month to add each of those devices to a Verizon Wireless account are not.

AT&T says this deal was no problem, but ponders whether Sprint-Clearwire is.

AT&T, the company that tried and failed to buy Deutsche Telekom’s T-Mobile USA, is sounding the alarm, urging regulators to carefully review any deal between Sprint, Softbank, and Clearwire.

“Softbank’s acquisition of Sprint and the control it gains over Clearwire will give one of Japan’s largest wireless companies control of significantly more U.S. wireless spectrum than any other company,” Brad Burns, an AT&T vice president said in a statement released late Wednesday. “We expect that fact and others will be fully explored in the regulatory review process. This is one more example of a very dynamic and competitive U.S. wireless marketplace, which is an important fact for U.S. regulators to recognize.”

AT&T claims its primary concern is the growing foreign control of America’s wireless carriers. That did not seem to bother AT&T from doing business with Germany-based Deutsche Telekom. Verizon Wireless has not been the recipient of any AT&T complaints either, and it is jointly owned by Verizon Communications and London-based Vodafone Group Plc.

Sprint bankrolled an opposition campaign against AT&T’s 2011 attempt to buy T-Mobile in a $39 billion dollar deal that failed after regulators objected to its impact on marketplace competition.

AT&T’s concerns about spectrum control may be an attempt to lobby the FCC for more leniency in approving future spectrum acquisitions. But industry analysts note that while a combined Sprint-Clearwire network may control more spectrum than others, much of it occupies less-favorable, very high frequencies that have trouble delivering robust service indoors. AT&T maintains a considerable amount of prime spectrum most sought by carriers, some of it yet to be used.

[flv]http://www.phillipdampier.com/video/CNBC Verizon Wants More Consolidation 10-18-12.flv[/flv]

Lowell McAdam, chairman & CEO of Verizon Communications, is back on CNBC in this exclusive interview calling for additional wireless industry consolidation. McAdam also discusses Verizon’s huge earnings after its wireless plan changes, Verizon’s latest union contract, and the current state of the U.S. economy. (8 minutes)

Wants $4.95 a month in some states to keep your number out of their phone directories.

In a case of shooting itself in the proverbial foot, Verizon’s argument its $4.95 monthly fee to keep your landline number out of their directory is justified has revealed a way to avoid paying it at all, saving $60 a year in unnecessary fees.

The company acknowledged that customers who drop their landline in favor of a cell phone will have an unlisted number at no additional charge.

A Network World columnist asked Verizon why it costs so much to do so little.

“Why do you charge me $4.95 per month just so that I can keep my phone number unpublished? Please do not merely tell me that you are allowed to charge me this fee because I already know that. What I want to know is WHY do you do it? What cost are you passing along? … I would appreciate as much specificity in your reply as possible.”

Here’s the reply from a media relations spokesman, who first consulted with “a key member of product management with oversight for (unpublished) numbers”:

“The cost charged to offer unlisted phone numbers is chiefly systems and IT based. Specifically, the costs we incur and factor into the monthly charge involve three things: quality control, data integrity and the interface we have with other carriers and directory publishers. These activities help us protect the feed of customer information we have, and must protect, when customers request that their telephone number remains private when requested.”

Stop the Cap! decided to pose our own follow-up to Verizon’s customer service department:

“If we were to drop our landline and choose a cell phone instead, would our number be listed or unlisted?” we asked.

Verizon’s reply:

“Cell phone numbers are not listed in our directories and are not available from directory assistance unless you pay an additional fee for our listings service. The rates vary by state.”

Customers switching landline providers with the intent of keeping their currently listed phone number may, however, remain in the telephone directory if Verizon forgets to remove the listing after the customer disconnects service. But there should be no charge to remind Verizon you disconnected service and want the listing deleted.

As a consequence of deregulation, many states no longer keep tabs on ancillary fees charged by Verizon for these services, which are largely based on what the market will bear.

Plaintiffs charge that Verizon’s spinoff deals earned millions for top executives and investment bankers, but left nothing but wreckage for employees, retirees, customers, and smaller banks duped into covering the tax-free debts that were left behind.

Verizon Communications is defending itself in a Dallas courtroom against a $9.5 billion lawsuit brought by creditors who allege the phone company fraudulently structured the spinoff of its phone directory business to Idearc in a deal that enriched Verizon while leaving the new publisher crippled with $9 billion in debt and eventual bankruptcy.

Verizon structured the spinoff of its phone book unit much the same way it has sold-off its local phone business operations in several states to Hawaiian Telcom, Frontier Communications, and FairPoint Communications — through controversial, tax free Reverse Morris Trusts. At the end of the deal, the buyers are saddled with enormous debts, eventually forcing HawTel, Idearc, and FairPoint to declare bankruptcy.

Now the creditors that took the hit over Idearc are in court alleging Verizon engineered the deal to unjustly enrich itself while sending the dying phone directory business straight into insolvency.

Werner Powers, an attorney for the creditors, said in opening statements Idearc was purposely loaded down in Verizon debt and “sent into the market to die.”

“They knew in major markets they had been suffering a double-digit decline,” Powers said to the judge in a Dallas courtroom. “They knew that was the canary in the mine shaft.”

The Association of BellTel Retirees is fighting for former Verizon employees who woke up one morning discovering their safe Verizon pension benefits had been transferred to a shaky startup that quickly went bankrupt.

But creditors are not alone suffering from a bankrupt Idearc. During the 11th hour of negotiations, Verizon quietly engineered a transfer of Verizon retirees that formerly worked for the directory unit to Idearc’s startup pension plan — a very risky proposition for the nearly 3,000 retirees who were secure with a fully funded, low risk Verizon pension plan.

Curtis Kennedy, the attorney representing the interests of the retirees, explains how it all happened:

On October 18, 2006, after conducting a very cryptic half hour meeting via telephone and reviewing a packet of Power Point presentations, the Verizon Board of Directors gave full approval for the Spin-Off transaction. A month later, on the last day to do the transaction, the retirees were thrown into the mix. Of course, no retiree had any prior knowledge, no fiduciary advocate, no legal representation, no union representation, and no say in the matter. The designated group of retirees were simply treated like obsolete telephone equipment being disposed of by Verizon.

At the proverbial “11th Hour” before the closing, Verizon EVP John Diercksen, acting as the sole director of Idearc, resigned his director position and he appointed a new set of corporate directors. The new directors hurriedly executed a resolution to ratify and approve the Spin-Off transaction. In reality, the new Idearc board had no choice but to sign off on the Spin-Off.

Wall Street investment banks JPMorgan and now defunct Bears Stearns swooped in to finance the multi-billion dollar transaction that engineered the transfer of $9.5 billion in debt to Idearc while allowing Verizon to keep more than $2 billion in valuable assets for itself, crippling Idearc from day one, as plaintiffs contend. Both investment banks quickly packaged and sold off the now-worthless loans to hundreds of other unsuspecting financial institutions, while keeping deal fees for themselves.

Investors also got blindsided. One Wall Street analyst gave this recommendation on Idearc shares to unwitting investors:

“When a corporate parent casts off a vexing unit with unpromising growth, the natural inclination is to steer clear of this forsaken offspring. But the yellow pages business Verizon Communications is spinning off may merit a second glance.”

Judge Joe Fish

It got one in bankruptcy court, eventually emerging with a new name: Supermedia.

Much of the documentation that surrounds the deal and those responsible for it have been sealed by the court. U.S. District Judge A. Joe Fish has announced he will decide the case himself and turned back efforts for a jury trial.  Judge Fish has also denied repeated attempts by Verizon to have the case dismissed, although he has also ruled against creditors dismissing some of their claims.

Bloomberg News this month filed motions to unseal the record in the public interest, but the judge has yet to rule on the motion.

Verizon retirees are watching the current lawsuit between Verizon and creditors carefully. The group of former employees have brought their own lawsuit against Verizon, with some of their worst fears realized when Supermedia sent word in June they were canceling the retirees’ pension benefits.

Verizon has reportedly hired eight expert witnesses to testify on its behalf, one who will receive more than$4 million in appearance fees. Verizon has leased office space specifically for the trial near the downtown Dallas federal court building.

Many current Supermedia employees report a siege mentality at what is left of the directory publisher, with regular threats of further job cuts.