Verizon is in a world of hurt. The telecom giant’s stock blew up last month when they reduced their profit outlook for next year. Plus, they are drowning under $49 billion in debt. Can you hear me now?
But their real death blow was settling with the 78,000 strong Communications Workers of America and the International Brotherhood of Electrical Workers unions, who pushed for stronger access to unionize wireless workers, but were bought off with a raise and job security. The unions had feared that Verizon would just back itself into virtually union-free Verizon Wireless (51 out of 40,000 workers,) leaving the unions out in the cold. Actually, that sounds like a plan. Either management does it, or the stock market will force their hand.
Ever since Alexander Graham Bell yelled “Mr. Watson — come here!” and not so accidentally killed off telegraph keyers, phone companies have been about taking people out of the business, not guaranteeing cushy employment to its workers.
At the turn of the last century, an undertaker named Almon Strowger designed and patented an operator-killing automatic switch called “Step by Step” when he discovered that his competitor’s wife was the local phone operator and was connecting the freshly bereaved solely to her husband’s funeral home. Lucky stiff.
In 1937, an AT&T mathematician, George Stibitz, was doing calculations to improve the quality of long-distance calls and invented the NAND gate that is the basis of every modern computer, which of course, can now recognize voice requests for the local pizza parlor. His early logic was made out of relays (the same ones that protect our electricity grid), but then came the transistor from Bell Labs, invented to amplify long-distance signals so you didn’t need any operators along the way. Today, trillions of these transistors allow for a complete workerless phone network and even phones untethered from wires.
Almost all of the phone network can be run dark; i.e., without workers, just a control center monitoring traffic and a call center to handle billing complaints. The unions argued that while productivity in the U.S. is up 5.9% from 2000-2002, Verizon productivity is up 14.9%, and workers deserve to be compensated accordingly. But Verizon removed 18,000 jobs in 2002, so my money says some guy at Lucent or Cisco, with a new switch or router that replaces human function in the phone network, is more responsible for that productivity pop than a bunch of guys riding around in vans taking coffee breaks.
Wall Street looks on with less than amusement. Verizon’s stock has been a dog this year, down 14% in a big up market. Verizon can be a Wall Street darling again if management would reinvent it as a 21st-century communications company, with flat fees for voice, data, cellular, baby-sitter scheduling and whatever other modern services yet to be invented.
But this isn’t going to happen with a job-secure work force trained for a 1930s era phone system. CEO Ivan Seidenberg could have saved the company, by walking away from the unions and cutting the $4 billion a year dividend, paying it instead to the displaced workers for retraining. His stock would pop 30%, allow him to fund a modern network (vs. milking it) and be considered a growth company again. All right, I know: Dream on. The communications workers unions may have won, but like a parasite, killed off their host. The Post Office has this problem, too. When Verizon’s stock gets low enough, management will be forced to act, by getting rid of the wires.
Three headlines from last week hint at new workerless and wireless directions:
- “Verizon Offers Buyouts to 74,000 Non-Union Managers”
- “Verizon to Shift More Spending to Data, Wireless”
- “Verizon and Verizon Wireless Team Up to Offer One Bill For All Services”
Local Number Portability, enacted in 1996, will finally launch on Nov. 24. Verizon Wireless, after fighting number portability for years, announced last week that management is now for it. Want a cell phone with your existing home number? Verizon, which owns 55% of Verizon Wireless won’t complain — it’s their transition plan. The only hitch in Verizon’s plans is Vodaphone, a 45% owner of Verizon Wireless, but smart investment bankers know how to whack minority holders, with an offer they can’t refuse.
Verizon Wireless workers have a “card-check agreement” which supposedly makes it easy to unionize. But they don’t. They’re no dummies. Would you? They have figured out Wireless is the real growth company, and workers smell stock options and an IPO to separate them from their dying parent. The stock market may force the hand of Verizon management to this new reality, or maybe this was their plan all along.
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