Double Standard When It Comes to Verizon

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Although during its existence as a corporation, Verizon has made its share of mistakes, there are often contrasting principles at work with some members of the press and certain industry analysts when it comes to the firm, especially in relation to AT&T. While the latter is looked upon more favorably nowadays, its strategy has been based mainly over the years in staying as big as possible for its own sake, including: the quasi-re-incorporation of Ma Bell with four of the seven “RBOCs” (despite taking on a massive number of residential lines, particularly copper that can often be money losers), the purchase of DirecTV (with the unstated rationale of offloading video from capacity-constrained, copper-based modems and creating confusion in the market because of the lack of synergy between the operations), and the announced merger with Time Warner (with no apparent questioning of the wisdom of a bunch of ex-Bell-heads running a huge entertainment content entity). Ironically, despite being more technologically innovative and entrepreneurial by far than any ILEC on the planet, Verizon is evidently perceived in a negative light for concentrating much of its efforts in what it does best – being a wireless company and providing distribution pipes, including future ones to support 5G.

Consistently over the years, Verizon has been in particular criticized unjustifiably for the amount of debt it takes on for purchases of companies as well as other investments, sometimes because the idea behind such outlays are misunderstood on the Street and elsewhere. Of course, the over $20 billion investment in FiOS was heavily and wrongly denounced for destabilizing its financial position because it was not recognized that it was subsidized by fiber to the business installations, nor were the 50%+ savings in operational costs by using fiber instead of copper anticipated by these industry observers.

There also continues to be a widespread misunderstanding as to why Verizon decided to buy Yahoo (and to some extent AOL). It was looking to bypass the stringent restrictions of the previous bureaucrats at the FCC on the net neutrality stipulations. So, with the new FCC chairman, it is practically a given that almost $5 billion will probably not have to be spent on Yahoo.

In terms of advances in networking, AT&T cannot hold a candle to Verizon. According to our metro 100G study, Verizon “has concentrated in recent years in building a 100G, scalable to 400G backbone, which led to the collapse of the older network onto this new infrastructure. The evidence is clear that the construction allows for a healthier consolidation with the cost per bit dropping probably almost by a factor of ten.” Although at least a few consultants are getting overly excited about just trials scheduled to happen at AT&T with 400G, the company is apparently still operating mainly at an order-of-magnitude, lower data rate.

On the wireless side, it was AT&T’s network that could not adequately handle the capacity demands of the Apple iPhone, especially at the beginning. If one works in a hospital, there is no doubt that the penetration of the signal by Verizon phones are significantly better.

In short, Verizon has by far performed more uniquely than other US incumbent competitors in both the wireless and wireline sectors. It is not an accident that it became the market share leader in 4G. Moreover, the current and prevalent commentaries favoring AT&T over Verizon demonstrate ignorance both about the massive technological challenges that will need to be overcome and the major investments in optical backhaul that will be required to make 5G a reality, such as the importance of a potential Charter Communications purchase. While the business case for 5G is an uncertainty, Verizon is evidently committed to making it happen, and is likely the only carrier in the world that could be a successful pioneer with far-reaching deployment of that next-gen equipment.

Please find details on our latest reports, including Clash of Optical Component Vendors & Technologies in Data Center Networks here. For our seven-day-a-week updates, please follow us here.

[written by Mark Lutkowitz]

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