Telcos

Judge: Windstream can change retiree benefits

Dan O'Shea — Sun, 04 Jan 2009 22:11:30 -0500

In our 2008 Year in Review, we noted labor-related issues as one of the biggest stories of the past year. Well, just before the year ended, there was another notable headline on this topic. A U.S. district court judge declined to block a previously-announced plan by Windstream Communications to reduce benefits and force some retirees to contribute to the cost of their health insurance. A lawsuit representing hundreds of retirees who used to work for Nebraska-based Aliant Communications, which was acquired by Windstream, had sought to stop Windstream from doing so on the grounds that their benefits were fully vested and permanent. However, the judge ruled that Windstream is entitled by the language in the benefits plan to make changes to the plans. The lawsuit remains active.

There are several other benefit-related disputes between telcos and either current or retired employees (or both) going on around the world, so the headlines are likely to keep coming in 2009. Rulings like last week's decision, however, may suggest that workers and retirees have a tough fight ahead of them.

For more:
- Forbes has the Associated Press story

2008 Year in Review: No rest for labor unrest

Dan O'Shea — Tue, 23 Dec 2008 23:54:50 -0500

Labor negotiations are seldom smooth and unfettered by controversy, so perhaps this year's contract disputes between major telcos and their unions are nothing more than business as usual. However, Verizon Communications' contract disagreements with its unions nearly led to a strike, before talks were extended and a deal eventually reached, and Qwest Communications later saw a tentative deal rejected by its union membership. The unions made out fairly well with near-term pay hikes, but in both cases, long-term benefits for some employees were trimmed.

The latter may represent a future that the broader telecom industry workforce could find hard to escape. Embarq and Windstream Communications were among other telcos that stirred retiree anger by their attempts to cut long-term benefits that were costing their operations more and more money. Companies in all types of industries are confronting the difficulties of paying for the livelihood of an increasing large group of retirees. This year's labor difficulties offered just a glimpse of what could be the telecom industry's biggest dilemma this side of shrinking capex in the years to come.

2008 Year in Review: Telecom nuclear winter, Take 2

Dan O'Shea — Tue, 23 Dec 2008 11:23:42 -0500

Snow is swirling around the FierceTelecom Chicago outpost as I write this. The dog is curled up in a ball to stave off a draft coming from... somewhere. The temperature is dropping. Visions of sugar plums, but also, unfortunately, of telecom nuclear winters, are dancing in my head.

Telecom economic metrics remained reasonably robust for most of the year while other industries were crashing. For the most part, company executives around the telecom world put on a happy face as the quarters progressed, though by the third quarter, many of them were put in the position of celebrating still-solid numbers, while being sure not to be too celebratory. Fourth quarter numbers, of course, will not become clear for a few weeks, but it did become clear early in Q4 that the industry's mood had changed.

While the industry debated whether or not TelcoTV services are recession-proof, telcos and their vendors began to cut back on most other fronts. AT&T announced major job cuts, as did Telecom Italia and BT, among others. Verizon Communications and Qwest Communications have taken their turn cutting back, and numerous vendors announced layoffs and other moves as capex forecasts dwindled. For most of 2008, the economy was a major story, because bad times weren't hitting the industry hard, but as the year closes, it's becoming a bigger story because the downturn has reached us. The snow drifts are piling up, and it's getting colder.

Of course, the "nuclear winter" is the part that comes after the big explosion, so to be clear: While 2008 got dicey near the end, we may have yet to experience the worst that the downturn will offer.

AT&T pair-bonding? Wait 'til next year

Dan O'Shea — Wed, 17 Dec 2008 10:13:43 -0500

AT&T still has not begun its planned VDSL2 bonding trial, but the carrier told Telephony late last week it will do so in 2009. If you have been keeping track, it originally looked like AT&T would pursue this test as early as last year, yet many other carriers are not likely to pursue similar tests until sometime next year anyway. The idea of broadband bonding in general has definitely picked up steam in the last year, behind companies such as Mushroom Networks and Sharedband Networks, but many telcos have remained on the sidelines for now.

Bonded DSL has often been cited as a future option for carriers such as AT&T, Qwest Communications and others deploying fiber-to-the-node types of architecture with potential for last-mile bandwidth limitations. However, lack of customer premises equipment reportedly has been a factor in the failure of the bonded DSL opportunity to evolve at a faster pace. That being said, shortage of copper pairs also may be a factor. In addition, the availability of multiple DSL technologies may be causing carriers to carefully and continually review their deployment strategies for each flavor.

For more:
- Telephony has this report

Telus talks up big 2009 goals

Dan O'Shea — Wed, 17 Dec 2008 00:51:03 -0500

Amid all the talk about the collapsed deal for the takeover of Bell Canada Enterprises, Telus may be Canada's forgotten telco. This week, Telus is doing its best to remind everyone it's still around and worth watching. The Vancouver-based company is taking the opposite direction of many North American telcos at the moment, actually pledging to increase capital spending by as much as 12 percent next year, with wireless projects as a primary target.

Telus issued a statement saying it will bring spending up to about $2.05 billion, from about $1.83 billion this year, with some of the increase coming from spending money deferred from this year to next year. The company still sees relatively flat profits, but the potential for improved earnings per share.

Telus CFO Robert McFarlane said the company would look toward Eastern provinces Quebec and Ontario for growth in 2009. According to several published reports, the company also is saying this week that it would not be interested in pursuing a buyout of suddenly-available BCE-at least not right now, as some BCE watchers and investors might have suspected. Telus had been a contender for the BCE acquisition at one point in 2007 after the company was put in play, but reportedly pulled out of contention because of what it saw as an unfair bidding process.

For more:
- The Toronto Star reports

Telco marketing efforts hit the streets

Dan O'Shea — Wed, 10 Dec 2008 09:27:00 -0500

After cable TV company chiefs speaking at the UBS Global Media and Communications Conference on Monday expressed some cautious optimism about their market position, telcos chiefs yesterday took the stage and indicated they need to act more like the cable guys-at least where marketing strategies are concerned. Qwest CEO Ed Mueller said his firm is trying to adapt its market from centralized to a more regional market-by-market focus.

Meanwhile, Telephony reports that R. Stewart Ewing, CenturyTel's chief financial officer, said his firm would take a similar approach following its pending acquisition of fellow independent telco Embarq. For a while now, it has seemed like telcos, especially the biggest ones, were very interested in touting their brand images to as big an audience as possible, though their direct marketing efforts at a local level already have taken a different tone for some time (the localized approach starts when you go to a telco website and immediately are asked to enter your zip code). But, perhaps we'll start to see even fewer national commercials urging us to "ride the light" and other, similar messages, and more energy directed at the unique needs of each customer. It couldn't hurt.

For more:
- Telephony covers the UBS speeches

Verizon vs. AT&T: No siblings, no rivalry

Dan O'Shea — Mon, 08 Dec 2008 11:22:53 -0500

Are Verizon Communications and AT&T rivals? Much was made of Verizon's move to build-out its FiOS network in a portion of AT&T's Dallas area market earlier this year. That decision made some sense for the telco because it already had network properties in the area stemming from its long-ago acquisition of GTE, the independent firm that was once the largest non-Bell company telco in the country. It's also the first case in which Verizon is testing FiOS in an area where it doesn't offer complete voice coverage, but no doubt Verizon has other former GTE properties around the U.S. that overlap or fringe on AT&T markets, so perhaps we'll see more situations in which FiOS goes head-to-head with AT&T's U-verse.

Clifford Holliday, an analyst with Information Gatekeepers, will be issuing a new report soon called "Overbuild: The New RBOC Advanced Access Architecture Strategy?," in which he examines this trend. There's something exciting about the possibility of the two biggest telcos over-building to compete with one another, in the same sense that watching Oklahoma and Florida compete for the national championship of college football should be pretty exciting next month. The Sooners and the Gators are not necessarily rivals, but they are the two biggest heavyweight powers in college football, and if there is anything America loves to see, it's the clash of best against best to determine who is really best. If it's anything like the Texas-USC game a few years back, it will live up to its billing.

I'm not so sure Verizon vs. AT&T will be worth the ticket, however. One reason is because Verizon so far is demurring from the idea that any heavyweight battle is brewing. Another reason is because any competition that does develop probably will be pretty slow to develop in any broad, meaningful sense. If Verizon enters an AT&T market (or AT&T enters a Verizon market, for that matter), it may not come off to the consumer as a clash of rivals. Verizon will just be the new guy, probably (though it hasn't said this) offering a discount to new customers to establish some kind of market foothold. It might also be hard to determine who really has the best offering in an economy that might drive customers to keep switching for lower-priced offers. Finally, AT&T and Verizon are not really the siblings we might think them to be-they once were cut from the same corporate cloth, but 25 years or so later, these companies have been changed and re-made so often that the only place you can call them siblings is in the history books.

Rivalries are fun to think about, but competition between service providers may not be much more than just that. If you are the new service provider in a market, your competition is Incumbent, Inc., and if you are the incumbent, your competition is everyone else.

-Dan

For more:
- Telephony has this report

Analyst knocks quad play, cable wireless efforts

Dan O'Shea — Mon, 08 Dec 2008 09:28:57 -0500

Sanford C. Bernstein & Co. analyst Craig Moffett last week questioned the quad play-the idea that telcos and cable TV companies need to bundle voice, broadband Internet, TV service and wireless service-and more specifically the idea that wireless needs to be part of a bundle delivered by cable TV players. That's a knock on recent moves by cable TV companies, including Cox Communications's $500 million plan to invest in 700 Mhz build-out. Moffett said it is not clear that the cable guys can make a real difference or stake out any new ground in wireless, and he added that while bundles may reduce churn, their value is harmed by the discounts at which they are marketed.

Moffett does like Cablevision's approach to wireless, which includes a $300 million commitment to Wi-Fi combined with DOCSIS 3.0. It gives Cablevision an edge in part because the company's main telco competitor, Verizon Communications, has not pursued Wi-Fi. Moffett also had some harsh words for Clearwire's business plan.

For more:
- Light Reading's Cable Digital News has coverage
- Telephony also has this report

AT&T to slash 12,000 jobs

Dan O'Shea — Thu, 04 Dec 2008 08:56:50 -0500

AT&T announced it will cut 12,000 jobs throughout the next year, take a $600 million charge in the fourth quarter related to those cuts, and also will cut its capital spending in 2009. AT&T and other telcos have been weathering the economic downturn fairly well so far, but recently fear about 2009 has been seeping into the industry. AT&T's move comes one day after industry analyst Nikos Theodosopoulos lowered his carrier capex forecast for 2009 and suggested AT&T could lead the way downward.

The telco giant did not say how much it would reduce its capex, and more specifics may not come until its fourth quarter earnings report in January. AT&T's statement on the job cuts and capex reduction cited the obvious economic pressures, but also "a changing business mix," and a need for a "more streamlined organizational structure."

It may be hard to tack a positive note on any of this, but the company did say it will continue to hire in growth areas, such as wireless, video and broadband.

For more:
- Here's AT&T's statement

Windstream looks to cut retiree benefits

Dan O'Shea — Wed, 03 Dec 2008 21:47:41 -0500

Another telco is set to go to court over retiree benefits. Windstream Communications has an appointment in front of a federal judge on Dec. 15. Windstream wants the freedom to reduce retiree benefits for people who worked for and retired from companies that Windstream eventually acquired, including Lincoln, Neb.-based Aliant Communications.

The retirees argue their benefits are vested and permanent, and that they were promised ongoing benefits. Another independent telco, Embarq, is facing a lawsuit over its decision to cut benefits for some retirees in order to reduce costs. Qwest Communications and BT are among other telcos that have been facing controversial benefit decisions. Do you have the feeling we have only seen the beginning of such disputes?

For more:
- KPTM.com has the Associated Press story

UBS predicts 10 percent carrier capex cutback

Dan O'Shea — Wed, 03 Dec 2008 10:37:00 -0500

UBS analyst Nikos Theodosopoulos revised his forecast for cuts in U.S. carrier spending next year from a drop of about 5 percent to a steeper decline of 10 percent or more. He said cable TV firms and wireless-related spending might not be as bad, but still would decline by at least 5 percent and 7 percent respectively. Theodosopoulos believes that AT&T specifically may cut wireline spending as much as 10 percent or more in 2009.

Infonetics Research previously said carrier spending worldwide would be down at least 2 percent next year, with 2011 estimated to be the next year of widespread carrier spending growth.

Some telecom companies already have been fortifying themselves for a telecom industry downturn following in the wake of the broader economic downturn. Third quarter earning reports from many companies looked relatively strong, but in recent weeks, a heightened stress level about 2009 could be detected at events like TelcoTV 2008.

For more:
- Telephony reports on the UBS forecast

BT investigated again over Phorm trial

Dan O'Shea — Sun, 30 Nov 2008 23:26:16 -0500

The U.K.'s Crown Prosecution Service is investigating whether or not national telco BT broke any laws when it collected the Internet browsing information of about 18,000 customers without consent in late 2006. BT earlier this year had been criticized over the activity, which occurred as part of a targeted advertising trial's beginning phases, and it even was investigated by the police.

It had not been previously determined that any laws had been broken, and for a while, it looked as if BT and technology partner Phorm might skate past any further controversy, the likes of which entangled several U.S. telcos over their trials with similar vendor partner NebuAd.

For more:
- Ars Technica has this post

AT&T wants to help EPA

Dan O'Shea — Wed, 26 Nov 2008 10:19:03 -0500

Verizon Communications arguably has been the more aggressive of the two largest U.S. telcos when it comes to environmentally-friendly strategies and technologies. But AT&T has done a lot, too, and, especially within the last month or so, such issues appear to have taken on new priority for AT&T. The company entered a filing with the U.S. Environmental Protection Agency (EPA) welcoming the opportunity--essentially asking for the opportunity--to work with the EPA "and other stakeholders to explore and develop cutting-edge approaches to combat the challenge of reducing greenhouse gas emissions."

AT&T Chairman, CEO and President Randall Stephenson said in a statement, "Protecting the environment and economic growth can go hand in hand. As a nation, we can limit greenhouse gas emissions and, at the same time, expand our potential for economic growth. Communications and broadband infrastructure, like the network and services AT&T provides, will be essential components in driving economic growth and achieving meaningful reductions in greenhouse gas emissions."

The cynics among us may read that as AT&T looking to protect its own economic interests as a U.S. President-elect with assertive environmental strategies prepares to take office. Still, AT&T this year joined the Green Grid, and like Verizon, already has taken many other steps guided by green thinking. Also, it's EPA filing contains lots of relevant ideas and info.

For more:
- Here's AT&T's EPA filing

A new broadband idea: 'Homes With Tails'

Dan O'Shea — Mon, 24 Nov 2008 10:35:45 -0500

"Homes With Tails" sounds like an effort promoting puppy adoption (an excellent cause, we might add), but it's actually a very interesting idea about how to promote universal broadband. Is it compelling, too? Hmm... "Homes With Tails" is the title of a paper authored by Columbia University law professor Tim Wu and Google policy analyst Derek Slater, and it proposes that last mile fiber ownership go the way of condominiums, with individual home owners owning all their household wiring. The paper also suggests creating associations to own and manage common neighborhood network facilities.

The proposal further would create neighborhood hubs that would support an open network environment allowing consumers to choose service providers on a flexible basis, rather than having to commit to one.

Sounds like a telco nightmare, yes? Well, it also sounds like a householder nightmare: Proposing homeowners take on the cost of own and funding a network management association at a time when many can't meet other household cost obligations. That doesn't even count ongoing maintenance costs.

I haven't read the paper, so while I'm picking at the idea a little, I'll also admit that it sounds very creative and noble, and in a way, elegantly connects back to some of the ambitions the telecom industry and the nation had when local exchange competition was authorized almost 13 years ago.

And while you may have stopped listening at the mention of Google, Slater told InternetNews.com this was a personal project and an effort to bat around new ideas: "It was something I worked on on Sundays before football season started."

For more:
InternetNews.com has this report

Diversify and conquer

Dan O'Shea — Mon, 24 Nov 2008 10:04:40 -0500

Do telcos need to start diversifying? And when you already offer voice, data and video to residential consumers, mobile consumers and businesses of all sizes and in all vertical markets, what does diversification really mean? There are some who would say that telcos already have gone too far in trying to diversify into the world of self-branded TV packages, but as landlines disappear, voice market value vanishes and broadband growth modulates, where else is a telco to go?

Canadian telco Telus last week explored one possible answer, saying it would invest $100 million over the next three years in its 1,500-employee Telus Health Solutions unit. Telus acquired healthcare data services and transaction processing firm Emergis almost one year ago, and at the time, the deal might have inspired a collective scratching of heads. Now, it seems clear that Telus sees the healthcare sector in particular as an area in which it can generate new revenue by delving deeper.

As the telecom industry faces the likelihood of being more harshly affected by macro-economic doldrums in the months ahead, should U.S. telcos do the same? It is not immediately clear to me whether a major U.S. telco would be allowed, regulatory-wise, to acquire a major sector specialist the way that Telus acquired Emergis, but regardless, you could argue that the big U.S. telcos already have positioned themselves strongly enough through the managed services they offer in various vertical markets to reap the benefits. If there is room to grow and generate more revenue from sectors such as healthcare, perhaps it can be accomplished simply by forging stronger, deeper relationships with those customers that eventually lead to telcos taking over more responsibilities.

On the consumer side, there is early evidence that telcos are looking to diversify by becoming household technology helpers for consumers with highly-connected homes. They are leveraging those existing broadband connections into something more.

Diversification, of course, has a double meaning. As telcos diversify their revenue possibilities, they may not necessarily need to diversify their organizations, or, more specifically, their asset holdings. The telecom industry has indeed consolidated into fewer, larger, broader-reaching companies, but diversifying to attack new market opportunities in a timely manner requires leanness. We have wondered recently if more telcos should outsource voice or traditional landline management in some way, thereby allowing them to focus even more on services. Maybe rather than adding in order to diversify, telcos should instead subtract. Beware of conglomeration, a word whose sound could not be more apt to its meaning and consequences.

-Dan

For more:
- The Toronto Star has Telus coverage

Telecom lobbyist's alleged Obama advisor role criticized

Dan O'Shea — Sun, 23 Nov 2008 22:32:42 -0500

Telecom industry lobbyist James Halpert reportedly is advising President-elect Barack Obama on issues related to intellectual property and the U.S. Patent and Trademark Office. Halpert worked on behalf of the Internet Commerce Coalition, which included major telcos AT&T and Verizon Communications. If Halpert is advising Obama (Halpert has not been officially named as an advisor), it would violate Obama's stated ethics policy regarding lobbyists, which prohibits transition team members from working in areas in which they have served as lobbyists within the last year.

An Obama spokeswoman says in a story at GovernmentExecutive.com: "Everything we're doing is consistent with the principles that President-elect Obama laid out during the campaign. We are operating under the farthest-reaching ethics policy in history."

The allegation about Halpert also comes at a time when the growing consensus is that the telecom industry will face a tougher regulatory environment with Obama in the White House.

For more:
- GovernmentExecutive.com reports

Qwest CFO reassures investors

Dan O'Shea — Sun, 23 Nov 2008 21:00:21 -0500

Joseph Euteneuer, who has been CFO at Qwest Communication International for only about two months, spoke at a Bank of America investors conference late last week and said the telco will continue to be able to cover its debt commitments. Euteneuer said Qwest "was generating enough free cash and had enough 'levers' to pull to cover its debt," according to a Dow Jones wire story. Much of the company's free cash is currently being used to pay down debt

He indicated that Qwest wants to refinance some of its debt when the debt market settles somewhat, and he acknowledged that about $1.27 billion in convertible debt due in November 2010 is getting significant attention from the company.

Qwest has continued to suffer from financial shortcomings while other big telcos AT&T and Verizon have so far been holding their own in a difficult economy. Euteneuer said Qwest actually has ramped up marketing efforts recently which he suggested could give the company momentum into next year. Qwest has been helped somewhat by receiving federal government contracts related to the Networx Universal project, but Euteneuer said the Networx contract awards still are only trickling out, which was a common complaint by carriers several months ago.

For more:
- CNN Mony has this Dow Jones story

Study: POTS reliability still king

Dan O'Shea — Wed, 19 Nov 2008 08:30:00 -0500

A study released earlier this month by Keynote Systems Competitive Research found that while VoIP audio quality continues to improve, VoIP is still no match for landline service reliability. At least that's what happened when Keynote pitted AT&T landline POTS against VoIP service from major cable TV providers and other telcos, including Verizon.

AT&T landline service earned the highest grade by far in service reliability, followed by VoIP offerings Time Warner Cable Digital Phone and Verizon Voicewing. Comcast Digital Voice was ranked best in audio quality, while AT&T POTS fell to third place in that category. Do the findings help the case for either landline carriers who are still losing lines by the hundreds, or VoIP carriers who are looking to move up another rung on the mainstream market ladder? It's not clear that quality has been a major factor in switching or staying with a service. For many, even VoIP may be an interim stop on the journey to completely cutting the cord for mobile.

For more:
- GigaOM has this post

Evslin: No more landlines under Obama

Doug Mohney — Tue, 18 Nov 2008 01:29:27 -0500

VoIP guru Tom Evslin is predicting the death of copper landlines by the end of Barak Obama's first term. We aren't sure if he's a little too bearish on the subject.

Evslin recites the current trends that young people are all cell phone all the time, while the middle aged people are going with cable triple-play bundles and canceling their telco copper services. Meanwhile, Verizon has simply sold all of its legacy copper infrastructure in three northern New England states to FairPoint. Meanwhile, FairPoint, like Verizon and AT&T, continues to lose access lines. And to top it all off, Verizon is busy replacing copper with fiber, starting with its most lucrative markets.

Loss of copper is going to provoke a number of public policy problems; Evslin is predicting an implosion with medium-sized phone operators who have copper that sounds a lot like Detroit and car manufacturing (i.e. Declining revenue base, bankruptcy, implosion, doom). There's also the whole "What do we do with the Universal Service Fund?" issue to support broadband.

The solution to all this is cheap cell phone and broadband access, maybe through the same device. USF needs to go to subsidizing connectivity, not voice service.

For more:
- Seeking Alpha seeks controversy over the death of wireline. Article.

Alameda P&T to sell cable assets to Comcast

Doug Mohney — Fri, 14 Nov 2008 10:11:26 -0500

After years of troubles and debts, Alameda Power & Telecom wants to sell off its Internet and cable TV system to Comcast for $17 million.

Last fall AP&T proposed three options to get out of its 10-year mess: keep the network it had built and refinance its 2004 notes; keep the system, refinance the 2004 notes and add voice; or, just sell the network. Three bids were offered for the network, and if the Public Utilities Board and the City Council approve the deal next week, Comcast could take over the operation next Friday.

However, the venture is still going to take losses. The city originally planned to invest $10 million and to provide up to $20.5 million in financing. City-owned AP&T transferred in another $44 million, but the municipality will not be repaid that amount.

AP&T was facing a $33 million bond payment in June. Comcast will make bondholder payments of at least $15 million under the deal, but that won't resolve lawsuits hanging over the utility or the costs the utility will have to pay to close the deal.

The AP&T system currently has around 9,500 cable and 6,600 Internet customers..

For more:
- San Jose Mercury News opines on Alameda/Comcast deal.