- The Washington Times - Monday, June 10, 2002

Verizon Communications is, on balance, a good company: It provides the phone service in Washington, D.C., Maryland, much of Northern Virginia and throughout the Northeast. It owns the phone company that serves a good chunk of Southern California as well, including the tony locale of Malibu, and the city where Richard Nixon was born, Whittier.
Many of Verizon's services are also, on balance, quite good, such as their "universal number" system which, for a fee, will let people call one toll-free number and then reach you via phone, e-mail or pager. That there isn't a carrier pigeon or hot-air balloon method included in the service was probably an oversight.
Even Verizon's broadband Internet service known as Digital Subscriber Line, or DSL seems to be on a roll. After initial hiccups in getting customers signed up, the firm has, today, well over 1.35 million DSL subscribers, of which 150,000 signed up in the first quarter of 2002.
But, apparently, all this success isn't good enough for some at the firm, specifically Lawrence T. Babbio, vice chairman of the firm, which, it should be noted, is in the "Fortune 10" that's 10, not 100 and which reports $65 billion in annual revenues. Mr. Babbio, who began his Verizon career with New Jersey Bell in 1966, said last week that telephone companies such as Verizon have been offering consumers too much of a broadband bargain for too long.
"Everyone seems to want every service to every home or business at an ever-decreasing price," Mr. Babbio said in a speech at the SUPERCOMM trade show in Atlanta. "Don't get me wrong: I'm all for lower prices. But when we price below the point that we need to survive financially, the result is not just the loss of a business or corporation. It's a loss of faith in our ability to manage in a professional way.
"We are out of balance," he continued. "We are driving huge benefits for the customer, but we are not creating enough value for the shareholder. That needs to change: through more natural pricing and less regulatory interference."
Mr. Babbio didn't suggest, in his speech, what "more natural" pricing would net out to, but if he believes that $40 a month is too low for DSL service, one wonders what he would find acceptable.
The source of Mr. Babbio's angst seems to be that according to statistics he cited in his speech the average Internet user now spends 29 minutes each day using e-mail versus 45 minutes on the phone. The use of instant messaging and transmitting voice calls over the Internet also continue to grow.
"These statistics and others point to a clear and powerful shift in our industry. While traditional measures of volumes such as access lines and minutes of use are going down, the demand for communications overall is going way up," Mr. Babbio said. Of course, what he didn't say his audience of fellow industry people knew this is that flat-rate services such as DSL won't easily work in a message unit or by-the-minute rate structure. That might mean fewer profit opportunities for Verizon or would it?
At the same time that Mr. Babbio was hinting, strongly, at the need to boost broadband rates, the firm is advancing its plan to sell long-distance service to customers, recapturing business assigned to former parent AT&T; when it split off the so-called "Baby Bells" in 1984. Now, nearly two decades later, Verizon's long distance offerings seem competitively priced with AT&T;, WorldComm and Sprint, and this, coupled with expanding cellular revenues, seem to be giving Verizon a reasonably good year in 2002.
Profits are not as high as expected we can thank the September 11 hijackers for their effect on the economy in Verizon's key markets of New York and Washington, D.C. but the firm is doing well, and while its stock is not as high as it was a couple of years back, its per-share price in the $42 range isn't bad when compared with, say, AT&T; or, particularly and sadly, WorldCom.
I'm not an expert on finance computers and technology are this column's business but having observed the telecom game for many years, I'm a bit worried by Mr. Babbio's suggestion that Verizon might need to raise its DSL charges. Hiking prices may stall growth in DSL sign-ups, particularly in areas that could most benefit from the service.
As Mr. Babbio seeks regulatory relief for his firm, I hope those who do regulate Verizon's businesses, specifically the Federal Communications Commission and those in Congress who oversee that body, will encourage the firm to carefully consider the impact of any price hikes on the customers it serves.

Write to: Mark Kellner c/o The Washington Times, Business Desk, 3600 New York Ave. NE, Washington, DC 20002. Send e-mail to [email protected], or visit the writer's Web page, www.kellner2000.com. Talk back to Mark live every Friday from 5 to 6 p.m. EST. on www.adrenalineradio.com.



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