Verizon's striking workers have most to lose

Kamalini Ganguly/Ovum
17 Aug 2011

US service provider Verizon’s failure to reach a new contract with two unions has resulted in an indefinite strike that started August 7. Amid picketing at Verizon offices, the company has reported over 90 cases of attempted sabotage to their network since the action began. The strike includes 45,000 wireline workers in a few Eastern US states (out of a total employee count of 196,000), including those working on ongoing FiOS rollouts, the largest FTTH deployment in North America.


In response, Verizon has temporarily replaced the striking workers with tens of thousands of management employees, retirees, and others who are now providing network repairs, customer service, billing, back-office support, and other critical functions. A prolonged strike would cost Verizon dearly in lower FiOS connections and possible loss of subscribers, but in the long run it’s Verizon’s workers that have the most to lose.


Last week, Verizon’s FiOS FTTH services achieved a big boost in credibility: The FCC released a report that put FiOS in the lead among all major US broadband service providers in measured actual Internet speeds versus advertised speeds.


According to the report, FiOS consistently provided the highest speeds, which were also higher than advertised. This is a major validation of Verizon’s strategy of going with FTTH and delivering what it actually promises to customers.


Verizon had planned to deepen FiOS penetration throughout 2011, especially in New York City, where its fiber passes tens of thousands of buildings already. Those plans are now at risk, and if the strike continues we will lower our forecast for sales of North American FTTH ONTs and ONUs (optical network terminals and units), which are heavily dependent on Verizon’s deployments.


Lower-cost FTTH models will eventually require fewer wireline workers

Verizon claims that its substitute workers have been able to address the majority of repair and customer service commitments, including 91% of incoming calls on August 10. While this appears to be a good backup plan (the supply pool of retirees looking for work will only grow), it is obviously not sustainable for a long period of time. Managers need to get back to managing, not repairing networks. So it would be logical to expect Verizon to back down after a few weeks.


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