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	Discussion Board Verizon Communications

By Rick Aristotle Munarriz (TMF Edible)

By now I'm sure Chris covered a lot of the basics. You know, like how Verizon got its name by compacting the phrase "Very Bad Things on the Horizon" in one of those Mad Magazine back-cover folds -- you know, stuff like that. I'm sure he also covered the company's anemic growth rate, post-strike strife, and the competitive onslaught in its selected lines that have reduced the company to little more than commodity status.

What? He didn't tell you that? Naughty, naughty, Chris. I'm not surprised. You see, while it's easy to pepper up Verizon's potential with glitzy words like "wireless" and "broadband," the truth is that the company is just a slow-footed behemoth now coping with the margin-munching evils of deregulation.

That means that its own territorial markings are now all for naught. Competition is now being let into its former telco exclusive digs, while the company now has the freedom to try to outbid everyone else in new and suddenly overcrowded diversifications.

Who wins? The consumers. Who loses? The providers.

So, let's put Verizon's pursuits in proper perspective. Did my buddy Chris sell you on the DSL promise? Did he boast that Verizon is adding 3,500 new DSL accounts a day to its installed base of half a million? Probably. That's just great. But, why did the company call off a merger with NorthPoint Communications Holding Group (Nasdaq: NPNT) back in November? The DSL provider was supposed to be a great way for Verizon to grow its broadband base. Verizon balked at the last minute, citing deteriorating fundamentals.

NorthPoint isn't alone. Companies like RCN Corporation (Nasdaq: RCNC) and Covad Communications Group (NYSE: COVD) have recently announced layoffs. By providing the telephone network to many of these companies teetering on solvency, Verizon is in this mess deep and thick. DSL has simply not been the money tree the pioneers planted.

Even if the problems were NorthPoint specific, why didn't Verizon buy in anyway, knowing full well that it would be able to leverage its own strengths as a communications heavyweight? Well, the field reports are coming in, and it seems that DSL has become tech support's worst nightmare.

Two weeks ago, The New York Times took Verizon to task in the aptly titled "DSL Service for Linking to Internet is Problem Ridden" feature (free registration required). Even in our own Verizon discussion board, you're finding one irate user of Verizon's DSL service after another. With glowing testimonials like these from shareholders, who needs bears?

Okay, but what about wireless? That's hot, right? You know it. Just last month the Federal Communications Commission began auctioning off 422 licenses in the 1900-megahertz band of the spectrum, and the total bids quickly went into the 11-figures range. Verizon alone was reported to have been the most aggressive bidder early on, offering more than $5 billion.

The sums are huge and, again, it's those on the receiving end (in this case the government that is selling the airwaves) that stand to benefit. Not the bidders. As a matter of fact, 100 of those licenses became available after NextWave Telecom went into bankruptcy after spending $4.6 billion in the bidding process years ago.

No, I'm not suggesting Verizon is going to keel over. However, the price to grow in the 3G space leaves little room for error. That's troublesome when you consider that the early adopters of everything from high-speed Internet access to high-end wireless services are already on board. From here on out, the rest of the world is just waiting for prices to drop -- and that means drop all across the board.

It happens all the time. That's why last year's DVD players and laser eye correction operations are now fetching half the former asking prices.

Ultimately, all of Verizon's glitz has become a product of commodity bidding followed by cutthroat cost-cutting. So, I'm sorry. I'm just not excited to find out that Verizon is making inroads to enter long-distance markets in the Northeast, when I know it is now competing to keep its own local service customers happy.

If all of Verizon's offerings have come down to the highest bidder receiving the right to serve, then the overpaying winner is the loser. If all of Verizon's offerings have come down to the cheapest provider receiving the right to bill, then the winner of the lean-margin slicing tourney is, in fact, the loser.

Have I been too hard on Verizon? Naturally. Are some of my comments out of line? Possibly. So, let me close here with the company speaking for itself. You see, no matter how hard Chris tries to sugarcoat things -- or I try to smear his use of pastels -- the company has already spoken on the kind of growth it sees in the year ahead.

DSL. Wireless. Long distance. Local service. Regardless of where you stand on how the providers here will fare, Verizon's projections have done the crystal-ball number crunching, and what did it come up with for bottom line growth? 20%? 30%?

Nope. 8%. The company is looking at a paltry 8% in 2001 earnings per share growth. It is selling for nearly twice that multiple right now. This is an overpriced utility. This is an overpriced commodity.

Don't believe the packaging. It's just generic goodies inside. If you were mesmerized by the annoying Verizon ad campaigns -- the ones where folks would extend their fingers in a "V" sign at the end -- stick around. My take is that their fingers will be gesturing in a new combination in the months ahead.

Thumbs down.

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