Ill. Judge Only Smart One

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Ill. Judge Only Smart One

Only a single judge in Illinois has the common sense to see that the Frontier-Verizon deal is very similar to the Fairpoint-Verizon deal that resulted in a bankruptcy within 18 months while screwing consumers in three states.

The Herald-Review has a report about "An administrative law judge ruled that the planned sale of Verizon's land-line service to Frontier Communications should not be approved by state regulators.... In her ruling, Administrative Law Judge Lisa M. Tapia says evidence presented in the case in front of the Illinois Commerce Commission doesn't support the sale, primarily because the transaction would leave Frontier too laden with debt to be able to properly manage the lines and other infrastructure."

This was exactly the deal with Fairpoint.

Debt is an issue for every telecom company. We can't keep ignoring the Debt. It can only be pushed out so far. It eventually has to become due.

Reminder: Windstream has been bulking up, but it still has a declining asset base: wireline revenues. There's not fiber plan nor cellular division to enhance revenues.

The only company that gains from the Frontier-VZ deal is VZ shareholders.

I would offer that VZ needs this transaction because it can no longer hold all its cards together. By that I mean, spending $23 billion to roll out FiOS, add TV, upgrade VZW to 3G and then LTE, plus billions in International network upgrades, while absorbing billions in debt from the Alltel merger. Think about this: what part of VZ is a growing pie: broadband, triple-play, cellular voice? Maybe cellular data but that's a double edged sword: as people use the data, the network gets saturated. It's finite how much money you can make from finite spectrum (especially when you haven't deployed all the spectryum you own). An additional issue is the customer acquisition and retention costs associated with consumer services. (Why do you think ETFs are so high?)

Notice that VZ has announced that it will stop deploying FiOS. VZ has FiOS passing 48% of its customer. It will "now focus on marketing the service to areas that are already deployed."

Passing thought as Cablecos announce DOCSIS 3.0 roll-outs: cable went from the lower margin TV service to Internet Access, which is a high-margin business at the rates they charge, to voice, which many have called printing money. Meanwhile, telcos have had to go from the highest margin business to the lowest margin business, while spending mega-bucks on network upgrades, middleware, content, and head-ends - and marketing. It triple-play pie isn't growing - it's a bloody red ocean.


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