Verizon Strike Underlines Focus On Wireless Market, Partners Say

The nearly two-month-long standoff between Verizon and about 36,000 of its union employees has come to a tentative end. But the strike may have underscored the carrier's plans to eventually sunset its legacy wireline business, solution providers say.

Businesses are going mobile, hitting many of the large, incumbent telecommunications providers in the pocket as users move off of traditional copper-based wireline services in favor of wireless solutions.

Verizon, like many of its competitors, is no stranger to shrinking legacy voice and data services sales. In the first quarter of 2016, the carrier reported a 3.1 percent decline in global enterprise wireline revenue. Enterprise wireline revenue also fell 3.3 percent in the fourth quarter of 2015 compared with one year earlier.

[Related: Verizon-Union Standoff Ends With Tentative Deal]

Sponsored post

Unlike the carrier's declining wireline business revenues, Verizon's fiber-based network services -- its Fios phone, video and Internet services -- have enjoyed net new subscriber gains and steadily increasing revenue during the past several financial quarters.

One executive of a telecom solution provider who asked not to be named believes that Verizon's strategy no longer centers on traditional wireline services. Rather, the carrier's wireline offerings today are an adjunct to its wireless services.

"I think Verizon has always had a strategy to drive their business towards wireless, so the other components are really just facilitators of that," said the executive.

The emphasis on wireless services also helped to cushion the blow of the strike, because businesses aren't as reliant on wireline services as they once were, said Greg Praske, CEO of Association Resource Group, a McLean, Va.-based telecom solution provider and Verizon partner.

"Overall, the impact of the strike is not the same as with strikes in the past. This time around, there are far more options," Praske said.

Cable companies are providing voice solutions. More buildings are being lit up with fiber, and some providers, such as Comcast and AT&T, are getting aggressive with expensive fiber network buildouts, he said.

"Today, we largely live in an [Internet Protocol] world. Verizon is certainly the dominant last-mile provider and the dominant lit-building provider … [but] mobile devices over cellular networks provide alternatives for some," he said.

The two groups of union Verizon employees that went on strike in April largely belonged to the carrier's wireline business unit. One of the terms of the newly proposed contract states that Verizon can provide buyout incentives to employees once a year without first getting permission from the unions, which could allow the carrier to eliminate jobs more easily as the carrier shifts its focus to wireless services. This particular contract term has some industry analysts saying that the carrier is looking to eventually offload the wireline business unit altogether.

"[The new agreements] include key changes sought by the company to better position our wireline business for success in the digital world," Marc Reed, Verizon’s chief administrative officer, said of the new contract forged between Verizon and its wireline employees.

But Verizon hasn't thrown in the towel on infrastructure investment entirely. The carrier in February bought Herndon, Va.-based XO Communications' fiber-based IP and Ethernet networks for about $1.8 billion.

At the same time, however, Verizon sold off a portion of its wireline business to Frontier Communications for $10.54 billion. As of April 1, Stamford, Conn.-based Frontier took over Verizon's fiber-based Fios network in California, Texas and Florida.