Verizon Needs To Duke It Out In the Market
By Steven Pearlstein
Wednesday, June 2, 2004; Page E01
Everyone knows the Washington game involves negotiating hard, stretching the truth a bit, buying access and making selective use of litigation. But one company, Verizon Communications, has decided to take this all to a disturbing extreme, engaging in a scorched-earth strategy that runs roughshod over the unwritten rules of the game.
It began years ago when Verizon dragged its feet in meeting its obligation to let rivals offer local phone service using some of its own network. The subsequent fines were just a cost of doing business -- and well worth it, in that many of the upstart rivals had been driven out of business.
More recently, Verizon has gotten quite efficient at letting rivals hook into its networks. But it and the other regional phone companies have spared no expense trying to overturn the process by which the price for this access was set -- including one Supreme Court case and another in the works.
Hoping to put an end to this legal warfare -- and avoid the prospect of a phone rate hike for millions of Americans in an election year -- the Federal Communications Commission and the White House dragooned the parties to try to negotiate a settlement. But while some deals were struck during last weekend's marathon sessions here in Washington, Verizon refused to compromise, according to one participant. It even rejected an offer it had put on the table itself back in December.
This wouldn't be the first time Verizon was not exactly negotiating in good faith. A few months back, year-long talks aimed at breaking an impasse over the fees phone companies pay each other for completing each other's calls broke down after Verizon walked away from the table.
Then there was Verizon's ill-considered campaign to drive WorldCom/MCI out of business. It started with accusations about WorldCom underpaying for "access fees," which turned out to be badly overblown. This was followed by a lobbying effort to get WorldCom debarred from government contracts. Behind the scenes, Verizon was also pushing the bankruptcy court to punish everyone at WorldCom for the misdeeds of a few at the top by liquidating the company rather than allowing it to emerge from bankruptcy as a going concern.
Nextel Communications is another local company that has competed successfully with Verizon in the marketplace only to run into Verizon's regulatory buzz saw. Until a few months ago, Nextel thought it had a deal with the FCC staff and a majority of its commissioners to swap some of Nextel's existing spectrum that was interfering with police and fire radios for some other spectrum that was more valuable, and for which Nextel was willing to pay billions in additional money. But then Verizon, which operates a competitive wireless network, got to FCC Chairman Michael K. Powell, convincing him that he was about to hand Nextel a bonanza. The latest Verizon-inspired compromise would leave Nextel with much less valuable spectrum that would require it to switch to entirely new technology.
In the Nextel case, Verizon's argument was that the only fair way to allocate spectrum is through auctions. Funny, that, coming from a company that a got its big leg up on the competition by getting its original cellular spectrum for free. Ironically, one of the last times Verizon showed up at a spectrum auction, it bid over $8.5 billion. That was just before the telecom bubble burst. When it realized it had overpaid, Verizon called in its political chits and persuaded the FCC to pretend it all never happened.
The official most responsible for Verizon's Washington strategy is general counsel William P. Barr, the former U.S. attorney general who brings the litigator's take-no-prisoners approach to government relations. Maybe it's time for Chairman Ivan Seidenberg to rein in his litigious bullyboy.
Rather than playing the role of the old regulated monopoly, scheming endlessly to eliminate rivals and tilt the rules in its favor, maybe Verizon could concentrate on trying to compete the way companies in most other industries do -- by offering better products and services at more competitive prices.
Steven Pearlstein will host a Live Online discussion at 11 a.m. today at www.washingtonpost.com. He can be reached at firstname.lastname@example.org.
© 2004 The Washington Post Company