Verizon Communications [NYSE: VZ] is struggling through yet another strike. Actually, all the workers, customers and anyone who touches Verizon are also struggling. I have commented on these strikes many times over the last couple of decades. What is happening is unfortunate, but it’s a necessary part of the process as the industry changes.
First, will there be long-term repercussions for workers, investors and customers? There hasn’t been in the past, so the Verizon brand should be OK as long as this is settled quickly. Customers don’t like it, but they are relatively used to it. Like it or not, this has long been the way phone company employees negotiate for a raise.
On the other hand, there was no competition until the last decade. Now there is — from cable television companies, wireless companies and Voice over IP companies. Will customers suddenly decide now is the time to make a change? Yes, I think more will. That will make matters worse.
The Shifting Marketplace
The telecom industry is changing. It has been in transition over the last few decades. We are communicating differently today. There is good and bad to that new reality.
The local phone business is shrinking. It was growing through the 1990s — but during the last several years, it has been giving way to competition and new technology. Remember the Wave theory I regularly talk about? This is a perfect example.
Local phone companies have watched their traditional local phone business drop like a rock. Verizon local phone service has crossed over the top of the Wave and is now on the downside.
Other parts of the Verizon business — like wireless and FiOS Internet and television — are growing. That is the new model. These sectors are on the growth side of the Wave.
So what does that mean to all the long-time Verizon workers who are now fighting for their financial lives? I have met with many workers over the years and feel for them on an emotional side. After all, they are people with families and they relied on promises made. We all understand how earning less hurts.
However, on the business side, I understand that Verizon has to make some changes in order to remain competitive and continue to grow. If it doesn’t, its expenses will be higher than competitors. That means it will have to charge more. That means it will lose business. And that means it will have to cut even more workers, and everyone gets hurt.
After all, one of the things customers look for is the lowest price. They won’t pay more for phone service just to take care of Verizon workers. Especially not during these trying financial times.
Harder Times Ahead
So even though Verizon is still growing and healthy, when you take a closer look, only parts are growing and healthy. Other parts are shrinking on the down side of the Wave.
As hard as it is for workers to accept, this is the problem that companies like Verizon must address. It’s not only Verizon; many other companies whose businesses are also changing are wrestling with the same issues.
Customers and investors love the changes. On the other hand, workers don’t — because of what it does to their earnings.
Over time, workers have seen their income and benefits rise year after year. However, that world cannot sustain itself any longer as the industry continues to change and non-union competition increases.
So, what’s the answer? The company and the workers both have to understand the needs of the other and negotiate a solution that neither is really happy with — but that both can live with.
That’s the only real solution. And they should also prepare for more of this wrestling down the road, because for workers on the downside of the Wave, things are only going to get rougher as the years pass.