FCC Recommendations and Verizon Controlling Customer Ownership

Implications: Although federal regulators are recommending that Verizon did not violate consumer privacy laws in retention activities, the key issue is using landline billing to control customer ownership.

Analysis: The competition for telecom customer ownership intensifies with the FCC reviewing Verizon’s use of customer information for retention of consumers switching to cable voice services.  Although the federal enforcement bureau’s recommendation is favorable to Verizon, the larger question is tactics to control the customer ownership with billing information.  The cable MSOs of Comcast, Time Warner Cable and Bright House Networks are complaining that Verizon is retaining landline disconnects by using customer information.  Through its billing and call detail, Verizon can try to persuade the customer that disconnecting the landline could affect other bundled services or voice usage and calling cards.
The FCC chairman and the MSOs have commented about the issues of pro- and anti- competitive practices and the benefits of lower prices.  The fact that some cable MSOs ask the consumer to cancel the telephone line instead of submitting themselves implies that the cable provider does not want to lose a new customer about disconnecting the telco services.  AT&T and Verizon have been able to offset landline losses with wireless services.  But landline defections reduce the customer ownership as indicated by the 2007 fourth quarter results that show AT&T only increasing consumer revenues by 1.2%, Qwest losing 7.3% of its landline base, and Verizon disconnecting about 3 million residential lines.