• Bloomberg


Verizon Communications Inc., deadlocked in labor talks over pension benefits and health care that caused a strike in 2011, has gained bargaining power this time around after shedding operations that employ older unionized workers.

The Communications Workers of America and the International Brotherhood of Electrical Workers, representing about 39,000 Verizon employees, are in the weakest position they’ve ever been. That’s because the phone giant has refocused on wireless, where it sees more growth and employees are nonunionized and typically younger.

The labor dispute is the first since Verizon took full control of Verizon Wireless and agreed to buy AOL, two deals worth almost $135 billion that point toward a wireless-centric future. Today’s Verizon makes just 30 percent of revenue from its landlines, and Chief Executive Officer Lowell McAdam has begun a review of legacy telephone assets that could result in the sale of additional union-heavy operations.

“Verizon is not the same company it was when the idea of employment contracts were center stage,” said Jeff Kagan, an independent telecommunications analyst based in Atlanta.

The parties, which had been negotiating since June 22, remained divided on issues that include retirement security, health care and efforts to outsource call-center jobs when contracts with the CWA and the IBEW expired Aug. 1.

The CWA also says Verizon has reneged on its commitments to build out FiOS in certain areas while ignoring necessary maintenance on the company’s existing copper network.

Leaders of the two unions, Verizon’s largest, said Sunday they decided not to strike after the deadline passed, even though “the two sides remain far apart.”

Both unions and the company said Tuesday that the talks have stalled, and neither gave indication as to when they may resume. Employees in the Northeast and Mid-Atlantic regions have continued to work without a contract, but CWA members approved a strike authorization in July so CWA President Chris Shelton can call a walkout at any time.

Health Care

Verizon is pushing back against union demands such as increasing tuition assistance and eliminating employee health-insurance contributions. The contributions were instituted for the first time in the 2012 contract that was ratified more than a year after the August 2011 strike — the second walkout in 11 years. The unionized workforce has more than halved since the 2000 strike -—from more than 85,000 to 45,000 in 2011 and 39,000 today.

Verizon’s initial offer in June included a 2 percent wage increase in each of the first two years of a three-year contract, plus a lump-sum payment in the final year.

The carrier, which has a workforce of 178,000, is seeking to cut costs as U.S. households give up their traditional home phones in favor of mobile technology. The New York-based company said in a statement Friday that it wants to negotiate changes to health care and pension benefits that would make it more competitive. The carrier would require union employees to choose between continuing to earn pension benefits or receiving company matching funds for an enhanced 401(k) retirement savings plan.

The two labor organizations are remnants of a landline telephone era in the U.S., and predate the 2000 merger of Bell Atlantic Corp. and GTE Corp. to create what was at the time the nation’s largest telephone company — renamed Verizon. This legacy telecommunications segment transmits telephone calls via either copper landlines or fiber-optics.

In February, Verizon agreed to sell landline assets across California, Florida and Texas to Frontier Communications Corp. for $10.5 billion in cash. Union employees in those three states are covered under a different contract, and once the deal closes, Verizon will have reduced its landline territory to nine East Coast states and Washington, D.C.

The shift to wireless has been felt by union workers, said Bob Master, an assistant to CWA’s New York office vice president.

“They’ll disclaim this, but they’ve completely abandoned the copper network,” he said. “And that’s where the work is.”

In addition to ignoring its legacy copper network, Verizon has reneged on commitments to build out FiOS in certain parts of the East Coast, the CWA says. Verizon has also neglected a $500 million subsidy available from the state of New York to help defray the cost of extending wireline Internet service to sparsely populated corners of the state, it says.

“The company’s made $1 billion in profits every month for the past 18 months,” said Candice Johnson, a spokeswoman for the CWA. “That’s not dollars generated exclusively by wireless. In fact, Verizon has been using the resources from the wireline side of the business to bulk up the wireless operation.”

In 2004, Verizon pledged to invest $18 billion in FiOS, according to Richard Young, a company spokesman. To date, the company has spent more than $23 billion, he said.

“We have a wireline business that’s facing incredible challenges, and we need the unions to work with us on making this wireline unit more competitive,” Young said.

Fiber is a much bigger part of Verizon’s landline footprint than it was the last time the two sides sat down at the negotiating table four years ago. Fiber is also much more resilient, requiring less maintenance by workers.

Yet wireline still matters to Verizon, providing critical infrastructure for handling the company’s increasing mobile data traffic. So there will be a place for the unions, albeit a smaller one.

“What we see here is basically Verizon wanting to bring their wireline employees into a similar structure as their wireless employees,” said Roger Entner, an analyst with Recon Analytics LLC in Dedham, Massachusetts.

Speaking to investors on an earnings call July 21, Chief Financial Officer Fran Shammo said negotiations could extend beyond the Aug. 1 contract end date.

In preparation for a possible strike, Verizon has been training 18,000 nonunion workers to fill in for union roles, said Richard Young, a Verizon spokesman.

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