After Hurricane Sandy, Verizon Takes Hostages

The disaster allows a phone company to provide inferior service at a higher cost

"I've been on the phone with Verizon all day," says Jason Little, the tan, sinewy owner of the popular Fire Island haunt Bocce Beach. The restaurant's phone and Internet are down. Little made an appointment, a customer service rep scheduled it, but it doesn't matter. He knows Verizon won't show up. "They never come."

The same thing happened last week. And three weeks before that. Sometimes service will come back on its own, but until it does, Bocce Beach can't process credit cards. Losing that ability would hurt any small business. But on remote Fire Island, where there aren't many ATMs and the few that exist charge huge premiums, it's a major blow. "I have to tell everyone who comes in we're cash-only today," Little says.

Last fall, Fire Island took Hurricane Sandy square in the jaw. Shortly after, residents were hit by a second sucker punch: Verizon, the sole provider of landline phone and Internet service on the island, announced that it would not repair damage to wires connecting homes and businesses to the outside world.

Verizon VP Tom Maguire says it’s too expensive to repair Fire Island’s landlines, but residents say Voice Link service is spotty and unreliable.
Verizon VP Tom Maguire says it’s too expensive to repair Fire Island’s landlines, but residents say Voice Link service is spotty and unreliable.

The company could—but it won't. Verizon is using Sandy as an opportunity to abandon a basic

public infrastructure that has been around since Alexander Graham Bell. Instead, the company is offering more expensive, less reliable substitutes with a single, express purpose: fattening Verizon's bottom line.

Fire Island customers who lost service after the storm have been given the option of adopting a new Verizon product called Voice Link. It essentially turns a home phone into a cell phone, routing calls over Verizon's wireless network. But according to residents, reception is bad and calls are often dropped or missed altogether. The reviews have been so dismal that islanders with severely damaged landlines stubbornly cling to them, despite Verizon's refusal to service them.

Just down the street from Bocce Beach, Roberta Smith stands behind a glass display case at the beachwear boutique A Summer Place. She has owned the store for 16 years and, since Sandy, has used a single phone line for both calls and credit card transactions. "I had two here, but one was crackly—you couldn't really hear anybody, and it wouldn't transmit the credit card data."

As a backup, she purchased a wireless credit card machine, but "half the time" the wireless network on the island is so slow that the machine won't work. If all else fails, Smith says, "we have the old-fashioned, physical, knuckle-buster swipe machine, but you still have to call up and give the vocal authorization." And that requires a working phone line—something the folks on Fire Island no longer take for granted.

Verizon, it turns out, had plans in place to stop providing landline service to communities like Fire Island long before Sandy hit, but the storm provided an opportunity to accelerate the pace.

Last year, CEO Lowell McAdam spoke candidly about the company's strategy during a private symposium arranged by the financial firm Guggenheim Partners.

McAdam spelled out Verizon's plans to sunset old technology—cheap copper landlines—in favor of more expensive fiber optic lines and wireless networks. The decision wasn't motivated by customer demand so much as McAdam's interest in increasing Verizon's profit margins.

"We are going to kill the copper," the CEO told investors. "We are going to just take it out of service." The move would be a "pot of gold, in my view."

A few months later, when Hurricane Sandy swept through Fire Island, unearthing and corroding copper lines, Verizon asked the New York State Public Service Commission for permission to kill its copper lines and offer Voice Link as an alternative.

But Voice Link has proved a lesser alternative. It's not just that its customers can't process credit cards; home security systems and medical alert systems don't work, either. The device also requires power to provide a dial tone. If there is a protracted outage—which often happens on Fire Island—the inability to reach help in a timely fashion could be life-threatening.

It's 14 minutes by police boat to the mainland and another three minutes, via exchange ambulance, to the hospital. "It's really scary," says Gretchen Stegner, an EMS captain on the island. "To not be able to get through to 911? That's malarkey." Firefighters also say the system makes it more difficult to pinpoint the location of 911 calls.

Yet Tom Maguire, a Verizon vice president, says Voice Link is the future for Fire Island, whether residents like it or not. Demand for landlines has plummeted over the last decade. In 2000, Maguire says, Verizon had 53 million access lines. "That number is down closer to 17 million today."

"Imagine if you were any business and you lost 67 percent of your customer base," he says. Verizon, he says, is simply adjusting to realities presented by the market.

Maguire's statistics provide little comfort to residents who are still rebuilding their homes, and shopkeepers are struggling to make enough money this summer to stay in business.

Maguire isn't troubled by the fact that shopkeepers can't process credit cards. They should try the iPhone app Square, he says, or rely on cash—though it's doubtful Verizon would be pleased by such payment limitations on its own business.

Next Page »