Saving Verizon's (VZ) legacy business

Posted Feb 17th 2009 4:22AM by Douglas McIntyre
Filed under: AT and T (T), Verizon Communications (VZ)

Verizon (NYSE: VZ), AT&T (NYSE: T), and phone carriers around the world are facing a tough problem. As their cellular businesses grow, people are turning off their home phones. What these telecoms pick up in wireless business revenue is being partially offset by a drop in the landline operations which have brought them sales for nearly a hundred years. If the trend accelerates, Verizon and it peers could even face a contraction of their overall revenue.

Verizon plans to solve the problem by making landline phone service so cheap that people will be less likely to cut their service.

According to The Wall Street Journal, "In a sign that the recession is forcing phone companies to take bold measures to hold onto landline customers, Verizon Communications Inc. is considering a $5 monthly voice plan that would let customers receive calls but dial only 911 and Verizon customer service." Since most consumers are not idiots, they may think that the part where they are charged for the calls that they do make as a relatively unattractive deal.

But, if the plan sells, it is brilliant. It addresses the one Achilles Heel that Verizon has. Since the lines are already installed in almost every home in America, most of the expenses of offering landline service were made many years ago.

Verizon may be able to stop the bleeding in the one business that is hurting it.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Tags: cellular, inthenews, landline, T, VZ