State Probes Could Force Higher Capex for Verizon, Says Analyst
Verizon could need to increase capital expenditures if states act against the company due to investigations of copper service quality and fiber upgrade policies, said 556 Ventures analyst William Ho. Verizon has highlighted how much it already spends building and…
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maintaining its network in ongoing investigations in New York, New Jersey, Pennsylvania and Maryland. Also, in a District of Columbia Public Service Commission rulemaking that followed a two-year probe, the telco warned about the potential cost of proposed copper abandonment rules (see 1607260027). The worst-case scenario for the telco “may be that regulatory judgments or edicts require fiber technology,” Ho emailed Friday. “If they weren't planned for, there may be increases in subsequent years’ capex projections.” To keep spending stable, Verizon could shuffle money from other areas, he said. The company might need to reconsider how its business plan balances repairing older copper and installing new fiber, he said. Ideally for Verizon, fiber would be the norm for telecom networks, the analyst said. “Copper as we have in today's world is less efficient and costlier than fiber in terms of future proofing and operations/maintenance.” In the next three to four years, Verizon could use 5G fixed wireless to spread and keep up its network at less cost, he said. “It makes sense in some places as the cost to serve and operational costs like truck rolls and copper maintenance may be nullified.” Verizon wouldn't comment. Replies are due Monday in the D.C. PSC copper abandonment rulemaking, and the state probes are in various stages of comments. The Maryland PSC will determine next steps in its Verizon inquiry after it gets a response from the Communications Workers of America to Verizon’s July testimony about a practice in which it moves customers with major copper problems to fiber (see 1607140027), a commission spokeswoman said. The PSC sent a letter last week asking CWA to respond to the Verizon testimony by Sept. 6. Separately, the New Jersey Board of Public Utilities staff is reviewing comments from a public hearing last week in which the state's Division of Rate Counsel backed state action and Verizon claimed it had invested $100 million over the past two years in “proactive preventative maintenance” of its network (see 1608050043). Meanwhile, the Pennsylvania Public Utility Commission asked for CWA testimony by Sept. 29 and Verizon testimony Dec. 1, ahead of hearings scheduled the week of Feb. 6 (see 1607180020), according to the proceeding schedule. In New York, Verizon told the state commission last week it's spent hundreds of millions more dollars than it makes on its network there (see 1608010047).