Verizon To Divest Landline Biz Against Market Trend

Verizon Communications Inc. is spinning off its operations in Maine, New Hampshire and Vermont and combining them with rural telephony provider FairPoint, a Charlotte, N.C., based company, a virtual unknown in this neck of the woods.

This is one of a handful of times since the telecom deregulation boom of the late 1990s that there's been a move like this against the trend of concentrating on wireless and consolidation in that area. "Now you're seeing a defragmentation of the brands, which is a complete change in the pattern of how the industry has been moving," said Michael Megalli, partner with Group 1066.

Verizon's divestiture of 1.5 million telephone lines in New England comes at a curious time, especially considering the lengths rival AT&T is going with its national rebranding strategy that involves debranding Cingular and unifying its national landline, wireless and television assets under the AT&T banner.

More, what AT&T is boasting as its competitive advantage to marketers and advertisers--its ability to reach customers on three screens--is something Verizon was able to claim first.



This landline divestiture fragments what had been a successful marketing strategy, and indicates that Verizon is moving in another direction. In May, the company spun off 3.4 million lines in the Midwest, while it has made investments to upgrade to an all-fiber optic network in mostly densely populated areas.

Megalli thinks that Verizon's spinoffs are creating brand footprints in the red states and blue states that mirror the political, cultural and economic divisions that have developed over the past few years.

"The way Verizon and FairPoint will be marketed will be very different," Megalli explained. "It's not just a matter of different brands, it's different services marketed in a different way. It supports the fragmentation we've seen over the past few years in this country in an unprecedented way that we're seeing the split."

Going forward, Megalli anticipates further regional fragmentation, motivated by the disparity between the costs of maintaining infrastructures rurally versus along the coasts or in big metropolitan areas.

But wireless will benefit from wireline consolidation. "The sort of divestment that Verizon made doesn't happen with wireless--they're still committed to national brand on that side," Megalli said. "They're still committed to that strategy."

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