Corporate Power Research: Verizon Communications

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Table of Contents

Introduction
Company operations
Board of directors
Analytical/critical insights
Conclusion
References

Introduction

When it comes to analyzing the qualitative characteristics of how a particular telecommunication company addresses what happened to be its most pressing competitive challenges, we need to understand that, due to being essentially an ‘open thermodynamic system’, it cannot be discussed outside of the affiliated environmental/discursive context. In this paper, I will explore the validity of the above-stated at length, while coming up with the extended overview of Verizon Communications, as one of the country’s leading providers of telecom-services/products.

The main idea that I will aim to promote, throughout the paper’s entirety, can be formulated as follows – to be able to come as a winner, out of the ongoing competition with its closest rivalries (AT&T, Spring Nextel), Verizon will need to take advantage of what can be deemed its main competitive opportunities, and to lessen the acuteness of what are the company’s major operational weaknesses.

Company operations

Verizon Communications is the second largest provider of telecommunication services in the U.S. (after AT&A), which ever since the time of its founding in 2000 (made possible by the merger between Bell Atlantic, General Telephone and Electronics Corporation), never ceased increasing the extent of its corporate efficiency and expanding the range of the provided telecommunication services. As of today, it is being estimated that the overall number of this particular company’s customers, throughout the world, accounts for 100 million.

Structurally speaking, Verizon Communications consists of two major sub-divisions – Verizon Wireline and Verizon Wireless. There are smaller operational units, within each of the mentioned sub-divisions, as well. For example, Verizon Wireline consists of Verizon Telecom and Verizon Business. The first of them is responsible for providing consumers with local and long-distance phone services. It is also there to retail a variety of different broadband Internet/video and data products (Verizon, 2014, p. 1).

The scope of Verizon Telecom’s operational coverage is rather extensive – twenty-eight states in the U.S. The second of the units in question (Verizon Business), is concerned with providing the company’s corporate affiliates (large/medium-sized companies and governmental institutions) with what happened to be the IT-related managerial solutions of their interest. As of 2008, Verizon Business operated in 150 countries, with the number of its corporate-customers having been estimated to amount to 70.000.

There are several sub-divisional units within Verizon Wireless, as well. However, due to the ongoing rapid progress in the field of IT, the current particulars of their operational specialization continue to undergo a fast-paced transformation. In its turn, this makes identifying the full spectrum of these particulars a rather challenging task. At this point, it should prove thoroughly sufficient to say that Verizon Wireless is primarily about delivering different data and voice products/services to its customer base of about 67.5 million in the U.S. (Verizon communications, 2009, p. 1681).

At the end of the 2012 fiscal year, Verizon Wireless reported its consolidated revenue to be $116 billion – something indicative of the fact that, as time goes on, the company continues to increase the extent of its commercial effectiveness. The reason for this is that the mentioned revenue was up 5%, as compared to what it used to be in the year 2011. What is especially notable, in this respect, is that throughout this particular year, the tendency for the company’s wireline commercial activities to be gradually deprived of their competitive edge attained an additional momentum.

The validity of this suggestion can be illustrated, in regards to the fact that, as compared to what was the company’s wireline-revenue in the year 2011, the one accumulated in 2012 fell short by 2%. The company’s wireless-revenue (generated throughout the year 2012), on the other hand, has grown by 8% (as compared to the year 2011). In its turn, this can be explained by the fact that people become ever more attracted towards specifically wireless communication/data-transferring technologies.

As it was noted in the earlier cited report, “(In 2012) Verizon’s mobile sales grew in response to higher subscriber numbers (5.1 million new customers) and growing usage of data services, as well as a smartphone-driven increase in equipment sales” (Verizon, 2014, p. 2). The mentioned trend (concerned with Verizon continuing to increase the overall extent of its commercial competitiveness, and with the process of the company’s wireline services/products becoming less profitable), continued through the year 2013, as well. In this particular year, Verizon Wireless saw an increase of its annual revenues (as compared to the year 2012) by $5.2 billion (6.8%) – $120 billion in 2013 vs. $116 billion in 2012.

This accomplishment appears to be the direct consequence of the fact that, as time goes on, the company continues to apply an exponentially amplified effort into taking advantage of the ongoing process of more and more people deciding to switch in favor of using specifically the high-tech wireless devices (smartphones, tablets, etc.), as the tools of connectivity. During the same year, the revenues of Verizon Wireline decreased by $0.6 billion (1.4%). At the same time, however, Verizon continues to expand the scope of its FiOS (fiber optical) based services – primarily the ones that allow consumers to stream HD videos and to enjoy high-speed Internet access (2013 Annual Report, 2013, p. 13).

There are indeed a number of the objective preconditions for the range of Verizon’s wireless services/products to continue to expand, which in turn makes it possible for the company to subsidize the functioning of its wireline segment while expecting that it will eventually be able to restore its former profitability. The reason for this is that the continuous development of the FiOS-related technologies is supposed to result in the speed of data transfer (through Verizon’s fiber-optical landlines) being increased by five times.

The currently enacted business-strategy, on the part of Verizon Communications, is characterized by the company’s strive to aggregate its share in the U.S. market of wireless services/products, which as of 2012, accounted for 33% (Kirby, 2012, p. 6).

This explains the purpose of the most recent corporate-acquisitions, undertaken by Verizon. In 2011, Verizon bought Terremark Worldwide – the company that used to specialize in web-hosting several different IT services, meant to be referred to by other telecom-companies, as the mean of maintaining the infrastructural integrity of their functioning. In its turn, this is supposed to empower Verizon, in the sense of establishing the objective preconditions for its wireless market-niche to be thoroughly secured. Essentially the same can be said about the purpose of the company’s acquisition of Hughes Telematics in 2012 for $612 million.

Given the fact that Hughes Telematics used to be one of the biggest players in the U.S. market of the automotive telecom-services (such as designing/selling the GPS-tracking devices), there can be only a few doubts that the mentioned strategic move, on the part of Verizon, will substantially upsurge what happened to be the current measure of the company’s discursive updatedness.

Another qualitative feature of the business-strategy in question is that Verizon strives to ensure the convertibility of its wireline and wireless services/products. The company’s approach, in this respect, is concerned with placing a strong emphasis on the expansion of its FTTP network. Throughout the last three years, the amount of Verizon’s investments into this network has reached a staggering $18 billion (Verizon, 2012, p. 3).

Simultaneously, Verizon invests rather heavily in developing many revolutionary IT-technologies, the adoption of which in the future is expected to sharpen the company’s competitive edge. One of these technologies is concerned with the so-called 4G LTE (long-term evolution) method of transferring large amounts of digital information wirelessly.

While connected to the 4G LTE network, consumers will be able to send/receive digital data at the speed of at least ten times faster than the company’s 3G wireless network currently allows, “In real-world, fully-loaded network environments, 4G LTE users should experience average data rates of 5 to 12 megabits per second (Mbps) on the downlink and 2 to 5 Mbps on the uplink” (Verizon wireless, 2011, p. 2). This, of course, allows us to conclude that Verizon’s top-officials do understand the importance of investing in long-term development projects – the activity that is being thoroughly consistent with the ongoing exponential progress in the field of IT.

Nevertheless, even though, as it was shown earlier, Verizon does enjoy the steady growth of its annually generated revenues, while investing heavily into increasing the extent of the provided services’ technological updatedness, the company’s currently deployed competitive strategy cannot be considered fully adequate. The reason for this is that, throughout recent years, there have been several controversies, triggered by Verizon’s unethical treatment of its customers.

For example, in 2010, Verizon was forced to pay $90 million in compensations to those affiliated customers who were wrongly charged with the additional fees for browsing through the web, although their contract-agreements with the company did not include any Internet data-access provisions. According to Wyatt (2010), “The refunds will be paid to customers who did not have data access plans but who have nevertheless assessed one or more charges of $1.99 because of data exchanges initiated by software built into their phones” (para. 8). It is understood, of course, that this hardly adds to the company’s reputation, as a reliable telecom-provider.

Another proof, as to the fact that Verizon’s top-managers appear a little too obsessed with trying to ensure that the company generates as many of the potential short-term profits, as possible, can well serve the lawsuit that Verizon faced in 2011. This lawsuit had to do with what many Verizon’s customers thought of as the indication of their telecom-provider having tried to defraud them: “Verizon Wireless has been fraudulently inflating sales of prepaid phones… (it) carried out the alleged scam by pressuring independent authorized retailers to purchase inexpensive cellphones and load them with $30 of pre-paid minutes” (Kosman, 2011, para. 4). As a result, the company suffered a substantial reputation-damage, as well.

Finally, we can mention the fact that Verizon has the legacy of acting rather enthusiastic, while faced with the third party’s (usually FBI’s) request to release sensitive information about its corporate and private affiliates, without requiring to be presented with the court’s consent (Vermont, 2007, p. 45). This, of course, cannot be referred to as anything but yet another objective reason for the company’s currently enacted competitive-strategy to be far from being considered thoroughly efficient.

Board of directors

As is being the case with the shareholders of just about any publicly trading company, Verizon’s shareholders can be classified, as such that fall into two general categories – corporate (institutional) and private (direct). Among the company’s corporate shareholders, the most influential are: Vanguard Group, Inc. with 206.981.034 shares (5%), State Street Corporation with 166.719.084 shares (4.03%), Capital Research Global Investors with 157.677.745 shares (3.81%), and Black Rock Fund Advisors with 126.571.663 shares (3.06%) (Ownership, 2014, para. 1).

Among Verizon’s major private shareholders can be named: Lowell McAdam (Chairman of the Board and CEO) with 263.952.000 shares (6.3%), Francis Shammo with 45.835.000 shares (0.6%), and Marc Reed with 36.124.000 shares (0.51%). The ownership-ratio between the company’s corporate and private shareholders, suggests that, within the context of how Verizon’s top-officials proceed with the executive decision-making, the deployment of the authoritarian managerial-paradigm, in their part, would prove quite out of place.

According to Verizon’s code of corporate ethics, the number of the so-called ‘outsiders’ (those decisions-influencing individuals, who do not have any immediate stake-holding claims in the affiliated company’s activities/assets) on the Board of Directors, must be matched with that of the ‘insiders’’ (Verizon’s major private shareholders/employed managers).

The reason for this is that the proportionally adequate presence of ‘outsiders’ on just about any company’s Board of Directors, is expected to serve as a guarantee that ‘insiders’ (who often consist of primarily elderly individuals) would not find themselves in the position of running such company into the ground, due to what may be the ego-driven considerations, on their part. As of the initial phase of 2014, the number of Verizon’s ‘outsider’ directors accounted for 11: Shellye Archambeau (51), Richard Carrión (61), Melanie Healey (52), Frances Keeth (67), Robert Lane (64), Donald Nicolaisen (69), Clarence Otis (57), Rodney Slater (59), Kathryn Tesija (64) and Gregory Wasson (55). (Notice of 2014, 2014, p. 3). The number of the company’s ‘insider’ directors, on the other hand, now accounts for 13: Lowell McAdam (60), Francis Shammo (59), Marc Reed (55), John Stratton (52), Robert Mudge (54), Roger Gurnani (53), Daniel Mead (60), Randal Milch (55), Anthony Skiadas (45), Marni Walden (46), Anthony Melone (53), Roy Chestnutt (54) and William Horton (55). (Insiders, 2014, para. 1).

Thus, we can well conclude that, for as long as the process of the corporate decision-making is being concerned, Verizon’s ‘insider’ directors will be in the position of having an ‘upper hand’ – all because, as it was illustrated above, on the company’s Board of Directors, they do enjoy a numerical superiority.

Based upon the above-provided insights into the qualitative aspects of the company’s Board of Directors, we can come up with the following two suggestions, as to what may be considered these aspects’ foremost effects on the Board’s performance.

First, there appears to be a good rationale to believe that the executive propositions, on the part of ‘outsiders’, would be more consistent with what are the realities of post-industrial/multicultural living in America. The main factor, capable of bringing about this particular state of affairs, is that the male representatives of racial minorities and females account for four out of eleven ‘outsiders’ on the Board (37%) – Shellye Archambeau (Asian-American, female), Clarence Otis (African-American, male), Rodney Slater (Hispanic, male) and Kathryn Tesija (Caucasian, female). (Notice of 2014, 2013, pp. 11-16).

Because the mentioned ‘outsiders’ will naturally oppose the discourse of a patriarchal euro-centrism/traditionalism (by the very virtue of who they are), there is indeed a good reason to believe that, on the company’s Board of Directors, ‘outsiders’ are expected to counterbalance the likely ‘enrichment at any cost’ agenda, on the part of ‘insiders’. This suggestion cannot be considered solely speculative, because the percentage of the representatives of racial minorities/women among these ‘insiders’ is rather negligible (15.38%) – Roger Gurnani (Hispanic, male) and Marni Walden (Caucasian, female). (Corporate executives, 2014, paras. 1, 4). However, due to being outnumbered, the Board’s ‘outsiders’ may find this would-be undertaking rather challenging.

Second, it will prove methodologically inappropriate to suggest that there may be an age-related correlation between the manners, in which both: ‘insiders’ and ‘outsiders’, would be likely to address the company’s competitive challenges. The reason behind this suggestion is quite apparent – whereas, the average age of ‘insiders’ is 53, the average age of ‘outsiders’ is 54. This, of course, implies that the Board’s ‘insiders’ and their counterparts from the ‘outside’ would prove equally committed to the virtue of ‘moderation’ when required to indulge in decision-making (Queen & Hess, 2010, p. 259).

That is, while possessing what it takes to recognize and to seize the competitive opportunities well ahead of time, these people would be likely to exercise a certain caution, within the context of how they would go about addressing their managerial tasks.

Even a glance at the list of Verizon’s institutional shareholders, reveals the fact that the overwhelming majority of them is closely associated with the economy’s banking/financing sector. These organizations’ very names leave only a few doubts, as to the validity of this suggestion: Capital Research Global Investors, Black Rock Fund Advisors, Capital World Investors, Northern Trust Investments, N.A., etc.

What it implies is that even though, as a commercial enterprise, Verizon should never experience the lack of funds, when it comes to financing its long-term projects, the company can only remain competitive, for as long as the country’s economy continues to grow at the rate of no less than 1.5% per year. The reason for this is quite apparent – it is specifically this growth that allows corporate investors/financial trusts to make money, by the mean issuing the so-called ‘derivatives’ (financial contracts between two parties, backed by a third party’s financial obligations, which could be bought and sold in the open market).

In their turn, these derivatives spawn the new generations of derivatives, backed not by the factual value of the affiliated material assets, but by the originally issued derivatives, as if they presented an objective value of their own. However, it is only when the economy experiences sustainable growth that derivatives may be considered a valuable asset (because this makes it possible for them to be exchanged for bank-credits).

In the time of the economy’s decline (such as what happened to be the case nowadays), bankers experience a lack of capitalization, which in turn often forces them to decide in favor of selling their shares with other companies. And, as we are well aware, if a particular company’s shares are being sold, their price begins to plunge. The implication of this for Verizon is clear – the longer the American economy remains in the state of stagnation, the higher are the chances for the company’s publicly traded shares to experience an abrupt and uncontrollable fall in value. This can happen at any time – Verizon is being simply in no position to effectively address the situation.

Following, are three of the company’s ‘outsider’ directors, whose presence on the Board should prove particularly beneficial:

Shellye Archambeau – (Chief Executive Officer of MetricStream, Inc.). For many years, MetricStream has been considered one of the nation’s leading providers of technologically up-to-date managerial solutions to privately-owned companies and governmental institutions. Hence, the rationale behind Archambeau’s appointment, as a director – being an expert in the field of e-commerce/telecommunication, she is expected to contribute rather substantially towards increasing the measure of the company’s functional efficiency.
Melanie Healey – (Group President of The Procter & Gamble Company). Probably the main reason why Procter & Gamble is being considered one of the country’s most commercially successful companies, is that its top-managers never ceased being aware of what ensures the effectiveness of the would-be-deployed marketing-strategies, meant to target a particular group of consumers. This, of course, presupposes that Healey’s presence on the Board of Directors is there to serve the purpose of making sure that the company’s advertisement campaigns are being adequately designed.
Gregory Wasson – (President and Chief Executive Officer of Walgreen Co.). Given the fact that Verizon never ceased applying a continual effort into improving the quality of its customer-relationship management, Wasson’s directorial appointment appears thoroughly justified. The main consideration behind this appointment may well be that being affiliated with Walgreen (known for the sheer effectiveness of its customer-relationship strategies), Wasson is expected to contribute to Verizon, in the sense of making it more customer-friendly. Another probable reason behind Wasson’s appointment can be well named his commitment to the cause of environmentalism – something that should add to the company’s discursive appeal with consumers.

Analytical/critical insights

Given the qualitative aspects of what we know about how Verizon Communications operates, it will be fully appropriate, on our part, to suggest that, even though the concerned company does enjoy many competitive advantages over its rivalries, it is being competitively disadvantaged in a variety of ways, as well.

Probably the foremost ’empowering’ factor, in this respect, is that, as compared to what happened to be the case with its main competitors, such as AT&T and Spring Nextel, Verizon continues to lead the way, within the context of how it works on expanding the network of its wireless services. In its turn, this increases the likelihood for the company’s technological innovations to end up being ‘standardized’ – that is, to be considered as such that set a particular standard for the competing companies to follow. The validity of this suggestion can be illustrated, in regards to the earlier mentioned 4G LTE technology, developed by Verizon. As the current trends in the U.S. telecom-market indicate, it is being only a matter of time, before the company’s main rivalries consider becoming affiliated with it, as well (Steele, 2013, p. 822).

The company’s other major strength, within the context of how it strives to remain ahead of the competition, is that it continues to apply a great effort into making the qualitative subtleties of its operational functioning fully consistent with the discourse of post-modernity. To exemplify the legitimacy of this statement, we can well refer to the fact that, as of today, Verizon is considered one of the most operationally flexible telecom-providers in America.

Partially, this is the consequence of the company’s top-officials’ awareness that it represents the matter of crucial importance for just about any telecom-provider to be able to ensure the effective functioning of its HR department (Poglianich & Antonek, 2009, p. 32).

Nevertheless, there are also many weaknesses to Verizon’s current positioning in the country’s telecom market. The main of them appears to be the fact that, given the specifics of what accounts for the company’s competitive strategy, Verizon is far from being considered ‘spectrally efficient’, “Verizon’s spectrum efficiency is seen to lag behind that of the rest of the industry, in many cases by a wide margin” (Analysis, 2012, p. 7).

That is, the company’s sub-divisions, associated with the telecom industry’s different segments, function in the manner that presupposes their de facto ‘detachment’ from each other. This state of affairs, however, can hardly have a positive effect on the structural integrity of Verizon. The fact that, as it was pointed out earlier, Verizon is ‘macroeconomically vulnerable’, only makes things worse, in this respect.

What also appears to undermine the extent of the company’s commercial competitiveness rather substantially, is the earlier mentioned fact that, throughout the last decade, Verizon has triggered several public controversies, concerned with the company’s unethical ways of treating consumers. In turn, this can be seen as the proof of the validity of the earlier claim that the factor of ‘corporate greed’, on the part of many of Verizon’s directors, plays an important role, within the context of how the company in question proceeds with facing whatever happened to be its competitive challenges at a given time.

Conclusion

I believe that the provided earlier analysis of Verizon Communications, as a provider of telecom services, and the obtained insights into what can be deemed the company’s competitive strengths/weaknesses, is fully consistent with the paper’s initial thesis. In light of these insights’ discursive implications, it will prove thoroughly appropriate to suggest that, even though the discussed company did succeed in securing its niche in the U.S. market of the telecommunication-related services/products, there is no good reason to believe that this will continue remaining the case in the future. That is, of course, unless Verizon’s top-officials proceed with striving to adjust the company’s functioning to be fully consistent with the realities of a post-industrial living in America.

In this respect, it would be in order to recommend Verizon to put away with the policy of trying to generate as much of a short-term profit, as possible, at the expense of applying hidden charges for the provided services. However, because this particular policy appears to be rather ‘institutional’ (in the sense of reflecting the company ‘insider’ directors’ greed-driven agenda), it is highly unlikely that the problem of Verizon’s corporate reputation continuing to sustain more and more damages can be addressed as a ‘thing in itself’. What it means is that there is indeed a good reason to think that the very principle of how the company’s directors are being appointed, needs to be revised. Such an eventual development appears to be predetermined dialectically.

References

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Wyatt, E. (2010). Verizon wireless to refund up to $90 mil. The Ledger. Web.

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