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A Strike Too Far

Verizon unions’ lost leverage.
August 22, 2011 |
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If a union falls by the wayside and nobody notices, does it make a difference?

Verizon's union workforce will return to work tomorrow, after a 16-day strike. You may have noticed that you didn't notice.

Unless you belong to the Communications Workers of America or the International Brotherhood of Electrical Workers -- or happen to live or work near a Verizon facility beset by shouting picketers -- you probably didn't pay much attention. People who recently moved didn't get their phone lines installed quite as quickly, and a few companies reportedly waited days for repairs. But, mostly, the strike was a nonevent, even for Verizon customers.

Anyone old enough to remember the 1970s should understand just how amazing this is. Back then, telephones were black rotary models that caused a sore spot on your index finger if you dialed too many numbers in a row. (Pros used a pencil.) You paid what the company told you, or you didn't make calls. The telephone company and its all-powerful union controlled the only way of talking to friends and customers, short of putting on a coat and toddling across town.

When the CWA went on an 18-day strike against AT&T in 1968, The New York Times ran it on Page 1. That strike resulted in major gains for the workers on wages and benefits. This time 'round, the unions made Page A18 -- and got no concessions. The walkout secured them an agreement on the procedures for negotiating a new agreement. The striking unions had struck out.

Small wonder, really: They work for a shrinking business -- Verizon's "wireline" division, which includes landlines and FIOS broadband service. A recent study showed that 25 percent of Americans now live in households with only a cellphone -- a number that's bound to grow. The same study indicated that 44 percent of adults under 30 now live without a landline. Millions more have canceled their landlines in favor of Internet telephony services like Vonage and Skype; businesses, still a cash cow for phone companies, are following suit.

Those figures show up in Verizon's annual report. From 2008 to 2010, Verizon's landline business lost 5 million subscribers. The firm's operating revenue dropped by more than $3 billion. But the division's operating costs -- like all those well-paid union workers with gold-plated benefits -- fell by less than a third of that. A business with steady costs but fixed expenses is in deep trouble.

The decline in landline subscriptions is slightly offset by 700,000 new customers for the firm's broadband services, such as FIOS. But that's not necessarily good news for the workers. Verizon estimates that the maintenance costs of the FIOS network will be much lower than those of Verizon's traditional copper network -- meaning less work for the unions.

It's not usually a good time to strike when your firm is losing customers and your job is becoming less necessary. So why did the unions walk out?

The unions' main grievance was the company's demands that members contribute toward their health insurance. Most of their fellow citizens have been doing so for decades, but the unions see this as an unreasonable demand to "give back" their hard-won benefits. Unfortunately, with the cost of health insurance rising briskly every year, they're actually demanding a hefty compensation increase from a declining business.

The workers also took a page out of the classic strike PR script, saying that the company has made billions in profit over the last four years. True -- but the profits attributable to these workers have declined dramatically in the same period. The growth is coming from Verizon Wireless, a joint venture that's almost entirely nonunion. The unions have been effectively asking the company to take money out of the profitable wireless division and transfer it to the workers. Predictably, management said no.

With the economy changing so rapidly, the unions that survive will be the ones that adapt to the new realities. There are worse things than giving back a little on your health benefits -- like walking off the job and showing everyone just how easy it is to get along without you.

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