Economic 411

The Verizon strike has been called “the strike of the 21st Century.” It is a clash of old economy issues of job security and working conditions against new economy concepts that companies not constantly expanding will shrink, that any job done here probably can be done just as well and at lower cost somewhere else, that the distinction between blue collars and white is increasingly blurred.

It is also that particular breed of strike in which innocent bystanders – the public – gets it in the neck. When GM goes out on strike, car shoppers can check out Ford, Chrysler or Toyota. When the nation’s largest local and wireless telephone company, the dominant local provider from Maine to Virginia, goes out, the backlog of unfilled repair orders swells, up to 82,000 by the end of the first week. Customers needing directory assistance can dial 411 and wait on interminable hold or, Verizon advises, they can hang up, log on to the Internet, find the number in an on-line directory, log off and make the call. Try that at a pay phone.

Verizon was formed in June by the merger of Bell Atlantic and GTE. The contracts with its unionized electrical and telecommunications workers expired Sunday. Negotiations on new contracts began months ago but bore no fruit, leading to the strike. It is not unreasonable for the consumer in need or a repair or a phone number to wonder whether the priority in the board room was meeting standing obligations or consummating the corporate marriage.

And now, in the midst of a strike and crisis-driven neotiations that languish, Verizon announces its intent to buy, for $350 million, NorthPoint Communications, a small, money-bleeding, nonunionized rival in high-speed Internet service. The more than 86,000 striking workers, already highly concerned about their role in Verizon’s future, now must wonder about their role in its present. At the very time when the very least the bill-paying public expects is that ending this highly inconvenient strike should be the center of attention, the timing of Verizon’s latest distraction is appalling.

Wall Street, already offended by the high cost of the Bell Atlantic-GTE deal, reacted to this new merger announcement by registering its disapproval with a 12-percent drop in the value of Verizon stock. The market’s concern, of course, is not whether downed lines are getting fixed or unknown numbers provided, but whether Verizon is buying NorthPoint with money that ought to go to shareholders.

Some financial analysts portray Verizon as a victim, an old-economy company that has to move into the new as fast as possible lest it be seen by investors as a fossil. Others say this double standard – traditional businesses must turn a profit while new-economy business can burn cash – is bunk. It’s not old economy versus new economy. It’s one economy and the old rules still apply: Take care of the customers, level with the employees, make money and reward shareholders. That sounds like some pretty basic economic 411.