July 9 (Bloomberg) -- Roni Elovitch replaced furniture and rebuilt walls in her home after Superstorm Sandy submerged parts of Fire Island, New York. She’s dismayed Verizon Communications Inc. won’t embark on a post-hurricane refurbishing of its own.
“They want to abandon us because it would be more cost-effective,” Elovitch said at the deck railing of her Bayberry Walk home in Ocean Beach.
Fire Island itself is small: a narrow, 32-mile (50-kilometer) stretch of barrier beach on Long Island’s south shore with about 300 permanent residents and tens of thousands around now, when it becomes a haven for trendy New Yorkers.
The issue there, however, is large, steeped in history and with implications for phone customers nationwide. Back in 1934, the U.S. government required carriers to offer home-phone service to all households. The policy, carried on copper wire for decades, helped extend telecommunications technology to remote and rural areas across the country.
The storm destroyed the copper wiring on Fire Island. Instead of replacing it, Verizon offered every resident a wireless alternative it calls Voice Link. Elovitch and others complain about call delays and echoes on Link -- and are even more upset that they have to use a wireless technology for Internet access, for an extra fee.
Verizon, the second-largest U.S. carrier, and No. 1 AT&T Inc. are asking federal authorities for approval to decommission traditional copper-wire networks to make way for Internet-technology services riding over airwaves and fiber. Critics say regulators need to make sure the changes don’t leave customers with degraded service.
“Fire Island is going to set the precedent of whether Voice Link, in its current form, is considered an adequate replacement for copper,” Harold Feld, senior vice president of Washington-based policy group Public Knowledge, said in an interview.
If the Federal Communications Commission approves Voice Link as a substitute, “then there’s no reason Verizon isn’t going to roll up copper for its 10 million customers” still using traditional landlines, Feld said.
AT&T has asked the FCC to approve a similar trial wireless service to replace copper lines, said John Donovan, the Dallas-based company’s technology chief.
“I think technology has changed sufficiently to have the rules revisited,” he said.
Verizon plans to make the switch in other storm-damaged areas, and, with approval, in rural regions like the Catskills. AT&T is watching the process and has said it wants to retire copper by 2020.
The storm flooded Verizon’s Fire Island facility and knocked out the cable from the mainland, said Tom Maguire, Verizon’s head of national operations support. The company restored service to the island and balked at the challenge of fixing home connections that were submerged in corrosive salt water.
The company had told analysts and investors that the economics dictate a move away from the old landline system.
Verizon’s general strategy, to move copper-line customers toward a fiber-optic cable service called FiOS, was accelerated by Sandy. In areas outside its FiOS territory, especially in rural and seasonal communities, the company is pushing wireless Voice Link to provide basic phone service.
“In some of these situations, we’re not going to rebuild copper,” Fran Shammo, Verizon’s chief financial officer, said on an April 18 earnings call. “It doesn’t make financial sense to lay fiber to some of these remote areas. So wireless may be a better solution here, and we’re working with regulatory agencies on that.”
In May, Verizon won temporary approval from the New York Public Service Commission to provide Voice Link service to customers whose landline connections were damaged by Sandy. To build on that, Verizon, based in New York, applied last month to the FCC for approval to discontinue copper-based phone services in parts of New York and New Jersey. New York Attorney General Eric Schneiderman has asked the state commission to block Verizon’s Voice Link expansion beyond Fire Island.
“Approving Voice Link would abandon a century of commission policy promoting universal wireline telephone services,” Schneiderman said in a filing to the commission last week.
In a statement e-mailed today, the commission said it extended the public comment period for Voice Link to Sept. 13, the end of the summer season, so customers can “fully evaluate” the service. The previous comment deadline was July 2.
Voice Link is a box about the size of a thick DVD case with a short antenna. It is attached to an interior wall and connected to a power cord, an existing phone jack and a home phone. While it is a wireless connection, it provides dial tone, 911 service and about three hours of battery backup. It does not work for fax machines and some alarm systems. For an additional monthly charge, customers can buy a Jetpack Wi-Fi hot-spot service for an Internet connection.
“What they are proposing is a Band-Aid solution, and they think they can get away with it because most people here are seasonal,” said Andy Miller, a former fire chief in Ocean Beach and year-round Fire Island resident.
The company weighed its options and saw that about 80 percent of calls on the island were wireless, said Maguire.
“Most of these people are visitors -- they aren’t going to buy triple-play, so it didn’t make sense to do fiber. It did make sense to beef up the wireless service,” said Maguire. “I marvel at the fact that people want to say we are doing something wrong by using the latest and best technology to offer service.”
If Verizon is offering an alternative, then customers need to make sure it is at least comparable to what they had, said Avi Greengart, a Teaneck, New Jersey-based research director with Current Analysis.
“To say they are going the cheaper route is a fair assessment. I’m not sure, as a public company responsible to shareholders, that they have any other choice,” said Greengart. “Will Verizon go to other places that have 70-year-old copper wire and want to replace it? Yes, they probably will.”
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