BROKEN CONNECTIONS:

an Alternative Annual Report for Verizon

www.verigreedy.com

CWA, founded in 1938, the largest telecommunications union in the world, represents over 700,000 men and women in both private and public sectors. CWA members work in telecommunications, broadcasting, cable TV, journalism, publishing, manufacturing, airlines, customer service, government service, health care, education and other fields. CWA is one of Americas fastest growing unions and a number of unions have affiliated with CWA because of its reputation for democracy and membership involvement. The union includes some 1,200 chartered local unions across the United States, Canada and Puerto Rico. Members live in approximately 10,000 communities, making CWA one of the most geographically diverse unions. CWA is affiliated with the AFL-CIO, the Canadian Labour Congress, the worldwide UNI Global Union, the International Federation of Journalists (IFJ), the International Transport Workers Federation (ITWF), and the International Metalworkers Federation (IMF). To contact CWAs communications office, call 202-434-1100.

CONTENTS

02 04 05 06 08 09 10

Exorbitant Executive Compensation; Massive Profits Attack on the Middle Class Outsourcing and Offshoring Tax Dodging Verizon-Cable Monopoly Promoting the Digital Divide Opposing Consumer Rights

EXORBITANT EXECUTIVE COMPENSATION; MASSIVE PROFITS

Verizon and its executives rake in money while workers endure cuts.
The top five Verizon executive made almost $350 million over five years while proposing deep cuts for frontline workers. Leadership for America means creating an economy that works for all of usnot just the top 1%. Profitable companies that cut wages and jobs for the 99% dont create sustainable communities. America needs broadly shared prosperity and a strong middle class. Our children and grandchildren deserve better than a growing divide between the super-rich and everyone else. 2007 2008 2009 2010 2011

Verizons top five executives took in $349,226,194 in just five years

Annual $82,258,818 $63,094,456 $82,612,322 $55,571,937 $65,688,661 Cumulative $82,258,818 $145,353,274 $227,965,596 $283,537,533 $349,226,194

Here are some things $349.2 million could buy:

at the median U.S. price2 Four years of college, all expenses paid, for

1,572 homes

new Chevy Volts1

11,035

4,369 students

A few people want all the money, when thousands of us support familiesEveryone can see how much the company wants to take from useven though theyre making more, they want Matt Rivera, 14 years with Verizon to give us less.

Chevrolet.com;

U.S. Census Department;

US News and World Report

How the dollars have stacked up for the top five in the Verizon executive suite:
$349,226,19 $283,537,53 $227,965,59 6 3 4

$145,353,27

$82,258,818

2007

2008

2009

2010

2011

Verizon Communications Inc. (NYSE:VZ): Key Financials

In Millions of the trading currency, except per share items.

For the Fiscal Period Ending

12 months Dec-312008A $97,354.0 4.2% $33,101.0 34.0%

12 months Dec-31-2009A

12 months Dec-31-2010A

12 months Dec-31-2011A

LTM Press Release 12 months Mar-31-2012A $112,127.0 5.1% $36,076.0 32.2%

Total Revenue Growth Over Prior Year EBITDA Margin %

$107,808.0 10.7% $35,359.0 32.8%

$106,565.0 (1.2%) $35,378.0 33.2%

$110,875.0 4.0% $35,330.0 31.9%

You said you needed to outsource work in order to save money to operate, and then that wasnt enough; and now you have tax loopholes where you dont pay your fair share of taxes, and now thats not enough; and now you have a contract negotiation where you have an opportunity to demonstrate your willingness to participate in society and support society, support middle class people and middle class jobs, and thats not enough! Where does it end?
Javier Espionsa, 15 years with Verizon

ATTACK ON THE MIDDLE CLASS

45,000 CWA and IBEW workers were forced into a 15-day strike in August. Verizons demands included: Freezing the value of pensions for active workers and eliminating them entirely for new workers Slashing disability benefits for workers injured on the job Eliminating all job security language and continuing outsourcing of work to low-wage, low-benefit, non-union contractors domestically and overseas Imposing health care payments up to $6,700 on retired workers and $6,800 on active workers. Eliminating paid sick days entirely for new workers Limiting paid sick days to no more than 5 for all other workers Union workers returned to work under the terms of their contractand the promise of good faith negotiations and a
4

Workers have been battling for a fair contract for almost a year
restructured negotiation process by Verizons management. Yet Verizons managementdespite billions in profits still refuses to offer a fair new contract, continuing to insist on deep cuts. Even though the company makes billions in yearly profits, Verizon claims wireline profits are too small. But Verizon Wireless is not rewarding its workers for the divisions relatively higher profits: Wireless workers who have joined the union are also fighting for a fair contract. Verizon Wireless has already raised health care costs for its workers by thousands of dollars, and has slashed benefit levels even as its costs have dropped dramatically. When nonunion Verizon Wireless workers have tried to form a union, the company has intimidated and harassed them, going so far as to close call centers to stop the union from spreading.

OUTSOURCING AND OFFSHORING

Verizon could be leading the way on Americas economic recovery. Instead, theyre contracting out and sending overseas customer sales and service, billing and many other types of jobs. For DSL tech support alone, 2,600 jobs are done in Mexico, India, Canada, and the Philippines. And in addition to sending several thousand jobs overseas, Verizon has started using contractors to do more and more work. More Fiber Solutions Center jobs are contracted out than done in-house.

Verizon sends thousands of jobs overseas and outsources even more to low-wage contractors.
Other jobs that are no longer done by Verizon employees but are instead outsourced to lower-wage contractors from outside or inside the U.S. include: VZ Business Monitoring eService email, chat and offline Dispatch Digging work for copper plant and FiOS In-home installation and networking Door-to-door sales of FiOS Materials distribution work/delivery Smart Home technology installation/customer service and other specialized home services This can come with a price higher than job losses. Recently, contractors in Rockland County, New York, dug into a gas line and caused a large explosion destroying several homes, injuring four people and landing two volunteer firefighters in the hospital.

American companies want American profits but they dont want to pay American wagesand that should be stopped.
James Burgund, 15 years with Verizon

TAX DODGING
While Verizon has been making billions of dollars, awarding outrageous pay to top executives, trying to cut workers benefits and outsourcing and offshoring jobs, theyve also been getting government benefits.

Verizon doesnt just pay low taxes. In some cases, it pays negative taxes.
And thats not all: Citizens for Tax Justice has documented that Verizon Communications has received $180 million in special tax breaks and grants from 13 states, and they regularly seek deep property tax discounts. Who pays? The rest of us do. Critical services go underfunded, the public debt load goes up, and individuals pay more. Perhaps worse, these massive subsidies didnt lead to higher employment, better wages for workers or higher investment, as companies so often promise they will. Instead, Verizon shed 40,600 jobs the past three years, is demanding more than $1 billion in wage and benefit concessions from workers, and decreased capital expenditures by $1 billion.

Verizon exploited loopholes to pay nothing in federal corporate income taxes between 2008 and 2010, but worse: theyve actually gotten tax rebates of nearly $1 billion from the U.S. Treasury. Verizons 2010 effective federal income tax rate: NEGATIVE 5.9%1 Verizons 2009 effective federal income tax rate: NEGATIVE 5.0%2

Citizens for Tax Justice;

2, 3

Ibid

Federal Taxes
2008-2009
At the federal level, Verizon should have paid about $11.4 billion at the statutory rate of 35 percent during the three-year period. Instead, it got $951 million in rebates, putting its federal tax subsidies at $12.3 billion. Its effective federal tax rate was -2.9 percent.

Statutory Federal Tax Rate

35.0%

Verizons Actual Tax Rate

-2.9%

$180.8 Million Special Tax Breaks and Grants from States3

NE. $3M UT. $0.75 M

OH. $6.5M

PA. $3.4M

NJ. $113M MD. $1.7M

TN. $6M NM. $12.8M TX. $0.3M AK. $1M AL. $17.3M

NC. $8.5M SC. $6.5M

When Verizon, as a company that I work for, is given a billion dollar tax break from the government, then they tell me they dont have money to pay my medical, I have a problem with that.
Anita Long, 32 years with Verizon
7

VERIZON-CABLE MONOPOLY
Blocking competition and choice is bad for consumers and workers
The 1996 Telecommunications Act promised consumers competition between telephone and cable companies in exchange for deregulation. But in December 2011, Verizon Wireless, a subsidiary of Verizon Communications, inked an alliance with the nations largest cable companiesComcast, Time Warner, Cox, and Bright House Networksto sell each others product and services. The Verizon Wireless/Big Cable alliance will lead to reduced investment in infrastructure, job losses, fewer choices, and higher prices for consumers. The Verizon Wireless/Big Cable partnership will end historic competition between formerly energetic rivals. The result will be market domination by an unregulated telecom behemoth with the ability to raise prices and reduce service, unconstrained by competitive pressures. Until now, Verizon Communications has systematically built out its all-fiber FiOS network, competing directly with cables broadband and video services. FiOS is a financial powerhouse for Verizon, representing 63 percent of consumer revenues, with an annual growth rate of 18 percent. More than 5 million customer subscribe to FiOS Internet (36 percent penetration) and 4.4 million purchase FiOS TV (32 percent penetration).1 But with commercial agreements with Big Cable that eliminate this competition, Verizon now has little incentive to continue investing in FiOS. This will leave about one-third of Verizons in-region customers without FiOS, and result in thousands of job lost.

Verizon 1Q2012 Earnings Release

PROMOTING THE DIGITAL DIVIDE

Verizon is building its all-fiber, high-speed network throughout many suburbsbut its leaving urban and rural areas behind.
To date, Verizon has refused to deploy its FiOS network in a number of largeand medium-sizedcities in its landline footprint, including Boston, Baltimore, Buffalo, Albany, and Syracuse, among others and has made it clear that it has no intention of further investments in FiOS in these or rural areas. People of color and lower-income households will be disproportionately affected. Given the critical importance of high-speed Internet to economic development, job creation, improvements in education, health care, energy conservation, and public safety, these communities must not be left on the wrong side of the digital divide.

Cities Without FiOS, Surrounding Suburbs With FiOS

City BUFFALO BUFFALO SUBURBS BALTIMORE BALTIMORE SUBURBS BOSTON BOSTON SUBURBS ALBANY ALBANY SUBURBS SYRACUSE SYRACUSE SUBURBS X X X X X FIOS Median Household Income $29,285 $56,925 $38,346 $95,386 $49,893 $82,816 $39,158 $70,540 $30,891 $52,961 Poverty Rate 28.8% 8.2% 25.6% 7.7% 23.3% 8.3% 25.3% 5.4% 31.1% 7.0% % Minority 44.9% 4.9% 72% 49.4% 52.3% 22.9% 44.8% 13.4% 38.0% 6.7%

Source: Calculations based on U.S. Census, American Community Survey, 2006 through 2011.

OPPOSING CONSUMER RIGHTS

Verizon is standing in the way of the open internet.
In December 2010, after a long and contentious fight, the Federal Communications Commission (FCC) issued comprehensive rules to protect an open Internet. The FCCs rules prohibit discrimination and blocking on the Internet, require full transparency and free speech, and cover wireless networks while acknowledging technological differences. These carefully crafted rules were endorsed by a broad range of public interest and consumer groups, labor organizations including CWA, civil rights groups, environmental organizations, broadband providers, software developers, and Internet applications companies. But not by Verizon. Instead, Verizon took the FCC to court to overturn the rules. Verizon almost alone among telecom companies has come out against regulatory oversight to protect an open Internet. The case will be heard in the fall of 2012. One would think that Verizon would be ashamed to demand the right to discriminate among customers on its network. Not Verizon.

Verizon, an ALEC member, is undermining state laws

Verizons lobbyists in state capitals are pushing to eliminate all current consumer protections on the traditional telephone network and prohibit any future telephone consumer protections. Verizon and ALECs legislative allies have enacted bills in over 20 States to eliminate protections on the traditional telephone network or pre-emptively prohibit any consumer protections for VoIP telephone service, which is the dominant telephone technology for the future. Legislation to end consumer protections pads corporate profits at the expense of telephone customers, who get higher prices, worse service, and even lose their guarantee of access to the network. Verizon has funded the notorious American Legislative Exchange Council (ALEC), which is pushing to eliminate State-level consumer protections. ALEC is the preeminent corporate-funded force behind identical, nearlysimultaneously introduced legislative initiatives including bills to take away voting rights, destroy public sector unions, and force through so-called Right-to-Work laws.

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