Verizon (VZ) to Shut Down Legacy Voice Services in 7 States

U.S. telecom behemoth, Verizon Communications IncVZ is reportedly seeking permission from the U.S. telecom regulator Federal Communications Commission (FCC) to discontinue four legacy interstate DS0 services across parts of seven states. These legacy voice and low-speed data services are Voice Grade Service, WATS Access Line Service, Digital Data Service and DIGIPATH Digital Service II.

The affected states include Delaware, Maryland, New England, New Jersey, New York, Pennsylvania and Virginia. Verizon has about 10 wholesale customers and approximately 67 retail customers for these services in the affected areas.

On or after Jan 31, 2018, subject to FCC approval, Verizon will stop accepting orders from new customers for these services. Existing subscribers will no longer be able to purchase additional circuits on or after Jul 17, 2018. The services are expected to discontinue from or after Dec 31, 2018 in specified centers.

The company claims that these four legacy services have become outdated legacy voice grade and data transmission services, which are no more preferred by bunch consumers. Most of the customers are shifting toward other fiber-centric options.

The service provider will offer a series of retail and wholesale fiber-based alternative services. Alternative retail products and services include fiber-based voice services, Fios Internet, Switched Ethernet Service, Private Internet Protocol Service, DS1 services, machine-to-machine services and LTE.

Verizon's alternative wholesale products and services include Wholesale Advantage or Resale, Fiber to the Internet Service, Transparent LAN Service (TLS), Private Internet Protocol Service and DS1 Service.

Recently, in August 2017, Verizon had sought permission from the FCC to discontinue its four-legacy interstate DS0 services in multiple New York wire centers. Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

In the past month, shares of Verizon have gained 5.3% compared with the industry 's increase of 3.0%.

Similar Service Termination Issues

In August 2017, another U.S. telecom behemoth AT&T Inc T appealed to the FCC to shut down its legacy Ethernet services - GigaMAN and DecaMAN - in 11 states, citing weak interest and the migration of customers to newer dedicated service lines.

In January 2017, telecom service provider Cincinnati Bell Inc CBB unveiled plans to discontinue offering Local Area Service (LAS) in the Butler, Falmouth, Glencoe, Warsaw and Williamstown exchanges within the Kentucky portion of the telco's operating area.

In November 2016, telecommunications and data service firm, Windstream Holdings Inc WIN announced plans to discontinue the DSL service it offers to SMBs (small and medium-sized business) and residential customers in CLEC (competitive local exchange carrier) territories across 25 states. Currently, 300 customers avail the service.

In June 2016, Level 3 Communications Inc LVLT had sought permission from the U.S. telecom regulator Federal Communications Commission (FCC) to discontinue its legacy voice services based on outdated TDM (time division multiplexing) technology. The service is expected to shut down effective Aug 25, 2016 subject to the FCC's approval. All affected users will be shifted to high-speed IP-based network before the termination of the legacy voice system.

Bottom Line

Discontinuation of legacy voice services and Ethernet services has become a growing trend in the wireline segment of the telecommunication industry. The decision to terminate the services stems from lack of demand. Customers are migrating from older services toward newer options and latest technologies. Given the low number of subscribers and high costs of support for these services, their shutdown of these services seems appropriate.

Meanwhile, telecom service providers are moving toward IP-based networks as an increasing number of enterprise customers are opting for IP-enabled cloud services.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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