Verizon Communications (VZ)

the phone companies do not have good an effective system to utilize the facilities it has or how to deploy new systems in a highly effective way.They are second only to the government in waste and failure to be efficient

Verizon is spending a tremendous amount of money to upgrade its fixed-line network and connect customers to that network. Earning a decent return on this investment, given declining demand for phone service and stiff competition for Internet access customers, will be difficult. Its wireline business segment continues to be under pressure as its margins tighten.

Verizon Wireless is performing well, but the cost of maintaining network quality and keeping out competition is high. The firm just spent $2.8 billion on wireless spectrum at a Federal Communications Commission auction, primarily adding capacity in areas it already serves.

Customers are increasingly replacing their traditional phone lines with wireless and data services or switching to competing carriers. Verizon's ability to extract high margins through its phone network is declining. Around two thirds of the fixed-line segment's revenue is still tied to the phone business.