Verizon Communications (VZ)

Global Wholesale

Global Wholesale offers switched access and special access services primarily to long distance and other carriers who use our facilities to provide services to their customers. Switched access revenues are generated from fixed and usage-based charges paid by carriers for access to our local network, interexchange wholesale traffic sold in the United States, as well as internationally destined traffic that originates in the U.S. Special access revenues are generated from carriers that buy dedicated local exchange capacity to support their private networks. Global Wholesale services also include local wholesale revenues from unbundled network elements and interconnection revenues from competitive local exchange carriers and wireless carriers. A portion of Global Wholesale revenues is generated by a few large telecommunication companies, many of whom compete directly with us. In 2009, Global Wholesale revenues were $9,637 million, representing approximately 21% of Wireline’s aggregate revenues. Major initiatives that are under way, such as Fiber-to-the-cell sites, global data growth, an increased focus on high-yield international voice routes and the development of new segments, will further differentiate Global Wholesale from its competitors.

As consumer demand for smartphones and bandwidth intensive applications grow, wireless carriers are looking for network solutions to carry increasing volumes of traffic. Our service allows virtually unlimited capacity and enables wireless carriers to offer next generation applications to their customers. We have constructed more than 2,300 cell sites in 2009 with fiber Ethernet service across most carriers and we are on track to fully support Verizon Wireless’ LTE launch in 2010.

Global Wholesale will also continue to capitalize on voice traffic growth to high-yield destinations where we have volume (minutes) going to key destinations around the globe. New opportunities are being driven by machine-to-machine applications, managed services, and digital content which provide more value to our customers and represent the largest growth opportunities. Global Wholesale’s initiatives are focused on providing value and targeting these growth services.

Global Wholesale

Global Wholesale revenues are primarily earned from long distance and other carriers who use our facilities to provide services to their customers. Switched access revenues are generated from fixed and usage-based charges paid by carriers for access to our local network, interexchange wholesale traffic sold in the U.S., as well as internationally destined traffic that originates in the U.S. Special access revenues are generated from carriers that buy dedicated local exchange capacity to support their private networks. Wholesale services also include local wholesale revenues from unbundled network elements and interconnection revenues from competitive local exchange carriers and wireless carriers. A portion of Global Wholesale revenues are generated by a few large telecommunication companies, many of whom compete directly with us.

Global Wholesale revenues during 2009 decreased by $723 million, or 7.0%, compared to 2008, primarily due to decreased MOUs in traditional voice products, and continued rate compression due to competition in the marketplace. Switched access and interexchange wholesale MOUs declined primarily as a result of wireless substitution and access line losses. Wholesale lines declined by 19.7% in 2009 due to the continued impact of competitors deemphasizing their local market initiatives coupled with the impact of technology substitution as well as the continued level of economic pressure, as compared to an 18.8% decline in 2008. Changes in foreign exchange rates resulted in a revenue decline of approximately 1.0% in 2009, compared to 2008. Continuing demand for high-capacity, high-speed digital services was partially offset by lower demand for older, low-speed data products and services. As of December 31, 2009, customer demand, as measured in DS1 and DS3 circuits, for high-capacity and digital data services increased 2.2% compared to an increase of 5.1% in 2008.

Global Wholesale revenues in 2008 decreased by $390 million, or 3.6%, compared to 2007 due to declines in switched access revenues in traditional voice products and local wholesale revenues and continued rate compression in the marketplace, partially offset by increases in special access revenues. Switched MOUs declined in 2008, reflecting the impact of access line losses and wireless substitution. Wholesale lines decreased by 18.8% in 2008 due to the continued impact of competitors deemphasizing their local market initiatives coupled with the impact of technology substitution compared to a 16.1% decline in 2007. Special access revenue growth reflects continuing demand for high-capacity, high-speed digital services, partially offset by lower demand for older, low-speed data products and services. As of December 31, 2008, customer demand, as measured in DS1 and DS3 circuits, for high-capacity and digital data services increased 5.1% compared to an increase of 8.2% in 2007.

The FCC regulates the rates charged to customers for interstate access services. See “Other Factors That May Affect Future Results – Regulatory and Competitive Trends – FCC Regulation” for additional information on FCC rulemaking concerning federal access rates, universal service and certain broadband services.

Global Wholesale

Global Wholesale revenues are primarily earned from long distance and other carriers who use our facilities to provide services to their customers. Switched access revenues are generated from fixed and usage-based charges paid by carriers for access to our local network, interexchange wholesale traffic sold in the United States, as well as internationally destined traffic that originates in the U.S. Special access revenues are generated from carriers that buy dedicated local exchange capacity to support their private networks. Wholesale services also include local wholesale revenues from unbundled network elements and interconnection revenues from competitive local exchange carriers and wireless carriers. A portion of Global Wholesale revenues are generated by a few large telecommunication companies, many of whom compete directly with us.

Global Wholesale revenues during the first quarter of 2009 decreased $243 million, or 9.2%, compared to the similar period in 2008, primarily due to decreased MOUs, in traditional voice products, continued rate compression due to competition in the marketplace and the negative effect of movements in foreign exchange rates versus the U.S. dollar, partially offset by an increase in special access revenues.

Switched access and interexchange wholesale MOUs declined 8.7% primarily as a result of access line losses and wireless substitution due in part to global economic conditions. Wholesale lines decreased 18.5% due to the continued impact of competitors deemphasizing their local market initiatives coupled with the impact of technology substitution. Changes in foreign exchange rates resulted in a revenue decline of approximately 1.5% in the first quarter of 2009, compared to the similar period of 2008. However, special access revenue growth reflects continuing demand for high-capacity, high-speed digital services, partially offset by lower demand for older, low-speed data products and services.