There's gold in them thar ILECs.

I know, I know, guys like my pal Scott Moritz are always telling youthe incumbent local exchange carriers are headed for the junk heap. Scott'sparticularly bearish on

Verizon

(VZ) - Get Report

, the ILEC for the northeastern U.S., because he thinksthe company's core business is melting away.

I'm here to tell you that's not so. When I look at Verizon, Isee a company that owns a monopoly on phone access in a big chunk of thecountry and draws steady growth from its wireless, its DSL/data and, increasingly, its long-distance businesses. I see a company whose pressing competitive challenges remain years off. I see a stock that yields 3%, which is far more than I'm getting in my savings account right now, I'm afraid.

But that's not the half of it. Verizon is becoming increasingly aggressive with cost-cutting measures, and people like Scott have underestimated the growth potential here. As the teleconomy begins to recover, earnings estimates will march higher -- along with this stock.

The Finish Line

What Verizon has is the last mile, the physical connection that linksthe phone network to your home or office. Lots of companies have builtout long-haul networks and metro networks and all kinds of other networks-- but ILECs such as Verizon own practically all the last-mile connections.

I can't overemphasize the importance of these access assets.¿ Sure,cable operators will eventually make a full-scale move into telephony. Butany serious threat to the ILECs remains at least a few years away.¿ This,after five years of deregulation. Until then, all phone-based services flowthrough the Verizons of the world.

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Gary B. Smith
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Tim Arango General Electric
Jim Cramer
and Arne Alsin IBM
Joe Bousquin
and Glenn Curtis

Case in point: DSL. Remember when competitive DSL providers were goingto lay waste to the "slow-moving" ILECs?¿ The analysts were dumbfoundedthat the ILECs were letting Covad, Rhythms and Northpoint build out theirDSL networks; we were going to see the ILECs scramble to catch up.

Bell-Ringer

But a funny thing happened on the way to the dump.¿ The DSL triumviratespent billions of dollars and years of effort making DSL technologiesviable and marketing their effectiveness. But then they went away (exceptfor Covad), leaving -- who else? -- the ILECs as the dominant DSLproviders.

Meanwhile, a leaner and meaner Verizon is outgrowing its Bell-headedinefficiency. A sign of this transformation: Verizon will be the first ILECto be able to provide long distance in all the states in which it's theincumbent. That will enable the company to leverage its impressive brand tocapture market share, expanding its growth opportunities.

Hey, nothing personal, Scott, but Verizon's a gold mine. You just have to look a little harder.

Cody Willard wears just as many hats as anyone. He is president of TelEconomics Consulting, a financial and technology consulting firm. He is also founder of TelEconomics.com, a Web site devoted to news and analysis of telecommunications stocks. At time of publication, Willard was long Verizon, though holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Willard appreciates your feedback and invites you to send it to

clwillard@teleconomics.com.