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| source: Larribeau Associates |
When will U.S. fixed access lines stop falling? And what stable level of lines should be expected?
Will lines stabilize at a third of their peak, half, or even more?
Right now, it is hard to say.
In 2000, there were more than 180 million access lines in service, and telcos supplied nearly all of them, either on a retail or wholesale basis.
And matters are not made easier by terminological confusion. Some count "access lines" as "voice lines."
Others might include high speed access in the total. Some count only telco-supplied lines, while others include cable-provided lines.
Others might count a "voice service" as a line, even if delivered over a high speed access circuit.
The point is that the telco line erosion will halt, some day. The issue is when, and at what level that will occur. The other issue is total market size, including lines sold by competitors. In principle, telco lines could drop even if the market does not contract.
Technology Futures, which has been a remarkably accurate forecaster in this regard, thinks it is conceivable U.S. telcos ultimately will find a stable base at around 100 million access lines, on the assumption telcos collectively get and keep about half the number of U.S. high speed access lines.
JSI Capital Advisors has estimated there could be just 40 million U.S. telco access lines in service by 2020.
Some might argue that is possible if one counts only narrowband voice lines in service. For example, Technology Futures has estimated U.S. telco narrowband lines could dip to as few as 50 million by 2020.
To some of us, that forecast of remaining narrowband lines seems too high, as it suggests half of all U.S. telco lines will be narrowband in 2020.
That just seems unlikely in the medium term, and virtually impossible in the long term, as legacy time division multiplex networks are decommissioned in favor of Internet Protocol networks.
Though it will remain possible for a narrowband copper connection to handle 2020 IP services, it will be difficult. Nor, in practice, will telcos struggling to reach lower costs want to maintain two separate networks.
The bottom line is that it is reasonable to argue that U.S. telco fixed network service providers might eventually reach a “stable” base of between 63 million to 100 million homes, each home buying at least one service.
One might note that U.S. cable operators had in 2013 about 57 million video accounts in service.
Taken together, one might therefore guess that total fixed lines in service could be between 100 million homes and 120 million homes, about 66 percent of the 2000 level.
JSI Capital Advisors has estimated there could be just 40 million U.S. telco access lines in service by 2020.
Some might argue that is possible if one counts only narrowband voice lines in service. For example, Technology Futures has estimated U.S. telco narrowband lines could dip to as few as 50 million by 2020.
To some of us, that forecast of remaining narrowband lines seems too high, as it suggests half of all U.S. telco lines will be narrowband in 2020. That just seems unlikely in the medium term, and virtually impossible in the long term, as legacy time division multiplex networks are decommissioned in favor of Internet Protocol networks.
Though it will remain possible for a narrowband copper connection to handle 2020 IP services, it will be difficult. Nor, in practice, will telcos struggling to reach lower costs want to maintain two separate networks.
The bottom line is that it is reasonable to argue that U.S. telco fixed network service providers might eventually reach a “stable” base of between 63 million to 100 million homes, each home buying at least one service.
Most service providers likely would be quite happy if the market stabilized at that level. And, at some point, it is likely that a fixed access line will be a high speed connection, not a "voice line." That would tend to suggest erosion will be driven as much by market share shifts as actual market contraction.
Demand shrinkage is one issue. Market share lost to other contestants is the other issue affecting incumbent telcos.
Overall demand for fixed voice lines is dropping. The "lines" that will be permanently lost are those lines which formerly would have been used to support home fax machines, "teenager lines," or dial-up access lines, as well as lines that shift to mobile usage.
It might be reasonable to suggest half of former consumer lines could disappear, under those conditions, though business lines might largely remain more stable.
Just as important, though, is lost market share.
For many of us, the notion that communication services have life cycles has proven quite unsettling, even though most people would agree that product life cycles exist for other products.
Ownership of private autos now is projected to fall by 16 percent in North America by 2030, according to ABI Research, driven by a shift of population to urban areas where it is possible or desirable not to own a car.
So the question is when North America might reach peak auto, as many have talked about peak oil production.
And it should be obvious that product life cycle peaks have become uncomfortably common over the last decade.
International calling revenue and long distance calling revenue already have peaked in the U.S. market. By at least 2003, long distance revenues were eclipsed by mobile revenues for the first time, even though long distance had been the industry revenue mainstay for many decades.
The number of fixed network voice access lines peaked in 2000.
Text messaging is likely to reach its peak, in North America, in a couple of years.
We already, in North America, have passed the time of “peak fixed network access line” sales, for example. It seems 2000 was the year when fixed network voice lines reached a peak, for example, and have been declining ever since.
We soon will reach peak text messaging, in terms of revenue. The point is that we now should have become accustomed to the idea that legacy revenues have peaked, or will peak shortly, for nearly the full range of legacy products sold by communication and video entertainment service providers.
That, in turn, is driving both tactical and strategic behavior. In the near term, service providers will attempt to prolong the life of declining products, while searching for big replacement revenue sources.
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| source: SBC |
Fixed network fixed access lines used for voice began in 2000 and has continued unabated since then, driven in part by a shift of voice consumption to mobile networks and market share lost to cable operators and other independent Internet service providers.
Precisely how to measure “lines” is a bit subjective, though. These days, service providers prefer to cite “product units” or “services” rather than “lines” as the appropriate metric, where units of video entertainment, voice or high speed access all are counted as discrete units.
Still, the total number of active connections does matter, as it is difficult to impossible to sell additional units to a household that does not already buy at least one product. Competition from cable operators or independent ISPs such as Google Fiber is one reason. But most primary consumer voice demand also has shifted to mobile networks.
The net result is a market where any single fixed network services provider might well expect to sell at least one service to only about 30 percent to 35 percent of all homes in any market, at best.
In that framework, it is conceivable that U.S. telco homes served could dip as low as 63 million or so, calculated as 35 percent of 180 million homes served in 2000.
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