Tuesday, July 22, 2008

Expect Continued Line Losses as Telcos Report Earnings

In the 12-month period between March 2007 and March 2008 U.S. telcos lost 8,647,000 access lines while cable companies added 4,508,400. That suggests the balance of lost telco lines either wound up in the "wireless" category, taken by independent VoIP providers or were part of business line contraction made possible, on the user side, by IP and broadband technologies that provide voice services over a broadband connection of some sort.

It is quite hard to avoid the conclusion that the lost lines taken by cable companies were solely due to "lower price," since cable digital voice normally has no new IP features, is provisioned in a "whole house" manner that mimics POTS, and differs mostly in its price, not its quality.

The drivers might be more complicated in the other cases. VoIP customers sometimes buy based on price, at other times because of the new IP features. Enterprise or business customers often simply substitute voice services delivered over broadband for "voice grade equivalents."

Make no mistake, telcos are behaving deliberately. They simply seem to conclude that losing lines is preferable to across-the-board price reductions. It wouldn't be the first time industry participants have decided that harvesting a declining business is the best course of action.

So long as that continues to be the case, there seems little prospect that the line losses will abate. That being the case, the metrics to watch for are how well broadband-based revenue streams are building. Wireless still will be a bright spot, of course. But telco wired network performance is all about broadband revenues.

Voice simply is being harvested.

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