Verizon and AT&T: F. Scott Fitzgerald Said it Best

First-quarter financial reporting by AT&T and Verizon Communications now illustrates clearly how diverse telephone industry contestants, and the market, now has become.

Wireless now constitutes 57 percent of Verizon Communications consolidated revenue. Also, 27.9 percent of service revenue comes from data, with 58 percent of data revenue now earned from non-messaging services.

At AT&T, fully 72 percent of revenue now comes from sources other than landline voice.

Compare that with revenue sources at a typical independent, probably rural telephone company. There, revenues are very much tied to voice landlines in service. A typical small telco might earn 45 percent--nearly half--of its money from access revenues (terminating long distance traffic for another carrier), according to Telecom Think Tank.

About 35 percent of total revenue comes from universal service funds. Local service fees paid by end users is about 18 percent of total revenues.

Add it all up and 98 percent of small telco revenue is dependent on active voice lines. So note the clear dichotomy. AT&T and Verizon represent something on the order of 80 percent of all U.S. communications market share. And for these two companies, mobility drives the business, while multi-channel TV is becoming a key contributor, with broadband Internet access, to overall revenues.

Verizon also had 299,000 net adds for its FiOS TV service, which now is at 23 percent penetration of homes that can buy the service, and added 298,000 net FiOS Internet access customers, bringing penetration up to 27 percent.

Most other telcos do not have the option of relying on mobility, television or global enterprise customers to dramatically change their revenue composition. That is the big cleavage in the U.S. telco market.
The rich are different from you and me, " F. Scott Fitzgerald once wrote ("The Rich Boy" in the volume of short stories "All the Sad Young Men."). One might say the same about AT&T and Verizon, compared to virtually every other telecom company in the U.S. market.

For AT&T and Verizon, the transition to new revenue sources--away from wired voice--is largely completed. For many other telco, the future pattern is less clear.

Very-small telcos often also own separate cable TV or local wireless operations. The good news is that the "video" and "mobile" functions possibly already are provided. The less-good news is that small video and small wireless operations do not spin off the same level of gross revenue or margin that the national operators are able to.

So some independent telcos might well be said to have, or will in the future have, the same basic wireless-video-broadband strategy employed by Verizon and AT&T. Many others, though, will not be able to do so, and will have to craft strategies based on a different pattern. The issue now is what those patterns might be.