Big Changes in Product Strategy Must Come, for Fixed Network Service Providers

Google Fiber will no longer offer a linear TV product to new customers, essentially migrating the business model to a more-typical independent internet service provider model that is based on one product, not a triple play or dual play (video or voice). 

Comcast and Charter Communications, though noting that entertainment video still is a highly-significant revenue source, also say they now focus on core communications--especially internet access, business services and the new mobility segment--as their revenue drivers. 

Some small cable TV operators and small telcos might be moving the same way, essentially letting their video customer base dwindle, as mobile phone and internet access become the ubiquitous services consumers want. 

The big problem for small and rural service providers always has been that the linear TV business model is quite challenged. Few such operators have ever actually claimed they make a profit on entertainment video. 

In rural areas, where there essentially is no business model, subsidies always have made the difference between no service and “some level of service.”

At times, some rural service providers that have taken on too much debt might find themselves unsustainable. 

There are clear business model and strategy implications. In a competitive market, the reasonable assumption must be that two excellent providers will split market share; three excellent providers might expect only 33 percent share. 

There are two really-important implications. Without a lower cost structure, any single firm cannot expect to prosper if it has been built to support two, three or more key products. In the monopoly days, one service could support a full network, whether that service was TV, radio, voice or telegraph. 

In a competitive market featuring skilled competitors, suppliers might have to sustain themselves with customer share of 50 percent, 33 percent or less. That is why the triple play became important. The revenue impact of serving one out of three locations is mitigated if three services are sold to each customer location.

All that changes if we start seeing one key product supplied by most firms in competitive markets. Lower costs are necessary. That is why most independent internet service providers have such low overhead, compared to the larger telcos and cable companies.

But it also is likely that no bigger firm can get by simply by slashing costs. Additional revenue must be generated from other products and roles, to replace the dwindling legacy sources. 

So we might predict two developments. Single-product fixed networks using cables are only feasible if internet access is the product. Voice and video will not generate enough revenue to support a fixed network. 

So far, it has been possible for a wireless network to support itself on the strength of TV, radio or internet access. 

That changed in the competitive era, when single-product strategies based on high adoption (market share of 80 percent or more) began to fail. Multi-product sales based on selling more things to fewer customers (scope), rather than one product to nearly everyone (scale). 

All that seems to be changing as revenue upside from voice and linear video dwindles. Video arguably is the more-difficult challenge, as cost of goods is quite high. 

It certainly will make more sense, in a growing number of settings, for highly-focused, low overhead firms to try and make a go of things based solely on internet access, abandoning the multi-product strategy. 

But other changes must follow. Either overhead, capital and operating costs must be drastically pared, or new revenue sources found, or both. The decades where product bundles compensated for lower market share seem to be ending.

Something equally challenging now emerges: how to make a profit from a one-product network with lowest take rates.

Verizon Fixed-Line Divestiture?

It might never happen, and wouldn't happen soon, but Goldman Sachs Group analysts think Verizon Communications might actually split in two, divesting all of its fixed-line assets to become a pure-play mobile operator.  

That would clear the way for some eventual combination of the wireless company with another partner. In recent years, Verizon's growth has been lead by its Verizon Wireless unit.

In many ways, such a decision would be driven by the simple economics of the landline business. By about 2016, it is conceivable that only half of U.S. households will be buying fixed line voice services. If you assume there are two dominant suppliers in most markets, and that market share is split evenly (it will probably be more like 60-40 or 70-30), then no single contender will have more than about 25 percent of homes passed as customers.

If you know anything about the economic of capital-intensive networks, you will sense the problem. A supplier builds a network reaching every location, then is able to generate revenue from only a quarter of the locations. That means 75 percent of the investment is simply stranded, unable to produce revenue.

That also means the 25 percent of users have to pay for all of the capital investment. And where the per-customer investment is that high, retail prices would have to be three to four times higher than if nearly everybody bought the product.

There are other products, though, including video entertainment, broadband access and other smaller revenue contributors that could include advertising and other services. That is a primary reason revenue will not fall as much as penetration would indicate. 

It also would be reasonable to point out that few companies have Verizon's assets or problems. AT&T, for example, has vastly more scale in terms wired network customer base, and in a scale business, that makes a difference. 

Also, Verizon's smaller footprint means it has a larger "out of region" opportunity than does AT&T, for example, in terms of "wired network services." In wireless services, AT&T and Verizon compete virtually head to head in all  U.S. markets. 

But Verizon has been signaling for some time that it might have new plans based on its new fourth generation Long Term Evolution mobile network. With some limitations, Verizon Wireless would be able to provide broadband access, voice and messaging to most consumers across the United States using only the 4G mobile network. Verizon Fixed-Line Divestiture?

Verizon already has business agreements with DirecTV to provide video entertainment, meaning Verizon Wireless could provide a quadruple play using only its wireless assets and business deals with other suppliers. Resale deals with leading cable operators

The challenging news here is the growing disconnect of sorts between the costs of a fiber to home network and the revenues that can be generated from deploying such a network, under competitive conditions.

That suggests we might once again hear calls for rather-substantial changes in regulatory framework that would somehow better "rationalize" competitor access to fixed networks. At some point, structural separation, robust mandatory resale and cable operator inclusion in such a framework will be on the agenda.

As important as facilities-based competition has been, there is a growing disconnect between investment cost and revenue opportunity for landline fiber networks, at a time when revenue growth is moving to a "mobile first" pattern.

Any future Verizon "divestiture" would be the first indication that matters are reaching a potential tipping point. Certainly there are continuing reasons to ponder the economics of the fixed network business.

By 2016, U.S. household  voice penetration will be about 52 percent, according to Pyramid Research. And that will be the highest penetration rate in the world.

In the Asia Pacific region fixed-line voice will be used by 24 percent of households.

In Western Europe, 21 percent of households will have a voice line. Revenue, on the other hand, will grow, in aggregate, on the strength of broadband access services.

“According to our estimates, global narrowband line penetration of households decreased from 45 percent in 2007 to 37 percent in 2011, and it will decline to 27 percent by 2016,” says Sylwia Boguszewska, Pyramid Research senior analyst.

Fixed services in every region are losing ground fast to mobile services, with mobile data capturing an increasingly substantial share of total telecom revenue, she says.

In 2007, U.S. voice penetration was about 97 percent of households, and seems to have peaked about 2000.

So penetration will have fallen in about a decade and a half. Those sorts of changes seem to be more common these days, as the volatility of the business reaches new heights.

Nor would that be the first such change, at about that time frame. In 1997 long distance revenue represented about half of fixed line network revenue in the U.S. fixed-line market.

By 2007 long distance had fallen by half. At the same time, and over the same time period, mobile services had grown to represent half of industry revenue.

And it is revenue, more than service penetration or usage, that seems to be important. Pyramid Research also suggests that fixed line revenue will be stable, or even grow slightly, as penetration falls.

That will be due in part to new revenue sources such as video entertainment, one might argue, and higher spending for broadband access and related products.

At the same time, it has over the last decade also been clear that the enterprise customer segment has become more crucial, not only for Verizon Communications but for most other tier-one service providers. Verizon Fixed-Line Divestiture?

Some skeptics will note that such ideas, which spawn transactions, always get speculated about because there are firms that make a good living advising clients about such transactions.

While true, it also is true that the fundamental industry drivers change quite dramatically over time. In 1999, tehre still were "Personal Communications Service" and "Cellular" segments of the wireless business. These days, the term is never used, because there no longer is any distinction between what used to be thought of as "PCS," and "cellular" service. U.S. telecom in 1999

In 1999, there still was an independent "long distance" industry. There was a company named "WorldCom."

A company known as "America Online" had a $125 billion market capitalization. Other Internet service provider firms, including "@Home," had market valuations of $100 billion.

In 1999, reasonable people would have argued that newer contestants in the "local" telecom business, namely competitive local exchange carriers, had a bright and substantial future.

Cable TV companies did not provide voice services at a significant level. But AT&T owned TCI, the biggest U.S. cable company. As I recall, US West owned Media One, another leading U.S. cable company.

Against that backdrop, it might have appeared that the former "Baby Bells" would have a hard time competing. Just a bit over a decade later, many of the "upstarts" have disappeared. The differences between leading cable TV companies and leading telcos are mostly of a regulatory sort, rather than any fundamental differences in product line.

The point is that if, barely more than a decade ago, the largest U.S. long distance company could own the largest cable TV company, if the wireless business was still thought of as having distinct personal communications service and cellular segments, if whole segments of the business can virtually disappear (long distance), then all sorts of other changes are conceivable.

Verizon deciding it has to get bigger on a global basis, and get out of the landline business, is not unthinkable.

Will Fixed Wireless Be a "Deploy at Scale" Choice for Telcos?

Up to this point, in U.S. and Canadian fixed network markets, cable TV providers have had a capex advantage over telcos. Their hybrid fiber coax networks have proven less costly to upgrade to gigabit speeds than telco networks, which often must break with copper-based access to match such speeds.

So, up to this point, the telco business decision has been whether there is a clear payback from ripping out copper access and replacing it with fiber to the home. Although fixed wireless and advanced forms of digital subscriber line are solutions in niche cases, the big choice has been to make the transition to FTTH or not.

The range of choices will change in the 5G era, as fixed wireless becomes a potential "deploy at scale" choice in instances where the FTTH business case is difficult.

The “politically correct” answer to the question of whether 5G fixed wireless competes with fiber to the home access is that “both have their place,” or are complementary. That has been the PC answer to the question of whether FTTH competes with digital subscriber line or cable modems as well.

Always, the answers have to be contextualized. The cost of each particular solution, for particular deployments, must be weighed against expected financial return, especially in competitive markets dominated by facilities-based providers.

One key element is cost per passing. The other key variables include take rates and revenue per account. At a high level, fiber to the homes least (per passing) in urban areas, most in rural areas, and somewhere in between in suburban areas.

source: ITU

The cost of a fixed wireless solution likewise varies by density: lower costs per location when connecting a high-rise apartment building or condominium; higher costs to connect individual homes. But nearly all observers would likely argue that fixed wireless should be less expensive than fiber to the home.

Cost estimates arguably are most developed for use of fixed wireless frequencies long in use, more speculative for 5G-based millimeter wave bands, as volume production and use of small cell base stations is just beginning.

But cost per passing is only one of the key business model drivers. In competitive markets, where there are two or more equally-talented and capitalized providers, the addressable market is never 100 percent of locations. Instead, two strong competitors essentially will split the market.

And that means the cost per customer is roughly double the cost per passing.

source: Siklu

In an era where one or multiple products might be sold, the average revenue per account also matters. And there, generally speaking, average revenue per account trends are clearly in the lower direction.

All of that--facilities-based competition; falling average revenue per account; cost per customer--means the cost of serving customers has to fall, even for next-generation networks that feature higher performance.

In that context, the question of “which platform” always includes a “cost to deploy” constraint. If the total customer base is limited because of competition, and average revenue per account is declining, then network cost (capex and opex) must drop.

That is why, all other things being equal, in competitive markets, the low-cost provider tends to win, when that provider has scale.

source: PwC

Internet Access Universal Service is Always an Issue for the Last 2% of Locations

Universal funding of “essential” telecom services always is difficult and expensive, since, by definition, there often is no private sector business model for rural areas. In large part, that is because there are too few potential customers, in relation to the cost of assets to serve those potential customers. In the continent-sized U.S. market, for example, the universal service problem largely is a matter of rural areas.  

Assuming a standard fixed network investment cost, that might not produce a positive business case over a 20-year period, the U.S. Federal Communications Commission has suggested.  And almost nobody makes investments with a 20-year payback in telecom, anymore. That is tantamount to “no investment return.”

In the United States, the cost of serving the last one percent of locations is astronomical, for example.

source: FCC

High infrastructure costs  are among the reasons wireless access is likely to play a bigger role in such universal service plans. Fixed networks cost too much in rural areas, in other words.

Consider many U.S. states where rural population density ranges between 50 and 60 locations per square mile, and ignore the vast western regions east of the Pacific coast range and west of the Mississippi River or 100th meridian,  where population density can easily range in the low single digits per square mile.

Assume 55 locations per square mile, and two fixed network suppliers in each area. That means a theoretical maximum of 27 customers per square mile, if buying is at 100 percent. Assume for the moment that buying rates really are at 100 percent. Two equally skilled competitors might expect to split the market, so each provider, theoretically, gets 27 accounts per square mile.

At average revenue of perhaps $75 a month (perhaps a generous assumption), that means total revenue of about $2025 a month, per square mile, or $24,300 per year, for all the customers in a square mile.

The network reaching all homes in that square mile might cost an average of $23,500 per home, or about $1.3 million.

At 50 percent adoption, that works out to network costs of roughly $47,000 per account in a square mile, against revenue of $900 per account, per year. Over 10 years, revenue per account amounts to $9,000. Over 20 years, revenue might be a bit more than $18,000.

The business case does not exist, without subsidies.

In the United Kingdom, Ofcom, the U.K. communications regulator, is planning a minimum 10 Mbps internet access floor for all locations in the United Kingdom. That probably is an issue for the last one to two percent or so of U.K. locations.

Ofcom estimates a per-location cost of £3,400, enabling coverage to around 99.8 percent of premises. Consumers outside this threshold will be able to get a satellite connection. That figure is a blend of higher-cost (and relatively speaking) lower-cost locations.

Mayors Want FiOS, But "You Can't Always Get What You Want"

It is not surprising either that nine New York mayors, as well as their counterparts in Boston and Baltimore want FiOS. By the industry's own reckoning, fiber to the home is the ultimate, future-proof network. Nor would the mayors be alone in thinking better consumer outcomes could result if there were robust competition between an incumbent cable operator and Verizon, in each city.

But the economics of fiber-to-home networks have never been especially easy. Verizon itself justified the FiOS network choice to investors by arguing a combination of benefits, including operating cost savings, would provide the payback.

But Verizon seems to have found the operating cost savings were not as large as hoped, and the incremental new revenue not large enough, to continue with the program. You can be sure that if FiOS were throwing off huge amounts of new cash, you couldn't keep Verizon from building as fast as it could.

The problem is that an argument can be made that major investments in all new fixed network infrastructure are questionable, at a time when a variety of reasons make wireless networks a clearly-better financial investment. Even proponents say the business case varies from location to location. 


Observers are right to wonder about the impact on competition if Verizon continues to refrain from FiOS expansion. On the other hand, wireless does provide an important developing element of the competitive picture. Wireless might never be a full-fledged alternative to fixed network access. 


But neither is it clear that the fixed network business case will remain where it is today. At least in principle, some shift in end user demand could boost the FiOS business case far beyond where it exists now. 


The point is that promoting competition, a reasonable public policy concern, also has to take acoount of the fundamental economics of various approaches to providing broadband access. What we might prefer is one thing. The economics might dictate something else.
Wireless also has become a feasible alternative for broadband access in many areas, and for some use cases.

Nor is there much evidence that service providers are doing anything but increasing investment, globally. It also is true that industry revenue is growing, globally. The issue is where growth is occurring.

In the 10 years from 2005 to 2015, telecom service provider revenue has shown and will continue to show year-over-year growth every year except in 2009, Infonetics Research says.
With industry revenues expected to grow at a modest two percent a year, overall capital expenditure will thus remain stable (0.7 percent CAGR) for the foreseeable future, with growth coming from spending on equipment. But capex is shifting to mobile, globally.

Wireless access infrastructure, already accounting for 43 percent of total telecom infrastructure capex, will increase its overall share as spending continues to shift away from fixed infrastructure.

That has to raise questions about the long-term role, revenue and services suite to be offered by broadband fixed network operators. Not, it must be said, because demand will be lacking, but only because cable operators seem to be executing on their premise that they can deliver bandwidth more affordbly than fixed-line telcos.

Indirect evidence for that view comes from the A.D. Little analysis, which suggests that fiber to the home investment for very-high broadband will be “mainly” driven by non-telecom players.

In part, in some markets, that will be the case because 65 percent of all households with access to FTTH  networks in Europe are on networks deployed by fixed-line incumbents. In other words, in Europe, much fiber investment already has been made. Where it has not been made, there likely are payback issues that make FTTH highly questionable.

So utility companies and alternative operators are expected to split the value chain as well as the financial investments, by forming innovative partnerships to invest in more fiber access, A.D. Little believes.

If cable operators continue to nibble away at available demand for fixed broadband, telcos will face the challenge of a radical rethinking of their business models and offerings.

If one assumes that broadband will underpin and drive most future revenue for fixed line providers, and if one assumes it is the cable companies who can do so at lower cost, telcos will face a challenging investment case, especially given the arguably better financial prospects in mobility and wireless.

Strategically, one might argue that, though expensive, a full fiber to home upgrade might be necessary. In some cases a fiber to neighborhood approach might be “good enough” as a bridging strategy over the medium term.

Either that, or a telco has to dramatically lower its operating costs to compete as a provider of lower-bandwidth solutions, with cable claiming the premium segments. That will not be an appetizing prospect for most telco executives, especially those without wireless assets.

FTTH is better, no doubt. But the business case remains challenging, especially where cable operators are able to boost bandwidth at much lower costs.

Fluid Cable-Telco Marketing Battles

Nearly 60 percent of surveyed households now have bundled services (telecommunication, internet, and video services), a 13 percent increase since 2007, according to new research by CFI Group. So far, though, cable companies are much more likely to serve bundle buyers, compared to telecom companies. Cable companies subscribe twice as many customers to bundled services as telecoms do, CFI Group says. 

And telcos have some work to do: Digital subscriber line services appear to be losing ground, compared to cable modem alternatives. Still, the battleground is fluid: customers increasingly asensitive to rising rates and poor customer service coming from cable providers, CFI suggests. 

Some 70 percent of customers cite high rates as one reason for canceling cable TV service, while poor customer service accounts for 40 percent of churn from cable TV service.

Of customers who will switch carriers, 40 percent say that the competition offers better rates and plans. 

Customers also seem to be more willing to switch wireless carriers than they were in 2007. Verizon leads all wireless carriers in customer satisfaction and Verizon customers are the least likely to switch carriers. Sprint/Nextel customers are the least satisfied and the most likely to switch.

Nearly 50 percent of households are interested in VoIP and IPTV, but awareness for either has changed little over the past year.

Bundling preferences are likely to change as telcos turn up new video services. Despite cable’s current lead, customers would prefer to bundle communications services with telecommunication companies over cable companies by a two to one margin, CFI Group says. However, 29 percent of customers have no intention of bundling at all, preferring instead to pick and choose the services that best meet their needs.

And though consumers often say "convenience" is why they buy bundles, lower costs probably are the primary driver. The vast majority of customers who choose bundled services make the decision based on price, CFI Group says. Still, 46 percent of customers say they chose a bundled plan because it simplifies billing. Most customers who intend to switch carriers will also choose better pricing and a simplified bill, CFI Group says. 

The predicted growth rate for bundling is nine to 17 percent over the next 12 months, slowing slightly over previous years. The greatest opportunity is in meeting the growing market demand for video services provided by telcos. If telecoms are able to provide fiber services to new access areas quickly, and market them effectively, the split of new bundled customers between telecom and  cable could widen to 63 percent and 29 percent respectively, reversing the present pattern. 

Packet Loss is Chief Experience Degrader on Mobile Networks

Traditional network “quality” metrics are based on throughput and latency. But according to a study by Kwicr, the chief source of mobile app quality problems now are packet loss and throughput variation.

Throughput and latency matter, but only to a lesser extent, in the mobile environment.

In part, that is because mobile video has emerged as a key app, and mobile video and mobile audio are affected by both packet loss and throughput variation.

But devices matter as well, in particular older devices with slower processors and less available memory. Additionally, older devices may only support more crowded 2.4GHz Wi-Fi bands, or not be enabled with the fastest cellular technologies such as LTE and LTE Advanced.

Both types of impairments result in stalls and lower quality streaming, even if there is ample bandwidth to service the customer.

Kwicr says content delivery networks are effective ways to improve app performance, particularly for apps with cacheable content such as streaming video, streaming audio, and static web page content.

That is a logical observation for a company that sells a mobile content delivery network.

The main point, Kwicr argues,  is that mobile Internet access networks are different from fixed Internet access networks.

TCP performs exceptionally well with wired networks, because packets are lost only when the network is congested, Kwicr says.

TCP is designed to work with wired networks and equitably split bandwidth across the applications that are utilizing the fixed sized links on these networks.

Mobile broadband is characterized by quickly varying available bandwidth, caused by impacted by endpoint motion, weather, topographic feature interference (mountains and buildings), the active or passive coordination between multiple access points or base stations, and contention for spectrum.

All that leads to a rapidly-changing bandwidth environment, something TCP was not designed to anticipate.

“Our data indicates that the throughput available to a mobile app for download and upload varies greatly during a single app session,” said Kwicr.

Wi-Fi and Long Term Evolution (4G) have the highest average throughput, but Wi-Fi has unusually high rates of packet loss events.

Good News, Bad News for Telco FTTH

There is good and bad news in Cincinnati Bell’s latest report on its fiber to home adoption. In the first year of marketing, Cincinnati Bell gets about 30 percent of customers to buy. After about four years of marketing, the company seems to get about 50 percent adoption.

So the good news is that fiber to home internet access seems to compete well with cable modem services, after a few years, in terms of market share. In a two-provider market, the company roughly splits the internet access market with cable operators.

The bad news is that no telco yet has been able to demonstrate that its fiber to home efforts, or fiber plus other access platforms, are able to take market share leadership from cable companies.

source: Cincinnati Bell

In rough terms, the upgrade to fiber to home networks allows a telco to battle back to splitting the market with cable, instead of losing share to cable.

There appears to be additional upside in linear video revenue, though some might question the magnitude of those contributions, long term.

So though there are other ways to monetize such investments, the cautionary note is that even with high-performance FTTH networks in place, about the best any telco has been able to show so far is an ability to split the internet access market with cable.

No telco has shown an ability to dominate that market, after upgrading to FTTH. In the future, the business case could be challenged to a greater extent if new rivals emerge. Independent ISPs and  mobile substitution are the prime examples.

If a new provider is able to gain 20 percent market share, that would limit telco and cable share to a theoretical maximum of 40 percent each. Some ISPs believe they will routinely do better than that, gaining perhaps 30 percent market share. Ting believes it can get as much as 50 percent share.  

Calculating share can be difficult, as these days, “revenue generating units” often are the metric used to derive market share. And RGUs are different from “homes” or “locations.” EPB, the poster child for municipal networks, offers voice, video and internet, and claims 45 percent market share.

But it does so by counting RGUs and comparing that to homes in the service territory. Internet access share is likely closer to 27 percent.

Still, the point is that, in a growing number of consumer markets, there might be three sustainable suppliers, not just two. That will have important ramifications for potential market share.

The larger point is that, in a two-supplier market, FTTH seems capable of allowing a local telco to get as much as half the market for internet access services. That drops in a three-provider market.

FTTH really does help. But how much it can help depends in part on the number of contestants in the market.  

Verizon Wireless to eliminate one-year contract option on April 17th | BGR

Verizon Wireless is eliminating its one-year contract option. After April 17th, a customer purchasing a new device must either sign a two-year agreement and pay the standard advertised price, or pay the full cost of a handset. Some might see the move as "anti-consumer" in some way, but apparently few customers actually opt for a one-year contract when they can choose to pay full price for a handset, with no contract, or get a substantially-subsidized device with a two-year contract.

In the European Community, regulators recently have decided to require one-year contracts, and some mobile providers already have begun to do so, perhaps because of the competitive situation in the United Kingdom. Vodafone trails behind both the T-Mobile/Orange joint venture, Everything Everywhere, and O2, and has been seeing competition from MVNOs at the low end. Retailer Tesco has been offering 12-month deals, for example.

Vodafone's one-year contracts start at £35 a month and so far come with four high end handsets - the HTC Desire HD, RIM BlackBerry Torch, Samsung/Google Nexus S, and the Nokia N8. Other models will also be included in the scheme as it evolves. Vodafone has had12-month terms for SIM-only contracts for some time.

There's no magic here. Consumers can pay full price for their devices and buy service with no contract. But most consumers want subsidized phones, and the two-year contract terms are set at levels that arguably simply recoup the cost of the subsidies. The one-year plans obviously represent less generous subsidies.

Market dynamics also are different in the EC nations and in the U.S. market. In the EC, virtually all providers use a single air interface, so a phone purchased for service with one carrier can be shifted easily to another carrier. In the U.S. market, the air interfaces remain split. A CDMA phone that works on Verizon or Sprint networks will not work on AT&T or T-Mobile networks. For that reason alone there is less opportunity to switch providers.

Still, the point is that no-contract service, one-year or two-year contract plans simply represent different combinations of value and price.

Verizon Wireless to eliminate one-year contract option

What Options Does CenturyLink Have to Wring More Value Out of its Assets?

CenturyLink is in many ways a hybrid company, including a healthy base of rural telephone access assets, several access networks in metro areas of the western United States and then long haul and enterprise assets originally part of Qwest Communications.

CenturyLink is not alone. Windstream and Frontier Communications are some combination of rural telephone assets and business-focused assets.

One might argue that, in all three cases, revenue growth is driven, on a net basis, by the enterprise and small-to-medium business operations. What is not so clear is what any of the three firms can do to--or might want to do--to enable each of the constituent business segments to perform better.

Windstream has tried to wring more value out of its operations by spinning its access assets in a real estate investment trust, while separating out the operating businesses.

At CenturyLink, strategic services are growing, the legacy access business dwindling. Some creative ideas might be offered for what CenturyLink might do, some fanciful, perhaps.

The “easiest” move would be to undo the Qwest wide area network business from the local access business. The problem is that the former Qwest assets represent the growth. Even in the fixed networks segment, the rural assets arguably could be separated from the metro markets.

The issue is that value, in the business and metro markets segment of the access business, benefits from the former Qwest assets. Also, for the most part, the new gigabit high speed access business will make sense primarily in the metro markets segment of the business.

Though conceivable, it might be hard to cleave the rural assets cleanly from the geographically-isolated metro markets parts of the business, in part because negative revenue growth is virtually assured for such rural assets.

The split of former Windstream assets into a wholesale company and a retail company leasing access to the network assets is a model CenturyLink might also consider.

Some might propose more-fanciful options, such as selling some of the assets to third parties. The issue there would be how to cleanly do so.