Tough Times Ahead for U.S. Phone Companies?

35 thoughts on “Tough Times Ahead for U.S. Phone Companies?”

  1. Let go of their legacy? Ha! They’re INCAPABLE of being proactive, period.

    They will embrace the future only after they first try to litigate it out of existence.

  2. Om,

    ATT and Verizon are well aware of the land-line loss and have been anticipating and planning for it for 5 years now. That is hardly an issue and I don’t beleive its a strong “sticky factor” as you mention.

    If Bundling is the name of the game, then ATT wireless subscribers would eventually want to move to U-verse or ATT DSL and get voice, video and data all on the same bill ? You have completely ignored that cable has no wireless presence at all and Comcast partnerships with Sprint have been questionable in long-term revenue forecast.

    I’d like to know how many of the 170K U-verse consumers switched from comcast who continues to have the most expensive product for long-term triple-play services.

    Rahul

  3. I wouldn’t bet on cable operators over the long term. As Rahul mentions, they don’t have wireless services. Also their lines run to fewer homes, and the whole video broadcast model is about to collapse anyway.

    Cable broadband started with 4-5 million subscriber advantage over DSL in the US, and the two have been selling at around an even rate since then. Between high-speed fiber, wireless and IP video, cable will start falling behind soon.

  4. “Lines run to fewer homes?” There are about 116.5M households in the US. The top 8 cable companies pass about 106.5M of them. The remaining small operators probably hit another 4M-5M. So even if one assumes that REA and USF succeeded in wiring up every single US household, that puts maybe 5M-6M households that are wired by a telco that aren’t wired by a cableco. And, honestly, those 5M-6M households aren’t exactly high on anyone’s priority lists for FTTH. They’re probably lucky if they can even get DSL.

    Verizon is going to pass 20M houses with FiOS. AT&T is going to pass 30M with U-verse. Together, that’ll give them (by 2012) as many households passed with FTTX as Comcast alone currently passes with HFC.

    You can argue that the wireless bundle opportunity will give the edge to the telcos, but you certainly can’t argue that the telcos have an edge in what’s wired. Especially inasmuch as you’re talking about wired with technology able to support greater than about 2 Mb/s.

  5. @Nick:

    There is only so much that can be done to improve the data rate that can be squeezed down a given chunk of shared spectrum. Unless you’re arguing that optical fibres (not being made from wire) are “wireless”?

  6. Allen makes a good point. I think a lot of the wireless adoption is going to be driven by how much data can get pulled down through that medium. It really is nice to have some kind of physical data line of some sort to ensure regular connectivity through inclement weather, deadspots, etc. That said, I do think a lot of where the big telecos want to be is in the wireless space.

  7. Good points & well researched Om!

    And I fully see that they shall stick to increase bandwidth as you mentioned.

    However, I would like to add, that they shall stop spending money on IP based applications that look like phone systems which they do not now to build anyhow. This generates stranded cost that shall rather be spent on the buildout of their last mile. These are the only assets they really have and they can really handle this turf.

    And to Allens comment, They need to make the transition to fiber networks anyhow if they will become MSOs which is essential for competing with the cable operators, support cloud computing and other things like feeding TV & Video.

  8. Excellent article. Cable has been more proactive about building out their networks than the phone companies. I lived is a small town in south Texas and Time Warner beat Verizon into the area by several years. The phone company must get proactive and start moving into areas that aren’t so lucrative. There is something to be said for being first in an area. The only other challenge is to provide top notch product and support. This would help stem the tide in my opinion.

  9. I have to say I was persuaded by the article, then confused by the graph at the end of it. The graph, sans numbers, seems to clearly show phone company net broadband adds beating cable company net broadband adds. Of course, that wouldn’t vitiate the existing argument; even if the phone companies are slightly catching up in broadband, the cable cos could be doing much better at voice than the phone companies at video.

    Cannibalization of DSL by FIOS is not entirely bad for Verizon, either. Their revenue per customer is higher on FIOS, after all.

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