Wednesday, January 21, 2009

What Is The Future For Land Line Phone Companies?

What does the future hold for "landline" phone companies??

It depends on their ability to adapt to the changing market. Some will adopt or hedge against new technologies or find other servies that can be delivered over their legacy (invest in new) infrastructure that will add margin to their accounts.

The residential market has been deflationary for years. Carriers have seen price erosion due to competition, competiting technologies (cell phones, email, VoIP). Verizon for example has found a new market to compete in, offerring television services as well as voice and internet, assumably increasing revenue per customer and margins (once the fiber is paid off). Sprint has more than offset huge landline losses with wireless sales

The SMB and Enterprise markets have seen similar deflationary forces for years. They have seen new technologies like email and cell phones as well as VoIP, WAN technologies, etc, lower the average revenue per customer significantly as we all as decrease margins. However, you see many respond by adding professional services, managed services and other high margin, value-added services to their portfolios.

Some carriers will not respond appropriately to the changes in the marketplace, and will be acquired for their customer bases, network or geographic presence.

Additionally, technologies need to evolve and become more stable before land lines can disappear. For example, land lines are still preferred for faxing, alarms and inexpensive redundancy as technology still limits alternative means.

Ten years might be a little too aggressive a timeframe to expect to see them disappear, but you may not recognize the companies that are selling them compared to the way they look today.

By now most telcos have come to the conclusion that telephony is evolving and IP telephony, whether over landline or mobile will be the norm in the next 2-3 years. As for the landline itself, it represents a significant investment in infrastructure, one which has, in most cases, already paid for itself, so the net return is high and warmly welcome. Its future rests with its ability to deliver competitive broadband services, and with VDSL2 can deliver around 50Mbs. This is enough (so far) to deliver IP telephony, some IPTV and reasonable broadband services with QoS.

There is the belief that Mobile services will overtake the humble landline, but the technology is not yet fully developed and there is the constant problem of lack of available spectrum. (not to mention those who think we will all end up glowing in the dark). For these reasons, as well as the additional cost of delivering data over radio, most telcos are busily running fibre services as quickly as they can.
Meantime, at least for the next 10 years, landlines (copper) will remain the cheapest and easiest means of delivering reasonable speed broadband services.

Fixed-line telephony companies - at least some of them - will be around for a very long time to come.

Yes, consumers and business now have a vast array of choices for their telecommunications needs. Disruptive technologies like VoIP and Wireless are changing the markets forever. Call and access prices on these services are dropping rapidly while hard lines remains somewhat expensive.

And yet...

There is an unimaginable amount of copper in the ground, all over the world, which represents a massive infrastructure investment. And it generally works really well. We can be certain that those who own the copper will find ways of ensuring it continues to generate revenue for them. Just dropping call costs enough would do it, as will the advent of new services which could be delivered over existing landline connections.

For a neat online tool which finds and compares available providers by location (e.g. YOUR area) play with the Best Phone Rate Calculator from FreedomFire Communications.

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Anonymous Robert said...

Grow or Go is the answer!
Bandwidth demand never went down in history so far.
The only way is forward which is FTTx.
Using last mile copper/VDSL. Otherwise big steps with FTTH.
Wireless HSPA/WiMax still keeps behind on speed and round-trip-time.
Dig fiber!

3:51 PM  
Anonymous Anonymous said...

Very good article, well stated position. There will be a certain, defined future for the landline... usually in rural areas, under-served clients, and other applications where wireless is either economically or practically unfeasible to install.

Also, in those instances where people just are not interested in services offered and prefer POTS (incredible as it may seem...), the need will be there. Incredible as it may seem, there are still certain defined applications for buggy whips...
Ron Isaacson

5:15 PM  
Blogger nathan.nelson1278 said...

I think you are missing some important market factors as it relates to what happens in homes, and the most important of these is age:

People 65+, these people tend to use a land line as this is what they have been trained to do for their entire life. Some have moved to a wireless phone, and some do email and a little online but most, when it comes time to communicate pick up a phone a call someone with the old trusty land line.

People 45-63, these people are on the back end of the of the start of wireless. Most seem to have wireless phones and land line phones. Additionally, this group generally understands how to use the internet and email and are really a mixed bag. If the telephone call is important meaning business they prefer the land line because of the historic quality issues that surround wireless. The internet is just that a place to retrieve information about news, or sports, or.... They use email as a business tool.

People 30-45, these people understand the computer and how it works, these people are tinkerers in technology and are a mixed bag of using the new. Wireless, and VoIP are not new shiny toys they are just what has been there since they entered the adult world. They consume bandwidth for business, recreation, and are more adapt to changing to IPTV as it offers more choices not because the technology is cool. People in this age group use their wireless phones as the primary means to communicating.

People 20-30; They utilize bandwidth because it is simply a way of life for them. They would rather text, facebook, or myspace, as their method of communications. They use the phone only because they have to for their jobs. They really have no concept of not using broadband or wireless for texting.

When you look at Broadband expansion and the change to new a better things look at the demographics of the area. If the population is older land lines will still be used. Whether that means TDM or VoIP it is about holding a phone connected to a wall jack. As you get younger is to about using a wireless phone to talk to people, and having broadband for entertainment and business, as you get younger than that it is about wireless texting for communication and broadband as a lifestyle.

Most homes have multiple age groups in them so you have a ton of crossover.

These are just my thoughts....

Look to age as the biggest market factor not the will of telecom companies.

Signed, a Telecom Executive

12:12 PM  
Anonymous Armil@phone companies said...

I totally agree with this one It depends on their ability to adapt to the changing market.Because if they will know how they can survive business life.

Thanks for sharing!

1:48 AM  

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