Losses All The Way Around

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Losses All The Way Around

What a terrible quarter. 

The FCC is playing around with Broadband - plans, definitions and classifications. The NTIA took the summer off from its task on the broadband stimulus. 

Meanwhile, VZ releases its quarterly numbers as a loss due to pension payments and layoffs. It is planning more layoffs, because it has to cut head count in its wireline business to reflect the declining revenue. The spin was that VZW was counter-balancing any revenue losses, but with wholesale (pre-paid) cellular subs, not direct, contract ones. Less profit. Less ARPU. 

The one thing (I repeat often) is that most of these markets are flat - cellular, TV, consumer broadband, consumer voice, wholesale voice. It's a zero sum, take-away game. That is expensive.

"The race to the bottom makes sense when you consider two other numbers: Despite improved enterprise sales and better FiOS penetration, both global enterprise revenues and mass market revenues were essentially flat. On the global enterprise side, declining wholesale revenues were at fault while on the mass-market side, access lines continue to decline." [source]

The good news is that the Duopoly has gotten into a price war. VZ reports healthy ARPU of $145 per FiOS customer and $81 for others. Because customer acquisition costs are so high - advertising, direct mail, special offers, installations, equipment, discounts, referral fees - the Duopoly has not lowered its MRC. 

I don't know the impact that Satellite TV (DirecTV and DISH) are having because in some cases the TV part of the ILEC bundle is one of these two.

Level3 didn't have a great quarter either. Year-to-year quarterly revenue fell to $908 million from $942 million

I don't know how that isn't expected across the board in telecom. Prices are dropping every where. Qwest is cutting local loop costs in some markets. AT&T is dropping MIS rates. Cogent is giving away ... oh, never mind, they always do that. 

Thnk about it this way: Many business customers are in three year deals. So customers coming out of contract now were signed up in 2007 when pricing was (my best guess) 20% higher. Today, you almost get 10MB of IP for what a T1 cost in 2000. There are markets where 10MB is $800 including loop. 

Meanwhile, we have the SIP trunking situation, whereby every carrier is offering SIP Trunks as a low cost replacement for one or more PRI's. The total telecom spend is shrinking.


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