What's With Wireline?

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

What's With Wireline?

Wireless replacement - now over 30% of households - is leading to the demise of landlines, but it is also hastening the regulation of ILEC's. Quite a few states have deregulated ILEC's and landline service.

This same decline is also affecting DSL. Naked DSL was supposed to help shore up broadband revenues by releasing the customers from having to purchase a POTS line, too. VZ is reversing course on that, just a year after offering Naked DSL for $25. Some of that offer had to do with the FCC asking the ILECs for a cheap broadband offer to bridge the Digital Divide. Now VZ is saying no DSL where FiOS is available. They need to make folks take FiOS service (to make the metrics look good for Wall Street).

The teclos have basically lost the broadband battle. They stopped rolling out FTTx - at least FiOS and U-Verse. 75% of broadband additions in 2011 went to cablecos.

What I can't explain is the 8.9% decline in wholesale landline revenue for VZ. Maybe CLEC's have been impacted by VZ's anti-competitive nature. Does that mean that resale CLEC's are seeing a decline too? Probably. Cablecos will own customers under $500, so that means a lot of T1 customers have become cable customers.

Two Other Things to Ponder

Cloud and Managed Services as the Next Big Thing and TV Cord Cutting

TV Cord Cutting is rising. Early adopters really like the TV anywhere anytime. They also dislike the huge cable TV bill, which is expected to rise to $200 by 2020. Cord cutting will speed up the price increase in TV because less subscribers means higher price. Content creators like Disney/ESPN pay more and more for sports and that is passed down. In this cycle, the higher the price, the more cord cutting - and around we go.

LEC's losing wireline revenue are looking to Cloud and Managed Services to make up for it. There are a few problems with that. One is that the sales process is so different for CMS. Two, the ILECs have tried e-Commerce and similar services before. (Didn't take.) Three, if the provider cannot deliver telecom services without problems, what makes them think that customers will trust them with more complicated and mission-critical services?

There was a period of time when CTO's would not consider Sprint or Qwest for MPLS because Sprint has an uncertain future and Qwest was for sale. The point is that if the CTO's don't trust your company, they won't buy from you.

It's a quandary.

As CLEC's once competed heavily on teh commodity Dynamic T1, they will now compete on MPLS services, which will (again) drive down revenue and margin. I don't see how this works out for most CLEC's - billion dollar companies or not. Paetec and Intermedia (ICI) were billion dollar CLEC's that had to be sold. It's about having a brand, differentiators, unique services, WOM and executing on a strategy flawlessly to counter the wireline revenue decline.

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