Stay on Top of Enterprise Technology Trends
Get updates impacting your industry from our GigaOm Research Community
[qi:086] If you want to hear what the death of copper phone lines sounds like, don’t just listen to AT&T (s T) CEO Randall Stephenson or Verizon Communications (s VZ) CEO Ivan Seidenberg talk about their landline losses over the last few quarters, come over to my house and lift the receiver on my landline phone. You’ll hear the crackle of static that grossly interferes with your ability to enjoy a call.
No matter how many times an AT&T technician comes out to the house, the static always comes back. The technicians can replace sections of the aging wire, fixing the static for a few weeks, but like rust or wrinkles, it always returns. Given that I pay $16 per month for the minimum plan to keep a landline in the house, and that several industry analysts have estimated that it costs Ma Bell between $100 and $200 each time a technician visits my home, this is not a winning equation for the phone company.
The combination of expensive maintenance on an aging network and users who are trending toward the cheapest copper-based packages available showcase some of the problems ahead for the old-school copper telecommunications infrastructure just as much as AT&T’s loss of 4.2 million 1.6 million landlines in the first quarter does. Others have pointed out that the economics of the eroding landline business will mean that we’ll see more problems as carriers weigh the costs of fixing up their old lines with the revenue those lines bring in. Larry Vanston, president of research firm Technology Futures Inc., says AT&T, Verizon and Qwest (s Q) provided service to 109 million (primarily copper) access lines at a cost of $5.7 billion in 2007 so the average cost of maintaining the copper network is at least $52 per access line per year. This number gets larger as the number of access lines falls. For example, it was $43 per access line in 2003.
Such problems will include longer wait times for repairs, cheaply repaired lines and even carriers dumping some of their wireline assets. Forward-thinking carriers in other parts of the world are addressing this problem by pushing WiMAX to subscribers. AT&T has pondered that in rural areas of the U.S., but so far hasn’t pulled the trigger.
The demise of the copper landline is becoming less of a business issue for the big carriers, which have offset landline losses with profits from wireless services and growth from fiber-based offerings, but smaller carriers such as Fairpoint Communications (s FRP) and Windstream (s WIN) will have to figure out how to serve those who don’t want to abandon cheap copper without the benefit of hefty wireless growth. Meanwhile, I’ve given AT&T a pass on my static-filled line, and have stopped calling to get it repaired. I use my mobile for all my calls anyway.