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Written by Ken DiPietro
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Monday, 07 March 2005 |
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Page 1 of 3 Something is happening, something disturbing and potentially capable of
radically changing a critical infrastructure we all depend on,
telephone. I am kind of amazed that nobody is talking about this as the
change could certainly mean the eventual collapse of the copper/fiber
infrastructure. Maybe, you’re thinking this is Chicken Little screaming
that the sky is falling and perhaps you’re right. It is quite possible
I am reading the signs incorrectly and I am sure that anyone with a
differing opinion will certainly let me know.{mos_sb_discuss:2}
So, what am I talking about? Well, according to this article,
the ILECs are losing an enormous amount of landlines to both cell
phones and VoIP every week. In the article I linked above, Time Warner
alone has been adding somewhere in the neighborhood of 11,000 new VoIP
users per week! Adding to the discussion, this article
claims that Vonage is adding 10,000 new users per week. I realize that
every single one of these customers isn’t necessarily abandoning their
landlines but I suspect that a sizeable portion of these users are
getting rid of their landlines. Personally, I know several people who
ditched the landlines in favor of a cell phone. Many of these people
are also picking up a VoIP account to leverage their broadband
connection while cutting down on their long distance bill.
The question before the house is, why is this important?
The
short answer is, there are only so many lines that a single ILEC afford
to lose before the entire copper/fiber network ceases to become
profitable. What that number is I am sure the public isn’t going to be
told.
Let’s look at the numbers, shall we?
According to this information
provided by the FCC, as of December 2004 there was roughly 180 million
end user switched lines in the US. That is an incredibly massive
number. However, if Time Warner and Vonage are converting 21,000 users
per week this is a trend that has to concern the ILECs, I would assume.
To keep things simple, I am going to just use these two
companies and I am going to make the assumption that each new VoIP
subscriber is a real loss of a landline to the ILEC. Based on the
number of 21,000/week we are looking at just over 1 million lost lines
per year if this number doesn’t accelerate (which it very likely will)
Please note – nowhere in this calculation are we taking into account
the amount of conversion from landline to cell phone, residential
customers dropping their second phone line when they convert to
broadband or any of the other VoIP companies like Packet8, Lingo or the
services offered by entities like Comcast. I think it is prudent to
assume that the real number of lost landlines to the ILECs could be as
high as two to three million per year as a very conservative estimate.
Even
at the highest number I estimated above (three million lines lost per
year) when you have 180 million lines this isn’t an immediate threat –
not by a long shot. If the trend stayed flat it would take 60 years for
all of the landlines to be completely abandoned. That 60 year figure is
deceptive though. If this trend stayed flat (and I don’t think anyone
would even consider that a possibility) at what point does it no longer
make financial sense to finance the network? What happens when we hit
below 100 million? How about 50 million lines total? Will the
conversion be unequal meaning if areas that have great cell phone
coverage drop a higher percentage of their landlines at a far faster
rate? What about VoWi-Fi in areas that roll out a free WiFi cloud like
Philadelphia is trying to do? Is this why the ILECs are so concerned
about this kind of municipal model?
I don’t know let’s look at a few other scenarios.
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