Former Bells struggle to overcome access line losses, reports Probe Group

11 September 2003 Cedar Knolls, NJ Lightwave--While the former regional Bell operating companies (FRBOCs)--BellSouth, SBC, Verizon and Qwest--seize opportunities associated with their entry into the long distance market, they are also suffering from access line losses.

11 September 2003 Cedar Knolls, NJ Lightwave--While the former regional Bell operating companies (FRBOCs)--BellSouth, SBC, Verizon and Qwest--seize opportunities associated with their entry into the long distance market, they are also suffering from access line losses. To combat this loss, as well as from the competition posed by rival local and long distance landline carriers and the cable and wireless operators, the FRBOCs are expanding their data services and building the IP backbones on which to run them, according to a new report from Probe Group.

According to Probe vice president, Lynda Starr, "The FRBOCs are in a time of transition. They are entering the long distance market. Core voice service revenues are declining, Frame Relay and ATM have matured and new services such as IP virtual private networking have not yet generated sufficient revenues to offset these losses. Access line loss is being driven by increased cellphone use and burgeoning offerings of phone service from cable companies, resulting in less need for second phone lines."

Starr considers the FRBOCs' biggest problem to be their loss of access lines in the neighborhood of 3% per quarter. If this trend continues, it will lead to decreased revenue despite constant fixed costs. One strategy for counteracting these losses is to bundle services.

Meanwhile, the FRBOCs' major assets for leverage are their networks, with major initiatives for them being the transition to IP networks and data network expansion out of region.

"Things are neither rosy nor bleak for the FRBOCs," observes Starr. "There is uncertainty about the effects that cable telephony, wireless substitution and the future use of UNE-P [unbundled network element-platform] will have on the FRBOCs' operating performance. The good news, though, is that through the use of bundles, the rate for lost access lines is slowing and the FRBOCs are also able to generate substantial revenue from vertical services with little capital outlay."

In its latest U.S. Competitive Service Markets report, "The FRBOCs," Probe discusses the environment in which the FRBOCs are operating and details the individual priorities of and directions taken by BellSouth, SBC, Verizon, and Qwest.

This report is part of the U.S. Competitive Service Markets program, which analyzes the business, financial and regulatory environments influencing strategies of the established mega-carriers and new competitors. The service provides high-level analysis, putting business activities into context amidst changes in the competitive landscape. It also examines the roles of specific market segments such as enterprise, small/medium business and residential as they relate to the success of U.S. telecom providers.

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