After years of high growth, the number of incumbent-local-exchange-carrier (ILEC) retail narrowband switched access lines peaked at 181.3 million lines in 1999 and has continuously declined since then, falling to 162.7 million lines by December 2002. More intense competition is to blame, says a new report from Technology Futures Inc. (TFI—Austin, TX). So what does this mean for the telephone industry?
"Competition from wireless, cable telephony, and broadband makes continued erosion of ILEC voice access lines inevitable," reasons Dr. Lawrence K. Vanston, president of TFI. "If ILECs want to be more than custodians for a dying network, they must seize the initiative for the next-generation broadband and video services. This will require massive staged investment in network upgrades as well as recovery of the investment in the existing network. The forecasts are intended to assist with both missions."
Wireless, cable telephony, and broadband substitution are forecast to cause total ILEC narrowband switched access lines to fall from 181 million at end of 2002 to 100 million by year-end 2008 and 50 million by 2013.
Broadband will make up for some but not all of this shortfall, notes the report. Assuming that ILECs retain reasonable broadband market share, total ILEC lines, including broadband, are forecast to fall from 189 million at year-end 2002 to 135 million by the end of 2008, stabilizing at about 100 million by 2013.
In the long run, maintaining a reasonable share of the broadband market will require ILECs to offer very-high-speed broadband services in the 2006 time frame. This transition to very-high-speed broadband will require significant investment in loop fiber, packet switches, and advanced circuit equipment between now and 2015.
For more information about the report, "Forecasts of Access Line Competition in the Local Exchange," visit www.tfi.com.