New technologies to nudge ILECs out of former local-access market monopoly

Nov. 1, 1999

New competitive-access technologies will make it tough for incumbent local-exchange carriers (ILECs) to hang onto what was once considered a "last-mile" monopoly. According to a new report published by Technology Futures Inc., an Austin, TX-based international telecommunications forecasting company, cable telephony and wireless technologies are capable of providing direct and significant competition for voice services in the near future.

The report, Telecommunications Access Technologies: Overview and Competitive Assessment, was sponsored by the Telecommunications Technology Forecasting Group, a consortium of telephone companies comprising of Bell Atlantic, Bell Canada, BellSouth Telecommunications, Cincinnati Bell, GTE Telephone Operations, Southwestern Bell, Sprint Ltd., and US West Communications Inc.

According to the report, the competing technologies--terrestrial wireless, satellite, or cable--are simply more economical than the ILECs' circuit-switched, copper-based network for multimedia services and will become more economical for voice as the ILEC market share declines.

A combination of technologies such as cable telephony and wireless in the hands of very powerful established service providers and nimble newcomers will completely eliminate the remnants of the ILECs' former monopoly on local access in the 2001 to 2002 timeframe.

The report also finds that it is now economically practical for multiple competitors to provide fiber facilities in core business districts. Additionally, continued improvements in fiber-optic technology and newly available "invisible fiber" wireless technologies (see Lightwave, September 1999, "Optical laser communications systems carve niche in metro markets") extend the reach of competitive providers further to include smaller cities and businesses.

Some key findings in the Technology Futures' report indicate that cable modems will continue to dominate the high-speed data market with 58% of market share in 2005. ILECs are expected to lose significant market share, dramatically increasing the cost of serving remaining customers. Also, both wireless and cable voice will become significantly less costly than ILEC access at reduced penetration rates.

The ILECs natural response to their competition is to expand beyond their franchise boundaries as full-service competitive LECs or by acquisitions. This, in turn, results in more competition from the other ILECs.

The report analyzes the competitive threat to local-exchange carriers from competing technologies and outlines the state of each technology; its key applications areas, strengths, weaknesses and limitations; key providers and users; and market size. It includes analysis and forecasts of new access technologies and provides assessment and opinion as to the direction of the industry.

For more information on this and other telecommunications reports available from Technology Futures, contact Debra Robison, (800) TEK-FUTR or (512) 258-8898, fax: (512) 258-0087 or e-mail: [email protected].

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