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from: IP Business

20 Years of Competition: Nobody Beats the Bells

By Gary Kim

After more than 20 years of steadily-increasing competition in the U.S. communications market, one trend is clear: though many things have changed, incumbents continue to dominate the business. Despite line losses, leading U.S. telcos have managed to keep revenue growing. And momentum in the U.S. VoIP industry has swung decidedly to the U.S. cable industry.

That isn’t to say there has been a dearth of strong competitors. The U.S. cellular industry once featured large independent wireless carriers. Only Sprint remains. The U.S. dial-up Internet access business once was lead by independent providers. Today the largest providers are at&t and Comcast.

At one point, AT&T launched vigorous assaults on the local exchange market, leading the whole U.S. competitive local exchange carrier business in the process. Those assaults failed to dislodge the leading local exchange carriers.

The independent CLECs fared no better. Then Vonage and a few other independent VoIP providers set out to prove there was a market for mass market VoIP. They succeeded, only to watch cable companies assume industry leadership.

And despite all the challenges, the former Bell Operating Companies are creating new revenue streams to replace their legacy services. Broadband services appear to be responsible for an uptick in Verizon Communications average revenue per user, says equity analyst William Trent.

At&t also can point to broadband services, both video and access, as contributors to their performance, but Qwest, which really isn’t pushing video, also is seeing some firming of line losses and strengthening of sales in the small and mid-sized business segment, for example.

In Qwest’s case, though broadband is getting serious marketing effort, abated competition probably accounts for a goodly portion of the revenue support. And smaller operators such as CenturyTel also say they are seeing heightened marketing effort from cable, but little revenue impact as of yet. By implication, CLECs are not much of a factor.

Broadband is key for Verizon. Increases in broadband and video revenue and more bundled customers helped drive Verizon consumer retail average revenue per user up $5.64 or nearly 11 percent year over year.

The 3.3 percent sequential growth in Verizon ARPU in the most recent quarter also is primarily broadband and video-related. In Texas the retail ARPU growth was in excess of 20 percent. New York, New Jersey and Virginia experienced double-digit growth.

Most of at&t’s line losses in the business space are caused by technology migration, at&t maintains. Only about 30 percent of its overall access line disconnects are caused by competitive threats, the company maintains. Of course, the cable company impact has yet to be fully felt. So far, only four to five percent of the churn is caused specifically by cable companies, at&t says.

That pressure is expected to grow especially at the lower end of the small business space, in the under-10-lines segment, and probably most of that will be concentrated in the four-lines-or-less segment.

If history proves an accurate guide, the telco incumbents will survive the cable challenge as well, as hard as the challengers will work. IP