There's been a steady hum rolling across the telecom plains for the past few months, driven in major part by the anticipation of an FCC green-light decision that will set the regional Bell operating companies loose into all sorts of growth-oriented spending. Lately, most people have taken to saying that we're on the rebound, things are looking up, spending is coming and the industry is going to "get busy" again.
Well, I hope so. But there's this nagging part of me that doesn't get it. The RBOCs have won the war against the competitive local exchange carriers (CLEC) largely by starving them out of existence. Now the Bells want to enter long-distance, video services, voice-over-IP (VoIP) services, enhanced services and other such markets, and that's how they're going to jump-start growth again and get us all to pay more money than we are today.
You buy that? I don't. While the RBOCs are financially stronger than many of their competitors, what is it that the RBOCs have won? Let's look at the general market that the RBOCs face over the next years:
• Second-line growth is negative as people cancel dial-up lines and install cable modems at a 2-to-1 pace over DSL.
• Voice lines are being disconnected (or not ordered) as more people use cell phones as their primary line.
• Features are being disconnected, and bundling options are lowering margins.
• Voice long-distance rates are moving toward $0.00 (literally) as the cost of completing calls plummets. With VoIP, calls can ride over existing networks for fractions of a cent.
• IP Centrex services are coming online as IP PBXs are the rave.
• Video is the rally cry for next-generation services to compete with cable's triple play of voice, data and video.
• Wireless LANs and hot spot services will sap 3G revenue growth.
• Robust alternatives for metropolitan networking are challenging RBOC metropolitan models.
The list goes on. Most of the near and midterm growth areas for the RBOCs are not likely to yield the results they would like to see, yet everyone is saying that "we've turned the corner" or "we've bottomed out." We might have run out of firms to go bankrupt, but clearly the RBOCs are not out of the woods - there's a lot of pain coming in the next two years.
The cable industry is going to hit hard at the small office/home office and midsize business markets with solid voice, data and video bundles. I wouldn't be surprised to see them add cellular services, too.
The wireless industry is going to hit hard at the RBOCs' future data growth and line growth. The wireless industry is not all that healthy: It has traded line quality and battery life for flashy phones, but this really hasn't increased revenue that much. After giving tons of free night and weekend minutes, now it is bundling family plans where all family members can talk to one another for free. Heck, they're running out of people to give free stuff to.
The entertainment industry does not seem to need the RBOCs - or at least is not seeing how they fit into the equation. Instead, Hollywood has chosen to do a lot of future development on its own.
The data industry is seeing a large uptick in alternative and competitive services. Companies such as Time Warner Telecom are offering metropolitan LAN services at a great price in a large number of buildings and cities.
Everyone has switched to a new customer focus: small business. This isn't really new, but just the latest marketing line. The RBOCs are talking a good story, but the market has gotten crowded, and the first services aimed at this group haven't even been launched yet.
So when people say the RBOCs have won and are sitting pretty, I have to wonder. From where I sit, the issues are very tough and will require investment, creative and differentiated services, and swift and reactive decision-making. These are all counter to what we've seen from the RBOCs lately.