Personal communications have shifted to VOIP (Voice Over Internet Protocol) and to cell phones from the plain old telephone service. This is not a temporary change, it is a permanent shift in buying patterns and it is spreading rapidly.
A telephone company has to make the difficult choice of whether they are willing to cannibalize their land line customer base or lose it to some other company. There is no other choice at this point.
This quote from a local telephone company executive tells it all:
Long distance revenue peaked in 2001, dial up revenue peaked in 2002, and basic telephone service revenue peaked in 2003.
The difference between where we were then and now is a difference of $1.6 million dollars.
Unfortunately, the situation will steadily worsen for them unless they can develop revenue from alternate sources.
In 2003, we lived in Lake Monticello, VA, and we were introduced to the Vonage VOIP service by a local handyman. He was not computer literate, but he knew that he could afford unlimited long distance and local calls for $24.95 a month.
We thought that was a financial lifesaver and did the same. We dropped our telephone bill by more then $150 by making a shift to Vonage. We kept our local land line as a backup in case of emergencies.
When we moved to Floyd, we continued the Vonage service and kept a land line out of loyalty to the local phone company, since we were dependent on their DSL service.
We use VOIP for personal and business communications and we use cell phones for backup. We require DSL, but the plain old telephone land line is an expensive luxury. The primary value of a telephone land line is to give you a listing in the phone book and not everyone wants to be listed.
If you were unsure of what a paradigm shift is, take a good look. You are in the midst of one that will have profound effects on a lot of jobs.
Like outsourcing, this is almost impossible to resist. When comparable services are available at much lower cost elsewhere, loyalty to local providers is put to the test.
You've cut to the heart of the matter, David. I work for AT&T and have seen this coming for a number of years. AT&T is cutting jobs by the thousands and is also spending heavily on areas that will hopefully generate revenue. The one thing that has always struck me about "Bellheads" is that they are locked into the past and unable to see very well into the future. Lucent Technologies (formerly Western Electric) almost went out of business about 5 years ago - they were saved by promises of contracts from the Bells for new equipment. Lucent did not forsee the rise of the Internet and how it would impact the traditional telephone business model. Even the contracts from the Bells didn't help much because now Lucent is owned by Alcatel, of France. Cisco is on top of the heap, followed closely behind by Fujitsu. Alcatel-Lucent is a distant third, in my opinion.
I have no crystal ball, but I really wonder why Citizens hasn't gotten into the hosting business. I don't know what kind of revenue that entails, but with DSL being so critical to our lifestyles these days, it seems a no-brainer to me that communications (notice that I didn't say 'telephone') companies would be remiss in not furthering the spread of DSL. Citizens is to be commended for their efforts in this respect - it is highly unusual for a rural telephone company to offer the services that Citizens does. With a reliable hosting service, I think many local folks with websites would gladly switch to Citizens. After dealing with tech support in India, wouldn't folks here just love to talk to a local person for support? In the not too distant future, the 5E switches are going to go away and the transition from circuit switching to packet switching will be complete. All traffic will be gigabit Ethernet with VOIP and TV over fiber to cabinets placed at strategic sites in the serving area. This revolution is resulting in a large scale loss of jobs at AT&T and doubtless is behind the turmoil at Citizens. But there is nothing to be done but to march forward - it is useless to look backwards and moan about the "good old days". Those days are gone, folks.
Posted by: Jeff Blakley | May 20, 2008 at 06:27 PM