blind_html Re: Fwd: Will the Phone Industry Need a Bailout, Too?

  • From: Nimer Jaber <nimerjaber1@xxxxxxxxx>
  • To: blind_html@xxxxxxxxxxxxx
  • Date: Sun, 10 May 2009 19:22:46 -0600

I think what this means is that the 911 carriers have to improve cellular and VOIP access.

Nimer J

On 05/10/2009 07:10 PM, Sylvia wrote:
This was an interesting read. Most phone companies charge extremely high prices for regular landline services whereas the price for voip bundles are coming down.

    ----- Original Message -----
    *From:* Nimer Jaber <mailto:nimerjaber1@xxxxxxxxx>
    *To:* blind_html@xxxxxxxxxxxxx <mailto:blind_html@xxxxxxxxxxxxx>
    *Sent:* Sunday, May 10, 2009 8:43 PM
    *Subject:* blind_html Fwd: Will the Phone Industry Need a Bailout,

    -------- Original Message --------
    Subject:    Will the Phone Industry Need a Bailout, Too?
    Date:       Mon, 11 May 2009 00:25:08 -0000
    From:       Ray T. Mahorney <coffee-craver@xxxxxxxxxxxxxx>
    Reply-To:   Blind-chit-chat@xxxxxxxxxxxxxxx
    To:         <Undisclosed-Recipient:;>

    May 8, 2009, 9:48 am

    Will the Phone Industry Need a Bailout, Too?

    By Saul Hansell
    NY Times

    Congress has asked the Federal Communication Commission to develop a
    national policy for broadband deployment. But it might be more important
    to think through how the country will handle the aging and increasingly
    less relevant copper phone network.

    You can see the problem building every quarter, when the phone companies
    report they serve ever fewer landlines. They are mainly losing customers
    to cable companies, which offer competing broadband and voice services
    that make copper phone lines unnecessary. More people are also deciding
    to abandon landlines for cellphones.

    AT&T lost 12 percent of its landlines over the last year. Verizon, which
    is converting some customers to fiber, lost 10 percent. The story is
    similar at smaller phone companies like Qwest, Embarq, Fairpoint and
    Frontier, but these companies don't have the wireless business to help
    bail them out.

    As all these companies lose wireline revenue, the costs of maintaining
    the wires strung on poles and dug through trenches is not falling nearly
    as quickly. It now costs an average of $52 a year to maintain a copper
    phone line, up from $43 in 2003, largely because of the declining number
    of lines, according to Larry Vanston, president of research firm
    Technology Futures, as quoted on GigaOm. There are more reports, such as
    this one about Verizon, that the telcos are skimping on maintenance of
    their copper wires.

    I am also having a hard time seeing how the pricing structure of the
    voice business can hold up. Right now, voice traffic is such a tiny
    piece of the overall data moved over the Internet that the cost is
    insignificant. One clue can be found in the most recent financial
    statement of Vonage, the Internet phone company, which show that its
    direct costs of providing telephone service come to $6.67 a month for
    each subscriber. And the largest part of that amount is not true cost,
    but subsidies to rural phone carriers by way of an inscrutably complex
    system that governs how companies pay each other when connecting
    long-distance calls.

    To be sure, the costs to run and maintain wires to people's homes (for
    any combination of phone, Internet and television) is a great deal
    higher than $6.67 a month. But for the vast majority of people who buy
    Internet and TV service already, the extra they pay for phone service is
    entirely unconnected to the actual costs of providing it.

    So far, stand-alone voice-over-Internet services have not really caught
    on with consumers. Vonage actually lost customers in the first quarter,
    when you might have imagined the tough economy would drive people to its
    cheaper service. And that's after spending more money on marketing than
    it does on providing its phone service.

    But as a policy maker --- or an investor, for that matter --- these
    economics make for a great deal of risk. If competition ever creates a
    significant shift to Internet-based phone service, it could quickly
    decimate the already precarious economics of the local phone business.

    You can see these stresses already in the local phone companies with
    heavy debt burdens from leveraged buyouts. Hawaiian Telecom filed for
    bankruptcy protection in December, three years after it was bought from
    Verizon for $1.6 billion by the Carlyle Group. Facing stiff competition
    from Time Warner Cable, the company has lost more than 20 percent of its
    landlines. The debt of Fairpoint Communications, which bought the New
    England operations of Verizon, was recently downgraded by Moody's to B3;
    the ratings firm cited increasing risk that Fairpoint would default on
    its debt.

    Craig Moffett, a telecommunications analyst at Sanford C. Bernstein&
    Company, suggests that even the phone companies that don't have such
    high debt burdens are heading down the same path.

    "These are fundamentally bankruptcy stories," Mr. Moffett said,
    suggesting the government may well be forced to confront a very
    expensive bailout of the telephone industry in a few years. "They have
    employment that is on a par with the big three automakers. And their
    pension obligations are close to being on par with the automakers too."

    All of these trends, of course, have been visible for years. But
    sometimes it is the slow-moving problems --- like, say, rising subprime
    home lending --- that are the hardest for government to deal with before
    there is a crisis.

    What good will it do for the F.C.C. to come up with a spiffy new plan to
    get faster cheaper broadband to more people if the phone companies fail
    and millions of people won't be able to dial 911 in an emergency?


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