Providing plain old voice telephone service was a profitable and growing business for more than 100 years, but that run could be coming to an end.
The decline of the traditional phone line is now regularly pinching the financial performance of telecommunications companies such as AT&T Inc. and Verizon Communications Inc.
While the companies are trying different strategies to mitigate and slow the declines — or even turn them around — another option could be to dump those shrinking services.
It would not be unprecedented.
Verizon, for example, sold some of its regular phone lines to another firm last year.
Another option would be to spin off land-line divisions into stand-alone companies to sink or swim, as Verizon did in 2006 when it transformed its Yellow Pages publishing division into Idearc Inc.
So far, neither AT&T nor Verizon is willing publicly to throw in the towel on land lines, and analysts say it’s probably too soon for them to do so.
But it’s clear that the venerable technology is more of a hindrance than a help.
For example, when AT&T reported first-quarter financial results April 22, the company highlighted its stellar results on the wireless side and the growth in subscribers to its high-speed broadband service, U-verse.
But the company also said that its revenue from traditional land-line voice accounts declined by more than $1 billion — from $9.9 billion to $8.7 billion — from the same time a year ago.
A few days later, in its first-quarter financial report, Verizon said that the number of Verizon residential phone lines had shrunk to 17.6 million from 19.7 million in the first quarter of 2008.
Verizon spokesman Bill Kula noted that the company sold hundreds of thousands of phone lines to other companies in the 1990s and early 2000s.
The last deal was the sale of 1.6 million lines in Maine, New Hampshire and Vermont to FairPoint Communications Inc. The deal closed last year.
But Kula said that doesn’t mean Verizon is abandoning the traditional land-line phone market.
“It’s extremely premature for us to talk about whether or not any additional land-line properties would be sold,” he said. “In terms of would we take a chunk of the land-line phone segment, carve it out into a separate company, it’s still speculative.”
Kula said Verizon is using several strategies to bolster the ailing land-line segment, including offering inexpensive land lines in bundles with Internet and TV service and touting the reliability of copper wire over cellphones and Internet phones.
He said Verizon also is considering offering extremely low-cost land-line phone service — perhaps for $10 a month or less — just for emergencies or incoming calls.
“We’re looking at several possible voice services that would provide basic communications to customers to preserve their ability to call 911 and stay in touch with people they most need to,” he said, noting that those new services might be available as soon as this summer.
Kula also said that while many young people are opting to go wireless-only, many of those customers get land-line phones when they get married and have kids.
“At the same time, we are not blind to trends,” he said. “We fully recognize that a growing base of consumers are opting to use wireless phone as their principal means of voice services.”
Officials at AT&T declined to be interviewed but said in a prepared statement that wired service is no longer limited to voice but includes a growing array of data and video products.
“We are transforming our consumer business from switched voice to customer relationships built on broadband and IP-based services like video, and we’re making good progress — scaling our AT&T U-verse video service and continuing to grow our broadband subscriber base,” the company said.
“Our traditional access lines, while declining, are still a valuable part of our business.”
Kurt Scherf, vice president and principal analyst in Dallas with tech market research firm Parks Associates, said there’s no question that land-line voice is a shrinking business.
But it still has value, he said.
Scherf noted that, for all his tech savvy, he still hasn’t dumped his land-line phone, as making long-distance cellphone-to-cellphone calls is still an exercise in dropped calls and crummy quality.
“I think it would be really tough for them to completely walk away from that business,” he said. “If it’s just not bleeding them dry to continue to provide that service, then I could see them holding on to it.”
Telecom industry analyst Jeff Kagan said wired technologies such as U-verse and Verizon’s fiber-optic Fios service are offsetting most of the decline in old-school copper voice lines.
“It will take years for average customers to move to other services, and that is in the places where they can,” he said via e-mail. “In many other places, customers cannot order these new services and can only still buy traditional phone service. They will be that way for years to come.”
Still, Scherf noted that Verizon’s decision to unload some of its phone lines to FairPoint may have been a smart move.
“FairPoint seems to be really struggling with that as well,” he said.
“Maybe that’s a clue that was a good idea for Verizon, that that was a dog that just wouldn’t hunt.”
(c) 2009, The Dallas Morning News. Source: McClatchy-Tribune Information Services.