Study examines access-line competition in local exchange

Dec. 23, 2003
Dec. 23, 2003-It concludes that ILECs will have to come up with 'significant investment' to retain reasonable market share.

A new report by Technology Futures Inc. (www.tfi.com) entitled "Forecasts of Access Line Competition in the Local Exchange" documents the company's latest forecasts of the future of competition in the local exchange, and its impact on incumbent local exchange carriers (ILECs).

Competition is having a major impact on ILECs. For example, after years of high growth, the number of ILEC retail narrowband switched access lines peaked at 181.3 million in 1999, and has continuously declined since then, falling to 162.7 million lines by December 2002. What does this mean to the telephone industry?

According to study author Lawrence K. Vanston, PhD, "Competition from wireless, cable telephony, and broadband makes continued erosion of ILEC voice access lines inevitable. If ILECs want to be more than custodians for a dying network, they must seize the initiative for the next generation of broadband and video services.

"This will require massive, staged investments in network upgrades, as well as recovery of the investment in the existing network," he continues. "The forecasts are intended to assist with both missions."

Key findings from the report include:
Wireless, cable telephony, and broadband substitution is forecast to cause total ILEC narrowband switched access lines (including UNE and resale) to fall from a height of 181 million to 100 million by year-end 2008 and to 50 million by 2013.

Broadband will make up for some, but not all, of this shortfall. Assuming the ILECs retain reasonable broadband market share, total ILEC lines (including broadband) are forecast to fall from 189 million at year-end 2002 to 135 million by year-end 2008, stabilizing at about 100 million by 2013.

In the long run, maintaining a reasonable share of the broadband market will require ILECs to offer very-high-speed broadband services (nominally, 24 Mbits/sec and above) in the 2006 timeframe.

The transition to very-high-speed broadband will require very significant investment in loop fiber, packet switches, and advanced circuit equipment between now and 2015.

The combined impact of technology substitution and competition on the depreciation lives (and value) of existing ILEC narrowband switching, copper cable, and conventional circuit equipment assets will be substantial.

The 180-page report costs $495 in North America and $510 elsewhere. Orders can be placed through the Technology Futures Website or by calling 800-TEK-FUTR.

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