Stranded Telco Assets are Becoming Untenable

By Gary Kim October 09, 2013

About 95 percent of U.S. households no longer rely solely on the traditional home telephone to stay connected, according to Dr. Anna-Maria Kovacs, visiting senior policy scholar at Georgetown University’s Center for Business and Public Policy.

The changes sometimes escape notice: telco fixed line voice accounts have decreased by 66 percent since 1999. That bears repeating: in a bit more than a decade, fixed network telcos have lost most of the consumer voice business to other alternatives.

That makes the fixed network voice business increasingly untenable. That also bears repeating. As the number of customers served declines, cost per customer climbs.

If network operators are efficient, and 50 percent of costs are variable, cost per subscriber at 30 percent penetration is more than twice what it was at close to ubiquitous penetration.

If only 20 percent of the cost is variable, then cost per subscriber is nearly 300 percent higher at 30 percent penetration.

At 15 percent voice penetration, the level AT&T is approaching in some of its areas, cost per subscriber grows 500 percent for a network that has 20 percent variable cost and grows by 400 percent even for a network that has 50 percent variable cost.

We sometimes get used to comparing telco statistics “fixed network to fixed network,” which is reasonable as far as it goes, but misses the impact of consumer behavior across all networks, fixed and mobile.

In fact, at the end of 2012, telcos served just 34 percent of consumer voice accounts, 14 percent of broadband access and 10 percent of video customers (when evaluating and including all mobile and fixed network accounts).

A study conducted by Kovacs finds that at year-end 2012, 38 percent of U.S. residents relied on wireless exclusively, 4 percent used VoIP exclusively and only 5 percent relied on traditional plain-old-telephony (POTS) exclusively, for their voice services.

Fully 53 percent relied on wireless in combination with either POTS (29 percent) or VoIP (24 percent).

The study was produced as part of an effort to promote a change of regulatory emphasis, of course. But “stranded assets” have been a key danger for fixed network providers under highly-competitive conditions, and the study points out just how challenging stranded assets now are becoming.

Edited by Alisen Downey

Contributing Editor

Related Articles

Why Blockchain Could Be a Gamechanger

By: Paula Bernier    1/22/2018

Blockchain has become closely associated with the controversial topic of cryptocurrency. And that's fine because blockchain is an enabling technology …

Read More

Consumer Privacy in the Digital Era: Three Trends to Watch

By: Special Guest    1/18/2018

Digital advertising has exploded in recent years, with the latest eMarketer data forecasting $83 billion in revenue this year and continued growth on …

Read More

CES 2018: Terabit Fiber - Closer Than We Think

By: Doug Mohney    1/17/2018

One of the biggest challenges for 5G and last mile 10 Gig deployments is not raw data speeds, but middle mile and core networks. The wireless industry…

Read More

10 Benefits of Drone-Based Asset Inspections

By: Frank Segarra    1/15/2018

Although a new and emerging technology, (which is still evolving), in early 2018, most companies are not aware of the possible benefits they can achie…

Read More

VR Could Change Entertainment Forever

By: Special Guest    1/11/2018

VR could change everything from how we play video games to how we interact with our friends and family. VR has the power to change how we consume all …

Read More