New Market Research Report

The Impacts of Competition and Technology on Local Exchange Switching Assets

AUSTIN, Texas, April 2000 --Technology Futures, Inc., an internationally-recognized leader in telecom forecasting, announces the publication of a new report entitled The Impacts of Competition and Technology on Local Exchange Switching Assets, authored by Lawrence K. Vanston, Ph.D. (President, TFI). This research was sponsored by the Telecommunications Technology Forecasting Group (TTFG), a consortium of telephone companies comprised of Bell Canada, BellSouth Telecommunications, Qwest, SBC Corporation, Sprint, and Verizon.

This study estimates the impact of competition on narrowband local exchange switches, especially as it relates to obsolescence and depreciation lives. According to Dr. Vanston, "Everyone knows wireless is impacting wireline voice. Everyone knows high-speed data reduces the need for analog lines. Everyone knows competitors will take some of the ILECs' existing market. What this report does is quantify these and other trends, looking at the total picture." He adds that "only with quantitative forecasts can you realistically estimate the impact of these changes on the value of ILEC investment."

The study addresses access line competition from wireless, resellers, cable companies, and other full-service providers. It also addresses the displacement of voice usage by wireless and e-communications. The impact of these forces on ILEC switches is forecast for both voice and data. Finally, the forecasts are combined with previous forecasts of switch technology, including the adoption of ATM/IP switching, to provide estimated depreciation lives.

• Competition from wireless and other sources may cut the number of existing ILEC narrowband access lines by 25% between now and 2005.
• Wireless and e-communications-e-mail, e-commerce, and IP-voice-could displace enough usage over time to have a major impact on usage-based ILEC voice revenues. Between now and 2005, 50% of existing ILEC revenue-generating voice usage may be lost.
• Subscribership to high-speed digital services is forecast to approach 25% of households by 2005.
• The economic value of existing ILEC assets will be very much affected by wireless voice and low-speed data, the adoption of high-speed data services, and the increase in data rates to above 10 Mb/s.
• When competitive and technology impacts are considered, existing narrowband switching equipment has an average remaining life of between four and five years.

This report would be of interest to the following groups: local exchange carriers, competitive LECs, cellular carriers, PCS carriers, wireless suppliers, interexchange carriers, cable MSOs, Internet service providers, telecom equipment manufacturers, regulators, depreciation experts, and property tax experts

We would be pleased to have this report reviewed by your publication and/or be quoted for articles examining the subject matter. Dr. Vanston would also be glad to be interviewed on the subject matter. An expanded table of contents and a list of exhibits follow this press release.

Lawrence K. Vanston, Ph.D., is a recognized authority in the use of technology forecasting in the telecom industry. He was interviewed on his views of telecom trends by the Wall Street Journal for a full-page article entitled "Consultant's Call: Lawrence Vanston Makes Some Pretty Bold Predictions for the Future of Telecommunications. He Has Been Right Before."

Technology Futures helps organizations plan for the future. Drawing on proven, quantifiable forecasting methods and strategic applications, we customize our approach to the technology, financial, and marketing issues facing our clients. Our services include consulting, research, and education.

PRESS CONTACT-Please contact Ms. Carrie Vanston by telephone at (323) 436-0314 or by e-mail at cvanston@tfi.com with questions and/or to arrange an interview with Dr. Vanston or other technology and telecom experts at TFI. If you need assistance immediately and Ms. Vanston is unavailable, please contact the corporate offices in Austin at (512) 258-8898 or (800) 835-3887.

PURCHASING CONTACT FOR YOUR READERS-Readers interested in purchasing the report should contact Debra Robison, Technology Futures, Inc. at (800) TEK-FUTR or (512) 258-8898, fax (512) 258-0087, or send e-mail to pubsales@tfi.com. The 74-page report is priced at $495 in North America and $510 elsewhere. Thank you for your attention.

Table of Contents

Chapter 1
Introduction
Purpose
Access Alternatives
Study Scope
ILEC Data Issues
ILEC Voice Issues
ILEC Switching Transition Issues
Outline of Forecasting Logic

Chapter 2
Forecasts for Voice Access
Logic for Voice Access Line Forecasts
Forecast of Wireless for Wireline Access
Market Penetration of New Telecom Competitors
Wireline Primary Voice Households by Provider
ILEC-Switched Voice Access Lines
Primary Voice Access Market Shares
ILEC Switched Voice Access Lines

Chapter 3
Forecasts for Data Access
Logic for Low-Speed Data Access Line Forecasts
Forecast of Online Households
Forecast of High-Speed Digital Access
Online Households by Primary Data Access Type
Market Shares for Low-Speed, Dedicated Data Lines
ILEC-Switched Narrowband Access Lines

Chapter 4
Forecasts of Usage Per Access Line
Logic for Voice Usage Per Access Line Forecasts
Wireless for Wireline Forecasts
Households by Wireline/Wireless Type
Impact of Wireless on Wireline Voice Usage
Voice Usage Displaced by E-Communications
Combined Impacts of Wireless and E-communications
Data Usage

Chapter 5
Combined Usage and Access Line Forecasts
Logic for Combining Access and Usage Forecasts
ILEC-Switched Narrowband Access Lines
Usage per Access Line
Usage Remaining on ILEC-Switched Narrowband Access Lines

Chapter 6
Impacts on ILEC Narrowband Switching Assets
Forecast of Utility per Access Line
Impact of Technological Change
Depreciation Analysis

Appendix

Tabular Data

Primary Voice Access Market Shares

Source: Technology Futures, Inc.

List of Exhibits

2.1   Logic for Voice Access Lines
2.2   Forecast of Wireless for Wireline Access
2.3   Market Penetration of New Telecom Competitors
2.4   Wireline Primary Voice Households by Provider
2.5   ILEC-Switched Voice Access Lines
2.6   Primary Voice Access Market Shares
2.7   ILEC Switched Voice Access Lines
3.1   Logic for Low-Speed Data Access Line Forecasts
3.2   U.S. Adoption of Home PCs and Online Services
3.3   Online Households and the Adoption of High-Speed Digital Access
3.4   Online Households by Primary Data Access Type
3.5   Market Shares for Low-Speed, Dedicated Data Lines
3.6   ILEC-Switched Narrowband Access Lines
4.1   Logic for Voice Usage Per Active Wireline Access Line
4.2   Wireless for Wireline Forecasts
4.3   Households by Wireline/Wireless Type
4.4   Base Wireline Voice Usage Left After Impact of Wireless
4.5   Voice Usage Displaced by E-Communications (among Online Users)
4.6   Base Wireline Voice Usage Umpacts of E-Communications
4.7   Base Wireline Voice Usage Left After Combined Impacts
5.1   Logic for Voice Access Lines
5.2   ILEC-Switched Narrowband Access Lines
5.3   Usage Remaining per ILEC-Switched Narrowband Access Line
5.4   Usage Remaining on ILEC-Switched Access Lines
6.1   Indexed Utility Remaining per Existing ILEC-Switched Narrowband Access Line
6.2   ATM Equivalent Access Lines by Implementation Alternative, Late Scenario
6.3   Survivor Curves for ILEC Narrowband Switching

Technology Futures, Inc.
13740 Research Boulevard, Building C
Austin, TX 78750
(800) TEK-FUTR (U.S. and Canada)
(512) 258-8898, Fax: (512) 258-0087
e-mail: cvanston@tfi.com