Technology Futures Inc.

PCS Poised to Capture Landline Revenues

Ray Hodges, Senior Consultant
Technology Futures, Inc.
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To date, wireless cellular service has complemented existing wireline service in the United States. This benign relationship, however, is likely to change as the new PCS providers begin to bring ample capacity on-line, which can compete directly with the LECs, first for usage and, ultimately, for access. Over the next decade, continued growth and improvements in wireless communications, coupled with lower prices, mean that wireless will be poised to capture an increasingly large share of wireline minutes of use, and ultimately wireline voice subscribers. Everything else being equal, this implies significant erosion of LEC landline revenues. Especially at risk is the 50% of LEC revenues arising from usage-sensitive charges, including long-distance access charges and short-haul long-distance.

The new PCS providers are building out their networks and improving the quality, capacity, and cost effectiveness of the wireless infrastructure. High-capacity technologies such as CDMA, GSM, and TDMA have been deployed, tested, and adopted by customers. As importantly, PCS providers are adopting very aggressive and innovative pricing plans, which brings them much closer to being price-competitive with wireline, especially for calls involving per-minute charges. All of this moves us closer to the realization of the scenario outlined above.

In a forthcoming report, Wireless vs. Wireline for Voice Services: Forecasts and Impacts, we analyze the competitive threat of emerging wireless services to the LECs' voice communications. To capture the incremental impact of wireless competition, the economic model we use considers a number of variables including access lines lost and message and non-message revenue lost. The significance of the developments and forecasts to various industry players is clear:

These changes will make life very interesting for people in the telecommunications industry for years to come. From the perspective of all of us as telecommunications customers, the benefits have just begun to be comprehended.

If you believe that TFI could be of assistance to your organization in identifying and evaluating new product opportunities and in developing strategies for bringing these products to the marketplace, please contact Ray Hodges at (813) 361-1990 or call John Vanston, Larry Vanston, David Smith, or any other member of the TFI consulting staff at (800) 835-3887.

Copyright © 1998, 2000, Technology Futures, Inc.
All rights reserved. Published January 1998. No part of this white paper may be reproduced in any form or by any means, other than short quotes to be used in reviews, without express permission from the publisher.