Wireline Carriers Must Look Outside Traditional Markets For Growth: S&P Study

Telecommunications wireline carriers looking for growth will be forced to expand outside of their traditional markets as demand declines for public switched telephone network-based voice services, according to a new study by Standard & Poor's Equity Research.

The semi-annual "Industry Survey on Telecommunication: Wireline" found that Regional Bell operating companies (RBOCs) experienced a decline of four percent in access lines in the face of stiff competition from Internet-based services. The penetration rate of cable, Internet telephony and particularly wireless continues to rise. Consequently, says Standard & Poor integrated telecommunications services equity analyst Todd Rosenbluth, RBOCs are particularly motivated to enter non-traditional markets.

"Due to improvements in the quality, affordability, and availability of wireless services, the technology has overtaken traditional wireline voice services as the preferred means of communication," Rosenbluth said in a statement. "With the RBOCs having successfully entered the long-distance markets, pricing pressures likely will continue. Traditional voice revenues for the telecom wireline carriers may be sluggish, however, we see continued customer growth in their wireless, DSL, and long-distance customer bases due to bundling efforts."

Rosenbluth notes that the pending $16 billion merger between SBC and AT&T is another manifestation of this market dynamic. Expected to close by the middle of next year, the deal will give consumer-oriented SBC access to AT&T's nationwide network and enterprise customer base.