Big trouble ahead for the telcos

The telcos have been very slow to upgrade broadband networks. The few enhanced speed offerings have been in very limited areas or as an adjunct to a pay TV system. Consumers are now leaving for higher speeds where they have a choice. Verizon and Qwest are facing potentiual strikes, and AT&T’s pay TV take rates has been abyssmal. Does this sound bad? There’s more:

The second-quarter 2008 financial reports are in –- and the tea leaves aren’t showing a sunny future for phone companies. While their financials today look bearable, economic and demographic trends are acting as gale-force headwinds for the future. Here are some of the major issues they’re facing:

• A slowing economy means people are choosing wireless phones over landlines, resulting in increased access line losses. That, in turn, is reducing the number of people the phone companies can convince to switch to their higher-speed networks and video services.
• Cable’s triple-play bundles, which include higher speeds and voice, are starting to resonate with the residential customers, leading to further landline losses.
• Phone companies’ own higher-speed services are starting to cannibalize their installed base instead of luring customers away from cable companies. (GigaOM)

To the Telco suits: we told you this was coming, time and time again. The world wants a big dumb pipe. Time to invest in that. It will require fewer resources and fewer people to operate. Flat rate billing will provide dramatic decreases in both cost of billing and customer service. Your high gross margin with lower operating costs, and growth of market share will reverse the negatives. If you get a clue and get with the program, and your companies still have a chance to survive.