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November 11, 2003

Number portability and the telco death spiral

The
FCC's decision to require local number portability between wired and
wireless phones by November 24 could have a mjaor impact on the telecom
industry.  According to the New York Times:

"Industry analysts estimate that 3 percent to 7 percent of telephone users - or 4.5 million to 10.5 million people - no longer have traditional land-line phones and rely on cellphone services exclusively. As many as 15 percent of mobile phone users said they would consider abandoning their traditional phone service and moving to exclusively mobile service, according to a survey taken last spring by the Yankee Group, a market research firm."

If 15% of customers really do turn off their landline phone service in the next few years, the impact on the local exchange carriers would be dramatic.  Back of the envelope numbers:
$5.4 billion is a big number.  And it might be a serious understatement, because those most likely to switch are the most active customers, who buy the extremely high-margin value-added services like voicemail and caller ID.  When all's said and done, the local telcos could be looking at a $10 billion revenue hit, targeted at their most profitable offerings. 

And we're not even talking about VOIP yet.

I have to say, Verizon's decision to brand both its wireliness and
wireline businesses under the same name is looking very wise right
now. 

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Posted by Kevin Werbach at November 11, 2003 9:16 AM

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