Telecommunications Industry News

Declining Market for Landline Telephone Services

As the popularity of mobile devices, digital phone services, and online VoIP applications skyrockets throughout North America, plain old landline telephone providers are beginning to feel the pinch.

Not only are incumbent local exchange carriers (ILECs) losing long distance minutes to cheaper, wholesale providers; but the overall landline subscriber base in most parts of the U.S. and Canada is declining at an alarming rate. Cell phones are largely responsible for this, as the cost of wireless voice minutes sinks to more reasonable levels and many customers “cut the cord” on landlines to go exclusively wireless.

Strong competition from the cable sector is another major factor, as incumbent cable giants equip their networks to handle IP-based digital telephone calls. These companies are having a much more profound effect on the telephone market than standalone VoIP providers like Vonage, since most cable providers have the built-in advantage of an existing subscriber base.

By adding cheap residential VoIP services to their existing broadband and pay-TV packages, cable incumbents like Rogers in Canada and Comcast in the United States have triggered a significant exodus of fixed-line telephone users.

Traditional telephone carriers are dealing with these challenges in a number of different ways.

Verizon Communications, for example, is divesting some of its fixed-line telephone holdings and refocusing marketing efforts on more profitable services like wireless voice and fiber optic television. The telecom giant’s quest to gain a foothold in the pay-TV market can be seen as a direct “payback” assault against the cable sector.

Regional U.S. carrier, Sprint Nextel, meanwhile, chose to spin off its entire local telephone division as a separate company, and become a pure-play wireless provider. The divested company, Embarq, faced the tough task of surviving as a standalone landline telephone carrier.

In many ways, Embarq has risen to this challenge much better than its competitors, by negotiating a wireless resale contract with its former parent, then launching a number of innovative new services aimed at fixed-mobile convergence. These offerings include an all-in-one voicemail system, as was as a service plan that bundles landline and cell phone services on a single monthly bill.