Wireline's Accelerating Demise

Two companies that will soon be one company, AT&T and BellSouth, reported their earnings in the last two days, and both had good quarters. BellSouth, which is set to merge with AT&T pending approval from the FCC, reported a 30 percent rise in third-quarter earnings, while AT&T, which like a revenant monster from a bad horror movie is slowly reassembling itself into the quasi-monopoly Ma Bell, said its third-quarter earnings rose a whopping 74 percent, to $2.17 billion.

What's interesting about these performances is that both were driven essentially by the same engine: Cingular Wireless. The No. 1 mobile operator in the United States is jointly owned by BellSouth (40 percent) and AT&T (the remaining 60 percent), and consolidating ownership of it was a major driving factor in AT&T's bid to obtain BellSouth.

Cingular Wireless said last week its net income tripled to $847 million as it added 1.4 million new customers.

Plain old telephone service, meanwhile, continues to decline at both AT&T Inc. (NYSE: T) and BellSouth Corp. (NYSE: BLS). Revenues from conventional wireline services fell 4.9 percent at AT&T compared to the same period one year ago, while BellSouth said the number of its wireline customers fell 6.9 percent, to 19 million.

Most tellingly, even the high-speed Internet offerings from the two phone companies are lagging: BellSouth added only 176,000 new broadband customers in the quarter; AT&T said its DSL business is not growing as rapidly as expected.

The companies blamed several factors for these disappointments, including customer churn from temporary promotional offers and a concentration on higher revenue services. Isn't it likely that many customers are finding cheaper and more attractive high-speed wireless alternatives as well?

In fast-growing markets like China, of course, this transition is moving even faster, as customers who have no prospect of getting a conventional phone line go straight to cellular service and to various forms of wireless Internet access, including 3G. (See 3G Nears Reality in China .)

What will the world look like when there are no more phone lines? That's a question that many telecom strategists have been pondering for a while now. It appears they'd better speed up their prognostications.

— Richard Martin, Senior Editor, Unstrung

Cellular Gateway Guy 12/5/2012 | 3:36:57 AM
re: Wireline's Accelerating Demise By embracing cellular gateway manufacturers like ourselves with products such as our CGW-D, Bell South can grow their cellular business while extending the revenue generating life cycle of its wireline business. For an average monthly cost of $80 per month, end users can keep their landline, while subscribing to a basic cell plan with two phones sharing 1000 minutes. The landline is connected to our CGW-D, the SIM from one phone is inserted into the CGW-D which is programmed to divert any incoming landline call to the cell phone after a predetermined number of rings. All of these calls are viewed by the network as mobile to mobile activity. End user wins, Bell South wins, manufacturers like ourselves win.
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