The Bells have continually complained -- "Woe is us.
We're losing phone lines and we are losing business, right and left, and
we need to get rid of any regulations that allow competition." It's
another smoke and mirrors campaign by the Bells. It's all about "Dirty
Math," the ability to play with numbers by leaving out significant other
Our last report refuted the Bells claims that the number of lines are
dropping at the rate the Bells are telling the world. (It features Bell
data, including overseas losses and executive compensation, through second
Next month, New Networks and Teletruth will be releasing a report on the
20th anniversary of the Bells' stats -- lines, employees, revenues, (lack
of) broadband deployment, etc. We�ve been actively tracking this stuff
Let me give you the crux of the issues as we see it.
a) Yeah, the number of copper wiring lines into customers' homes and
offices has been dropping. One of the largest drops is from people
dropping second lines. This is being caused by what we now believe was
hyper-growth during the Internet boom because when you track the census
data from 1995-2002, the number of lines increaseS way more than the
population and then starts to decline in 2001. I'll be supplying this in
data form for our upcoming report.
An example: BellSouth, 1998. "The increase was
primarily attributable to continued economic growth in BellSouth
Telecommunications' nine-state service region. Growth in additional
residential lines ordered by existing customers accounted for
approximately 30.8 percent of the overall increase in total access lines
since December 31, 1996."
What utility and monopoly has growth of 31 percent in
three years without major increases in the overall population and
households? In short, there is simply a "rebalancing" of customer demand
a1) This rebalancing is also reflecting the overall economic downturn
which everyone went through. The losses of the CLECs and Internet
businesses and other companies who have either gone bankrupt or cut back,
not to mention every other business that was a supplier in this
food-chain, also had an impact as they cut back on the lines they ordered
a2) It is ironic that the hyper-growth was created, NOT by the Bells who
just sat there and took orders, but by the small independent ISPs -- the
Innovation Engine, who brought America to the Internet. Ironically, the
Bells have done everything in their power to put them out of business.
We've argued that had the Bells a) actually fulfilled the promised
fiber-optic deployments; b) used the ISPs as another sales channel; and c)
the FCC and states got off their butts and enforced the laws on the books,
a large part of the telecom crash could have been avoided. (We've written
separately about this.)
DIRTY MATH ACCOUNTING
b)Voice Line Equivalents, the data that redefines the various products
the Bells sell as voice circuits and which Verizon uses when it tells
investors how well they are doing, have continually increased over the
last four years. (Voice Line Equivalents were not published in the 1990s
in the annual reports.)
Here's Bell South's last three years. Oops.. a 32 percent increase in
BellSouth�s Voice Line Equivalents,
c) Next, some of the Bells are NOT counting the addition of DSL and other
various circuits as a second line when it is line-shared -- so all of the
DSL is simply not being added into the equation. Also, this is a reason
people drop second lines -- who needs a second line when one will do? But
it is a second circuit of service.
d) Some of the Bells, Verizon, for example, DO NOT COUNT COMPETITIVE
RESOLD OR UNE-P LINES as part of their number of lines... Oops. So, when
the company loses a line, no, it's really reselling the line and simply
doesn't account for it in the number of lines.
e) We don't argue that some excess growth is being taken up from the cable
modem side. But remember, DSL is an additional service that the Bells are
making more revenue from, it is not part of "local service."
f) The wireless impact? Well, in a survey by PEW, only four percent left
their current land line for a total wireless experience and based on our
informal focus groups in the last two weeks, the "college student factor,"
where everyone leaving college gets rid of their land line, is so far
fantasy. One factor: Many college students live at home or with
roommates and those households aren't really changing too fast. People
don't like not being able to get a signal in their bedrooms and feel wire
lines are more stable.
Of the people interviewed, (Bay Ridge Brooklyn, Hollywood Video store,
clip board in hand) about half in college or recently out, NO ONE had
simply gotten rid of the wireline service.
And guess what -- because of the mergers, Verizon and SBC have
become numbers one and two in wireless, and no one has counted those lines
as additional businesses to these companies, even when they are from the
same customer who buys local phone service from them.
g) NO one is counting the
increase in long-distance as "another line." Though in common thought this
isn't being done, when you realize that the Bells have gamed the system to
enter LD prematurely, what you find is that the Bells now have 30 percent
of the LD mostly residential marketplace -- meaning over the same
household wire -- and while there's some local competition, only 10+
percent are using competitive lines, and that includes both business and
residential. If residential is one-third of that --- Who got the deal?
h) Selling off lines: Verizon annual report 2002, "The special and
non-recurring items include operating results through the sale date of
1.27 million non-strategic access lines sold in 2002, 1.6 million
non-strategic access lines sold during 2000."
Oops. Verizon cut 2.9 million lines... could that be one of the reasons
the number of lines is going down?
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