This article originally appeared in the October 2012 issue of INTERNET TELEPHONY.
Telcos were making billions every year on TDM services – POTS, T1, PRI and long distance. In 1986, Sprint’s (News - Alert) pin drop commercials were launched. This signaled the race to the bottom for LD for the big three IXCs – Ma Bell, Sprint and MCI – declining from over a dollar per minute to a nickel per minute in about six years.
Then 1996 hit, along with the Telecom Act of 1996. Now, the RBOCs had competition for their lucrative voice business. Due to the tremendous cost of voice switches and central office colocation, many competitors utilized UNE-P, a switchless platform to deliver voice. UNE-P allowed them to basically resell ILEC voice with their logo and bill.
Those with switches chased PRI business, since phone calls were the only way to contact businesses and customers at that time.
ISPs were one of the target customers for the CLECs with ISDN for dial-up access. ISPs were humming along with little ILEC competition. AOL (News - Alert) and EarthLink were the giants in the business. NetZero launched in 1998 to disrupt the dial-up business. There is always disruption – someone coming along to offer it cheaper. Technically, disruption like this is arbitrage.
In 1999, the new kids on the block were the DLECs – Northpoint, Covad and Rhythms – flush with millions in IPO cash. They were chomping away at the T1 market with DSL, a technology that Bell Labs (News - Alert) invented in the 1960s, but didn’t use because T1 and sub-rate frame relay were very lucrative.
All three DLECs filed for bankruptcy by the end of 2001, but DSL could not be stopped.
CLECs launched integrated T1 and in 2003 marketed it to the small business. This and DSL were cutting heavily into RBOC profits. The RBOCs (read: AT&T and Verizon (News - Alert)) bought the assets of the DLECs and the IXCs (AT&T and MCI), while betting heavy on cellular.
In 1996, the Motorola StarTAC launched. In 1999, Nokia (News - Alert) 7110 was released as the first mobile phone with a browser. Today, cellular is more than 60 percent of RBOC business.
DSL is an afterthought today. Cable modems are used for more than 60 percent of broadband deployments. DOCSIS 1.0, deployed in 2000, provided Internet access for MSOs. Today, RBOCs are talking about clipping the copper plant. They just want fiber and cell – and don’t want to maintain copper for CLECs.
Edited by Braden Becker