© 2007 cronin communications the chaos of telecom tim owens cronin communications...

© 2007 Cronin Communications

The The Chaos Chaos ofof

TelecomTelecomTim Owens

Cronin [email protected]

202-232-1107


The Deals and Developments The Deals and Developments That Defined the Last YearThat Defined the Last Year

• Midwest Wireless sold to AllTel for $1.1 billion.• Rural Cellular Corporation sold to Verizon for $2.7

billion, or $3,700 per subscriber.• Sprint spun off its wireless service and redubbed its

local exchange service “Embarq.”• Verizon failed to find a buyer for its rural New York

exchanges.• BUT, FairPoint is buying all Verizon lines in Maine, New

Hampshire and Vermont.• The Rural Utility Service has awarded 70 loans in 40

states for $1.2 billion to serve 582,000 customers. Cost = $2,100 per home.


The Deals and Developments The Deals and Developments That Defined the Last YearThat Defined the Last Year

• The FCC passed new CPNI rules to protect customer privacy, creating huge headaches for carriers.

• More than a dozen rural ILECs announced their sale in 2007.

• Adelphia sold to Comcast and Time Warner – both are now offering VoIP service to compete with telcos.

• The FCC is auctioning more spectrum, but ignoring the needs of rural telcos.

Consultants are very busy!


Telcos have lost approximately 20% of their access lines in just 5 years.


In areas where voice service has been rolled out, Time

Warner already claims 11% of the market share.

Midco claims 40% in some areas it serves.


Digital Phone from Time Warner Cable

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Vonage offers

unlimited long

distance plans

starting at $24.95 per

month.


An estimated 12% of homes have eliminated landline

service and are Wireless Only!

80% of the population has a wireless phone.


There are now about 200,000 cell towers across the United

States.


Why Telcos Hate Why Telcos Hate Selling CellularSelling Cellular

• Retail intensive.• Inventory management.• High churn rates.• High non-pay rates.• Programming phones.• Little or no profit.• CSRs are not sales driven.• Inferior product.• Damages the telco’s reputation.• No billing integration.


High-definition televisions are already in 18% of homes,

many of which do not subscribe to high-def.


Triple Play Rate $ 99.95

Set Top Box #1 7.95

Set Top Box #2 5.95

Set Top Box #3 5.95

One Premium Channel 11.95High Definition

7.95Digital Video Recording

7.95Video on Demand (2x per month)

10.00$157.65 *

Plus Up-front Costs!Plus Up-front Costs!Cable Modem $

39.00Wireless Router (estimate)

50.00Inside Wiring (estimate)

50.00Installation 4.95

$143.95 * Plus taxes and surcharges.

Digital services

really add up!


How’s Your Telco Doing?How’s Your Telco Doing?

Voice

Video Wireless

Data

Networks

CLEC


Life of the Account

ServiceMonthly

RateMonths

of Service

Years of Service

Local Voice 1% 100 8.3 years

Long Distance 1% 100 8.3 years

Cellular 2% 50 4.2 years

Broadband 1.5% 66 5.5 years

Video 2% 50 4.2 years

Triple Play .5% 200 16.6 years


How’s Your Telco Doing?How’s Your Telco Doing?• Voice.

– Decline of 3% of access lines per year, due to DSL, wireless and competition. Compounds very quickly.

• Data. – A profitable line-of-business. Telcos usually have about 50% of

the market share.

• Video. – You break even in Year 18.

• Wireless. – Lots of equity. No annual profits.

• Networks.– Can be very profitable, depending on customer base.

• CLECs.– All over the map.


FlavorsFlavors

• Voice– Local– Long distance– VoIP

• Managed• Unmanaged


FlavorsFlavors

• Video– Cable– IP Video– MPEG-2– MPEG-4– Satellite– Fixed wireless– Wi-fi


FlavorsFlavors• Wireless

– Cellular– PCS– Satellite– Wireless VoIP– Wi-fi– Fixed wireless

• MMDS• LMDS• 700 MHz• 900 MHz• 2.6 GHz


FlavorsFlavors

• Data– DSL– Cable– Fiber– Fixed Wireless– Satellite


FlavorsFlavors

• CLEC– Resale– Overbuild

• Fiber• Cooper (DSL)• Fixed wireless


What About FiberWhat About Fiber

• National obsession.– Verizon FiOS– SBC Build-out

• Superior technology.– Unlimited bandwidth– Redundant plat– Fewer outages– IP platform


What About Fiber?What About Fiber?

• Getting cheaper, but:– Trenching from the pedestal– Boring under sidewalks and driveways– Splicing to the network– Internal wiring of the home– Optical Network Terminal (ONT)

=$600 Per Premise


RevenueRevenue

50%

15%

35%

AccessUSFOther Income


Consolidated Revenue Over the Consolidated Revenue Over the Past 10 YearsPast 10 Years

• Increased by 10% or more.– ARPU goes from $30 for telco revenue to

$90 for the triple play.

• Profitability decreased by 10% or more.• Access and USF decreased by 10% or

more.


Which Telcos Are Doing Well?Which Telcos Are Doing Well?

• Own a cable network.• Delayed fiber to the home.• Cashed out on wireless.• Member of a state or regional network.• Poor wireless coverage in the area.• High cost.• Maximizing settlements,

interconnection and other revenues.


Which Telcos Might Which Telcos Might NotNot Be Be Doing Well?Doing Well?

• Not collecting full revenues from interconnection, settlements, USF, access etc.

• Fiber to the home.• IP video deployments.• Wireless agents.• Overextending on new initiatives, such

as CLECs, wireless and acquisitions.


What’s New in Customer Service?What’s New in Customer Service?

• No more DSL tiers.• Bailing on wireless.• Heavy on video.• 30 minute provisioning interval.• Technical CSRs• Integrated billing systems.• On-line everything.


Your Job As a Manager – Your Job As a Manager – “Take Nine”“Take Nine”

• Manage by the numbers.• Establish protocols.• Contain losses.• Grow subscribers and revenues.• Cross train.• Hire and recruit strategically.• Allocate resources effectively.• Operate efficiently.• Automate.• Obtain management support.


DiscussionDiscussion

QQ & & AA

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