Wireline’s decline in North America is proceeding apace, a new study has discovered. While that has obvious ramifications for traditional telcos, new players face challenges, even as they are seeking to enter the market. Technology Futures Inc. (TFI) has released Forecasts of Access Line Competition in the Local Exchange, its most recent look at the state of the telecom sector. The report was produced on behalf of the Tele-communications Technology Forecasting Group (TTFG), an industry body whose members include Bell Canada. Although most of the statistics used reflect the American marketplace, Bell does provide figures for Manitoba and points east. The study shows that throughout North America, wireline connectivity is in decline. "Until 2000, the number of wireline residential access line (ILEC and CLEC) per telephone household increased, driven by the desire for additional lines for voice or dialup Internet access," report authors Ray Hodges and Lawrence Vanston write. "Since then, additional lines have decreased from 27.5% of wireline households in December 2000 to 20.4% in December 2002. Internet users with an additional line for data usually drop it when they add a cable modem or DSL, and having one or more cellular phones in a household reduces the attractiveness of additional lines." This echoes findings of a survey done by Decima Research Inc. (an affiliated company of Network Letter publisher Decima Publishing Inc.) for Bell Canada (NL, Oct. 15/03). The Decima study found that consumers are migrating to other devices at the expense of wireline. The TFI report puts hard numbers on those projections. "We forecast that, in 2006, 20% of households will rely on wireless and/or broadband alone for voice service, and the figure could approach 50% by 2010," the study says. "We assume that 20% of households will retain narrowband wireline service indefinitely, due to technological resistance, cellular coverage limits, broadband availability/adoption limit, i.e. pricing or number issues, desire for network powering, desire for wireline backups, etc." The enormity of the decline came as a revelation to Bell’s representative on the TTFG. "The surprising part of it is the people are going wireless completely. Even though the percentage right now is very low, it still represents a good part of the people," Hosein Moavenian tells NL. "The way it is going probably, maybe not the next five years but in 10 to 15 years, you and I, we won’t even have a wireline at home." For years now, traditional telcos have felt competition from other wireline entrants. But the emergence of new technologies has meant new competition. Cablecos have been active in telephony in the United States and are starting to explore the Canadian market (NL, Feb. 17/04). Cable on increase At a national level, American cablecos are providing telephone service to 3 million subscribers as of December 2002, TFI reports. But in particular markets, the penetration of cable telephony is much higher. In Orange County CA, Cox Digital Tele-phone has reached 24% penetration; Comcast’s AT&T Broadband division holds 18% of the Chicago market. TFI predicts that by rolling out into new markets, and by expanding in current serving areas, cable could take a larger slice of the telephony pie. But the firms could find themselves on a diet within a few years. "As a wireline narrowband service, cable telephony will face the same substitution by wireless and broadband as the ILEC service," Hodges and Vanston write. "Cable telephony access lines are forecast to increase to 13 million by 2006 and almost 23 million lines by 2010. Thereafter, they are forecast to decline as wireless and broadband savage the wireline narrowband access market." Bell’s Moavenian agrees that cable will be a challenger. But that’s old news as far as he’s concerned. "As far as the old traditional phone companies are concerned, local competition has been on for awhile except there’s basically not that much money in it," he notes. He sees another contender on the horizon. "The biggest thing is resells. These guys, I believe, are the number one competition to us." Resellers rely on calling cards (NL, Aug. 13/02) or dial-around service (NL, Apr. 22/03) to offer discounted rates for customers. Their effect on LD traffic for traditional telcos has been enormous."These are Internet lines so they can afford to pay five cents a minute and these sorts of things," Moavenian states. "So we’re losing a lot of market on that." Hodges and Vanston see a slight improvement in DSL’s stake in the high-speed Internet market. But it will continue to lag cable service, they predict. In the United States, cable holds about two-thirds of the market to DSL’s one-third. A survey by Britain’s Point Topic Ltd. found that Canada had 2.3 million cable modems and 2 million DSL lines as of last September. "In the current forecast, we assume that DSL ultimately captures 40% of the residential wireline broadband market, but does not reach parity with cable modems, at least for the current generation of broadband," the TFI report says. "This assumption reflects the current advantage cable has regarding the bundling of cable TV with Internet access and voice, remaining difficulties in extending DSL service, and continuing regulatory uncertainty imposed on the U.S. telephone industry." Even though TFI focuses heavily on the American market, Moavenian finds the research valuable. The two markets are very similar, he reports. Canada has always been a telecommunications pioneer, he says, either leading or trailing American developments by a few months. That is why Bell is an enthusiastic supporter of TTFG.