The End of the (Land) Line?

Here in the UK, each telecommunications provider has just upped the cost of renting a land line… by around three times the rate of inflation. Is this to raise money for investment in new networks or new functionality? Hardly. It is more likely to be the continuance of the end for land lines being used for voice calls – and possibly the beginning of the end of them being used for broadband connectivity as well.

end of the lineThe number of voice minutes being used over land lines has dropped by 3 billion minutes year-on-year, or about 12.7%. This equates to around £85m ($135m) in revenues based on average call rates.

It’s not that customers are becoming less talkative, it is just that all inclusive mobile packages mean that they see using just the one contract and handset as making more sense than having a land line and tethered handsets along with a mobile under a different contract. Even more so, with Skype and Facebook offering real time messaging for free between computers, why bother with a call package at all? Even for those who do want to use a fair amount of voice minutes, a voice over IP (VoIP) package from the likes of Voipfone or SIPgate is cheaper and gives global calling costs that are way below the prices charged by the land line telco operators.

The telcos are then caught between the proverbial rock and a hard place – they have tried raising call prices, finding that this drove people away to using inclusive minutes on their mobile phones. They tried inclusive bundles – but as people weren’t using that many minutes anyway, so they couldn’t make it pay for them. This has left them with the only way of trying to increase revenues – put up the charge for the copper line that comes to the house. This is a necessity for anyone with a land line phone, and is the same price irrespective of how many (or few) calls the customer makes. A fool proof way of raising much needed revenues to keep the shareholders and investors happy, you would think.

Many will stick with their status quo because it is difficult for them to do anything else. The less technically savvy won’t understand VoIP or how to set it up. Skype is often less than ideal for things like business calls. And then, there are those who have to have a land line for their internet access.

In the UK, BT still has the lion’s share of last mile connectivity. Many companies that operate as broadband service providers are still dependent on BT, passing on BT’s land line costs to the customer directly as a separate line item. Even those who roll the cost up into their bill are still paying BT – and when anything goes wrong, it is a BT engineer/subcontractor (or several) who then take weeks over “fixing” the issue.

Even local loop unbundling (LLU) has had little impact. Few can afford the costs of setting up their own equipment and find that wading through the treacle of dealing with BT over use of its exchanges is not the best way to spend time. Since much of the infrastructure being used still belongs to BT, many of the original problems remain. Therefore, many just buy wholesale services from BT and just manage the contractual details for the customer.

And this is where it can all go further wrong for the land line providers. Sure, you can get a decent internet broadband service for a few pounds a month – but the land line subscription can be many times this. The fiber providers don’t have to charge you a subscription (some do, but the majority will just roll it in to the overall price for the broadband). Once the customer realizes that their £15 per month broadband is actually the best part of £35 per month, they will start to look elsewhere. With BT and the other incumbent land line providers being relatively slow in rolling out superfast broadband, and even where this is available it being fiber to the cabinet (FTTC) rather than fiber to the home (FTTH), it leaves the doors open for the likes of Virgin Media to come to the fore with its FTTH offer.

For the consumer, comparing highly contended FTTC speeds of “up to” 76Mb/s to less contended fiber speeds of “up to” 152Mb/s starts to make it apparent that the fiber option is more future proof. When looking at then bundling in voice calls, TV, mobile and other additional options, BT looks a little less attractive – as do the rest of the copper crowd.

However, BT is looking at its war chest to see if it can afford to buy either EE or O2 (which many years ago used to be BT’s mobile arm, CellNET) in order to pick up more to offer as bundles to its customers.

Will this type of bundling save the land line providers? Based on previous acquisitions and changes, it is likely to be bungling rather than bundling, and as customer requirements for bandwidth grow with, for example, 4k TV feeds, the race will be on for Gb/s speeds, rather than Mb/s.

Time to start planning the requiem for the land line – time to start the coronation of the Gb/s fiber king.