The future of telecoms is murky at best  

Summary Box: CenturyTel to buy Qwest

MAKING A CONNECTION: CenturyTel Inc., the country's fifth-largest local-phone company, plans to buy No. 3, Qwest Communications International Inc. Qwest stockholders would get CenturyTel shares that were worth $10.6 billion when the deal was announced Thursday.

WHY NOW: The companies hope that combining their businesses lets them reduce overhead and improve the profit margins in a shrinking industry.

THE CHALLENGE: Neither company has a wireless phone business to balance landline losses.

BILL VIRGIN; contributing writer

The News Tribune

May 2, 2010

Welcome, readers, to another edition of “Spot the generational differences.”

This week, we’re gauging your reaction to the news that CenturyTel Inc. is buying western U.S. telephone company Qwest Communications International Inc.

Which response most closely matches your reaction?

A) Geez Louise, could they just stop messing with phone company names and owners already? Pacific Northwest Bell, U S West, Qwest, whatever the new name will be – I can’t keep straight who I’m supposed to make my monthly check out to.

B) This is hardly surprising. With people abandoning their traditional land lines, telephone companies have to adapt to the new reality.

C) What’s this mean for the name on that stadium in Seattle where the Seahawks play? And what’s a Qwest?

D) What’s a phone company?

We in the daily fish-wrap business are given to endless griping and kvetching about what terrible things the Internet and technology have done to our industry. But newspapering has been a model of stability compared with how the telecommunications industry has been turned upside down, shaken up and rearranged.

It’s gone from the days of MCI proving it was possible to have more than one long-distance network, and then fighting for the right to sell that service to consumers, to the breakup of the Bell system. It was the widespread adaptation of mobile, wireless devices (when did the term “car phone” finally disappear from common usage?). With the most recent communications via the Internet, it should be apparent that not only is this not your father’s telephone industry, it’s hardly yours.

And that’s if you can remember far enough back to the introduction of that revolutionary idea of owning your own home phone, with a choice of colors and styles yet, instead of leasing the same phone everyone else had from Ma Bell.

For younger generations, however, even the term “Ma Bell” holds no meaning; the current reality is what they’ve grown up with. Their connection to the worldwide communications grid can be slipped into a pocket or purse and used virtually anywhere.

That poses a big problem for telecom companies structured to survive in the old world. Their customers have migrated to the new – companies such as Qwest, the largest in the state, serves cities such as Tacoma, Olympia, Seattle and Bremerton, and CenturyTel, the third largest, has a Washington service territory including Gig Harbor, Fox Island, Montesano and Packwood.

Here’s a factoid to chew on to understand the motivation behind the combination: When Qwest merged with U S West in 2000, the new phone company had 3 million residential and business lines in Washington. At the end of 2009, the Utilities and Transportation Commission reports, Qwest had 1.3 million lines.

Could your business take that kind of haircut in customer counts and still be a going concern?

The UTC’s Marilyn Meehan notes that there are multiple reasons for that precipitous decline. Beyond the obvious influence of cell phones and wireless devices, there’s also the competitive challenge of cable and Internet companies.

“Many people have eliminated second phone lines used for dial-up purposes and fax machines in favor of high-speed Internet service and e-mail,” Meehan says.

Here’s one more guess about the decline of land-line phones: Indulgent parents who once opted for a second line for their kids to keep the “main” number open, can now solve the problem by tossing their offspring a cell phone.

No wonder, then, that companies such as Verizon Communications are getting out of the land-line business. Verizon, which had been the second-largest traditional telephone company in the state, won approval in April from the UTC to sell its land-line residential and commercial business to Frontier Communications.

Telecom companies aren’t the only ones trying to figure out if, or how, they fit into the industry’s new structure. Regulators who administered a monopoly industry with a carefully arranged system of cross-subsidies – business for residential, long-distance for local, urban for residential – find themselves overseeing a smaller, increasingly irrelevant portion of the industry.

Cell phone equipment and service prices aren’t regulated by state utility commissions, and there’s been little cry from consumers to extend regulation to what is becoming a commodity purchase.

Combining two companies that are losing thousands of customers a year will save on some overhead and administrative costs, but that doesn’t look like a long-term answer to the problem of how to make a living based on a product that fewer people want.

By the way, the answer to that question about what happens to the name on the football stadium post-acquisition, as provided by a Qwest spokesman, is one that seems appropriate to questions about what’s to come for the traditional telecommunications industry: Don’t know yet.

Bill Virgin’s column on business and economics appears Sunday in The News Tribune. He is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

Read more: http://www.thenewstribune.com/2010/05/02/1171108/the-future-of-telecoms-is-murky.html#ixzz0msNw5KHg