Further Discussion on 'No More Landlines' Assertion

"Don't hold your breath," says Ted Wallingford in his post replying to my assertion that there won't be any more copper landlines by the end of Obama's first term as President. Ted continues:

I can easily counterpredict that there will be plenty of landlines left in the country by the end of Obama's term, and if he goes eight years, there will still be plenty of good old copper dial tone…

There are several more reasons why.  First, reliable and abundant FAX-over-IP is still a dream that hasn't been standardized to the point where consumers have a consistent manner in which to use it.  So those pesky FAX lines will be with us for some time.  Second, digital last mile services like PRI are still too expensive for the majority of subscribers, even medium-sized business with 6 - 8 phone lines, in many cases. Third, lots of monitoring equipment, like that used by fire and security systems, still requires the use of copper dial-tone because its modems are too sensitive to the use of jittery VoIP…

Everything that Ted says in the second paragraph is true; but in my humble opinion his counter-prediction is dead wrong. However, I don't think I was clear enough in my initial post on why copper-based POTS (Plain Old Telephone Service) will be gone before January of 2013 (to be honest, I once predicted it would be gone by the end of 2010 – now I'm hedging my bet a little).

Copper-POTS won't disappear because the last user voluntarily stopped faxing. People still will have alarm systems that they'll want to connect via copper because they weren't built with IP technology in mind. Plenty of people would be happy continuing to make their voice calls over copper pairs; worse, people in some parts of the country still may not have either good Internet access or cellphone coverage so they won't even have a ready substitute for POTS. That makes it all the more serious that copper-POTS won't be available then.

The reason copper-POTS will disappear is simple. Use of POTS landlines are declining. Worse, the most lucrative voice customers are the first to drop their landlines in favor of VoIP (often from cable companies) or just simply to do their calling and receive their calls on their mobile phones. This paragraph from AT&T's (T) last quarterly report is telling:

AT&T's third-quarter wireline voice revenues, which include retail local voice and long distance as well as wholesale voice, totaled $9.5 billion, representing a decline of 8.1 percent versus results for the third quarter of 2007. These results continue trends in recent quarters, reflecting the industrywide migration of voice usage from wired to wireless platforms, customer transitions to broadband and VoIP services and increased local voice competition.

Verizon (VZ) reports that it lost over 2.5 MILLION access lines in the last year, over a million of which were primary residence lines. Verizon is gaining FiOS (fiber) customers but at the expense of its copper network.

These losses of copper-POTS revenue may accelerate as the economy turns down. Strapped consumers at this point are more likely to give up their landlines than their cellphones. But the cost of maintaining the copper network WON'T go down nearly as fast as the revenue which supports it. Each span of the aging copper network must be repaired each time it fails or is tree-crushed even if very few of the pairs in the network are producing revenue. There are lots of tree-prone miles out there.

Within a year or two medium-sized phone companies (there are some) may well not be able to pay to keep the copper running. Small rural companies will need larger and larger subsidies to replace the lost revenue. Verizon and AT&T will announce that they too must have huge subsidies in order to keep their copper networks running for the few remaining users; they will say that they can't continue to subsidize this legacy service with their revenue from wireless and fiber – particularly as prices for those two services begin to decline.

From a public policy view we can do nothing and then pay larger and larger subsidies for the few remaining copper customers – who will be real people in real need. Or we can assure now that either cellular or broadband service – preferably both – is available everywhere POTS service is now available BEFORE the copper network becomes financially inviable. We can invest private and public money in preparing for the future or we can waste public money in subsidizing the past.

Reader Bill is a pessimist. He comments that the subsidies will keep copper alive. I'm an optimist; I think we'll future-proof. Oh yeah, IP converters for alarm systems will cost about $10 then and everyone will have learned to scan and email rather than faxing. More important, people everywhere in the country will have an affordable alternative to POTS.

Comments

[T-D:]

you fail to mention that most buisness lines will not convert and also there is a trade off, fiber is an expensive investment to make when you have a working network in place, copper will only be replaced when it is broken and too expensive to repair, there is no incentive to spend to lay fiber where copper is already serving. i deal with this everyday as an att employee

2008 Nov 19 09:02 AM

[iamdam:]

You all fail to recognize that there are still thousands of people living in remote areas of the country who can't get any cell or broadband at all. I"m one of them living in Maine. I have no choice to use my landline and slow and unreliable satellite for internet. I'd love to have fast connections to the rest of the world, but I'll have to wait for new technologies to get to me. Companies better not dis-own us just because we live outside of the city.

2008 Nov 19 10:46 AM

[Here's a th...:]

The problem with VOIP in the 5-50 user market is generally people are reluctant to rip out a phone system and replace it when there's little benefit and a multitude of headaches.

2008 Nov 19 11:12 AM

[RCA:]

POTS may be replaced in the future, but it won't happen any time soon - certainly not by 2013. Several good reasons for this have already been mentioned.

In addition, don't forget all the people who get their braodband internet access via DSL. There is still a lot of demand for point-to-point wiring.

2008 Nov 19 04:43 PM

[phonemanmort:]

The copper network does not need subsidies to survive. What it needs is an end to the socialist quagmire the Bell operating companies now find themselves in. In order to promote the illision of competion, the government requires the Bells to sell dial tone to their competitors at a loss so they can resell it to you for a profit. These parasites suck the life out of the network. They want to pay nothing for maintenance or upgrade of the network, but they want reliable service and all the goodies. They pay nothing in local taxes, while the Bells are the largest property tax payers in their footprint. What kind of a business plan requires a subsidy from your competitor? Why would any company invest in a product they are required to loose money on?
Cable companies are a different issue. They sell a product that acts like phone service, but is considered a data service by the government, and as such they are exempt from universal service requirements, regulation of their product pricing, and are exempt from taxes and fees requred for real phone service. If you want real competion level the playing field. Regulate them both or deregulate. The status quo is unsustainable.
The Bells used to be an engine of the economy. Now they are an anchor. Network reinvestment is frozen. That is why Lucent, Alcatel and Northern Telecom are failing. Bell Labs is now owned by a french company. 100 yars of innovation down the drain. We used to have the best network on the planet, but it is the victim of socialist goverment policy. But just think of all the money you are saving!

2008 Nov 19 06:36 PM

[Dan Roberts:]

I am not sure when they will be gone, but it is just a matter of time. 5-50 user businesses may be reluctant to "Rip Out" an existing phone system in favor of a VoIP solution, but eventually every system will wear out and I would be willing to bet that at least 85-90% will move into VoIP at that time. They may not have a choice since there may not be any analog phone manufacturers left.

2008 Nov 20 04:01 PM

[i build fib...:]

u still miss the point , this is all dollar driver! At att we have copper from the 1950's still working! u don't understand the huge capital investment it costs to build a network! u think they keep paying repair costs on copper because they like it???? no its a huge investment in a day when the pressure by the shareholder and analysts to come up with double digit profit!! Have u ever driven around in rural areas???? It'll be a long time before u reach them with fiber!! Also it probably won't happen because its not cost effiecent with the cost of the vrad and fiber, u have too much bandwidth for such small applications! We blew the budget again this year trying to push the fiber network deeper just for our vrad build in the midwest! That's just deploying fiber to the cross box, let alone get it to the house! The last mile is still a huge problem and time factor! READ MY LIPS , WHEN YOUR BURIED THEIR WILL STILL BE COPPER WORKING!

2008 Nov 21 01:02 PM