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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: mahler_one who wrote (41538)	9/29/2003 3:05:59 PM
From: Greg h2o	Respond to of 42804

from the wsj: REAL TIME By TIM HANRAHAN AND JASON FRY Residential Landlines Face Uncertain Future If you've got a landline phone at home, give it a loving look. Maybe even a little pat. That's because its future isn't so certain. Local phone service is a business in trouble, and the toughest part of diagnosing its ills is figuring out where to start. The cable companies? Wireless? Changes in customer habits? In case after case, the industry faces trouble, whether it's competition or demographic shifts. ALSO IN THIS COLUMN • MSN Ends Free Chat • Spam of the Week Let's start with the consumer broadband business, which pits DSL against the cable modem. The Bells like to say this fight is far from over, and they're right. But that's not a good thing when you're getting walloped on every judge's card and have an eye swollen shut. According to Forrester Research, about 10% of households with Internet access have DSL, compared with 20% that have cable modems. Now, some Bells are trying to fight back -- by Forrester's measures, in fact, DSL is picking up a percentage point or two of market share. But in our view that's a flailing right that's landed a glancing blow: The Bells have stopped the bleeding by undercutting cable-TV firms on price, a short-term advantage at best. DSL has been hampered by regulatory woes and horror stories about technical snafus, but it has bigger problems. For one thing, both the telcos and the cable firms are bundling broadband with their regular offerings -- but local phone service is dying (and becoming a low-return commodity as it does) and cable TV isn't. Long-term, most tech-minded folk agree DSL's capabilities can't measure up to cable modems'. Privately, telecom bigwigs will tell you DSL is a bridge technology to be supplanted by bringing fiber-optic lines directly to the home. But a bridge is only valuable if it goes somewhere, and we doubt the debt-heavy, risk-shy Bells will ever be able to make the leap of faith needed to pour money into digging up streets and running all that fiber. Our bet: History will depict the dial-up Internet business as a phenomenon that gave the Bells a brief, disorienting bump in selling phone lines before helping destroy them. Remember the heyday of dial-up, when extra phone lines were all the rage in new houses and remodeling jobs? According to the Federal Communications Commission, the number of households with second phone lines leapt to about 29% in 1999 from about 3% in 1988. Those second lines were highly profitable for the Bells, which sold add-on services such as call waiting and voice mail. What the Bells didn't see coming (and to be fair, neither did pundits such as yours truly) was that those extra lines were a passing thing: By 2001 the percentage was 25%, and all indications are it's kept falling. The reason: Once people upgrade to broadband -- including, ironically, DSL -- many second lines become pointless. Unfortunately for the Bells, broadband isn't the only thing killing landlines. Cellphones are increasingly used by Americans as a substitute for long distance and even local calling. In an article by our Dow Jones Newswires colleague Christine Nuzum, an analyst estimated that there are eight million households with wireless phones but no landline, most of them young, single-person households -- and there are many more single-person households that could scrap their landlines. Multiperson households are less likely to junk a landline -- but we bet that's only true of households that already have them. In the future, will the joining of two wireless single households automatically yield a multiperson household with a landline? No way. And those households are the Bells' future. Don't think the Bells are insulated because their wireless ventures will gain from this shift -- Verizon Communications wisely announced it will let its customers shift their landline phone numbers to Verizon Wireless phones, but the Bells' wireless operations are jointly owned, there are other wireless carriers that aren't Bells, and the wireless industry is a cauldron of uncertainty and customer churn. And this bad situation will get worse when customers can keep their numbers as they move between carriers. And even if we're wrong about the abandonment of landlines, we doubt the Bells are going to be the ones supplying them. The cable guys are making increasing inroads into residential phone service, undercutting the Bells' rates and offering add-on features for free as part of more-attractive bundles with cable TV and Internet access. The Bells aren't dead yet. Forrester analyst Charles Golvin notes a number of factors that could help them, from the fact that home-security systems generally require a landline to deals that let telcos bundle their services with a satellite-TV plan to the possibility that the Bells could build loyalty by offering additional functionality that lets different services work together. (One example: A single voice-mail box for landlines and cellphones.) But building that loyalty, he warns, will require telcos to "stop thinking about their networks and start thinking about what customers need." The Bells' track record in that regard isn't so good. Which makes us think the following scenario is the best bet for a few years from now: A young couple moves to a new town and making the necessary calls to get their utilities hooked up. One of them surveys the mountains of boxes, whips out his or her cellphone, and calls the cable-TV company. Cable-modem service comes as part of the standard bundle -- and for a few extra bucks a month, so does a landline. Few of our hypothetical couple's friends have landlines, but they figure what the heck: After all, cellphones are still notoriously unreliable in an emergency. So they get a landline. which sits tucked away in a bookcase or a kitchen cabinet. It rings every five weeks or so, it's always a wrong number, and the Bells don't get a dime.