The Death Of The Old Home Phone Keeps Hurting Verizon

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Verizon (VZ) is just like any other big telecom company around the world. The death of the old home phone keeps holding it back as the firm’s fourth quarter revenue showed.

The traditional "landline" on which all of the modern telephone firms were built is being replaced by cellphones, VoIP, fiber, and cooper each of which can carry a voice from Beijing to London to New York, and carry it cheaply.

Landline revenue was off 2.7% in the last quarter of 2008 to $11.9 million. The figure would have been worse if DSL, fiber-to-the-home and business data sales were not added as part of the numbers.

What large telephone companies are gaining with cellular service is being eroded by the legacy business which cannot be maintained. Verizon’s domestic wireless business grew 12% in the fourth quarter to $12.8 billion, but overall revenue for the period was up less than 5%. To increase the challenge that Verizon has, its wireless growth is slowing, according to Reuters.

With cellular phone penetration in the US starting to reach a limit, the question is becoming what happens when everyone has one cellphone or two. The answer Verizon, AT&T, and Sprint would give is that they are making more and more on wireless data traffic and video. That may keep their top-lines moving up, but if the erosion of home phone use picks up speed, the race with wireless service may become nothing more than a draw.

Telephone operations will be faced with the same issue for a least a decade.Their ancient operations are a boat anchor.

Douglas A. McIntyre