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tplink Posted:
Im trying to add
my HT802 vonage
adapter to my home
network. I
currently have
...

In The Forum:
Hard Wiring - Installation
Topic:
Vonage behind switch
On Dec 05, 2016 at 06:35:11

DWSupport Posted:
After recent
Vonage update that
took place on the
4th and 5th of
Nov. E-mails with
...

In The Forum:
Vonage
Topic:
Voicemail Not Forwarding to Outlook Accounts
On Nov 10, 2016 at 12:23:26

peterlee Posted:
Had a call from a
Hospital in Ajax,
Ontario to my home
in
Scarborough, Onta
rio
...

In The Forum:
Vonage Canada
Topic:
Hospital Incoming call unable to connect
On Nov 08, 2016 at 11:59:50

TELLDOUG Posted:
I am looking for a
product that will
make my phone ring
louder so I can
hear using
...

In The Forum:
Vonage
Topic:
Looking for a ringer ameliorate
On Oct 26, 2016 at 09:21:30

HildBeft Posted:
You can recollect
password by
connecting the
router to your pc
and open the
browser
...

In The Forum:
Hard Wiring - Installation
Topic:
How to arrive at wifi password?
On Oct 20, 2016 at 05:05:49

HildBeft Posted:
Great tips..
Thanks for sharing
...

In The Forum:
Hard Wiring - Installation
Topic:
How to have Vonage and another land line?
On Oct 20, 2016 at 04:55:03

massrman Posted:
The devices are
available at
different price
margins , please
share your
estimated
...

In The Forum:
Vonage
Topic:
IP PBX for small business
On Sep 30, 2016 at 00:48:03

massrman Posted:
Hi these are most
commonly used SIP
PBX interops and
their
configuration
guides,
...

In The Forum:
Vonage
Topic:
IP PBX for small business
On Sep 30, 2016 at 00:37:45

Sammy00 Posted:
Has anyone setup a
W52p phone for
vonage? I have
a W52p with two
wireless handsets,
...

In The Forum:
Hard Wiring - Installation
Topic:
W52p Setup
On Aug 30, 2016 at 10:38:01

James44 Posted:
Hi, I am
looking for a good
Sip Trunking
provider in
Canada. they
should offer
...

In The Forum:
Vonage
Topic:
A good sip trunking provider
On Jul 17, 2016 at 23:42:46


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Telecom industry on Fool.com


Vonage In Print News

Don't Make The Babies Cry

August 25, 2004

By Bill Mann

We're dueling over the telecom industry on Fool.com. Bill Mann says the Baby Bells are beset by far too many obstacles to make a compelling investment, while Ben McClure disagrees. Read both articles, and then vote for which argument you think is better.

Here's what I'm looking for: I want an industry that has to spend in the hundreds of millions to rebuild its facilities again in a race with competitors. I want an industry that has to fight regulators tooth and nail when newer, more nimble competitors can demand to use its facilities at cost. I want an industry that has a core product threatened by better technology, that has seen declining revenue per unit for decades, that once could offer its product on a monopoly basis, but now has competitors offering comparable-to-superior products at same-to-better prices using different technologies.

I want an industry with core customers leaving in droves. I want an industry that offers new products that cannibalize its existing revenues, or where most of its new offerings are already offered by other well-capitalized businesses. And for kicks, I want that industry to have a truckload of debt, with overcapacity and competitors that keep bouncing in and out of Chapter 11 just to ensure that economic profits at any level are nearly impossible.

That's what I want to invest in. Yeah. Where can I find such a beast? Well, look no further than the telecommunications carriers.

If you think that the telecom industry has been savagely competitive up until now, well, I don't think we've even gotten to the shooting part yet. In the end, the massive amounts of capital the Bell operating companies must spend just to cannibalize their own revenues (as opposed to the more negative outcome of having these revenues go elsewhere) make this a bad, bad bet. Yes, telecom services will continue to be a centerpiece of global commerce, but I believe carriers' combined top-line growth will be much lower than they anticipate, while their capital requirements won't be. The S&P hasn't put SBC (NYSE: SBC) and BellSouth (NYSE: BLS) on negative credit watch for nothing.

The local telecom carriers -- SBC, BellSouth, Verizon (NYSE: VZ), and Qwest (NYSE: Q) -- face a market that once offered them near-absolute barriers to entry, but today the Baby Bells are beset by competition from all sides. In effect, those 50-foot protective walls that the carriers once had around them are being filled with water. More nimble companies lacking legacy infrastructure are using the Bell carriers' own lumbering size against them. In the era of the softswitch -- costing a fraction of the central office switches of old -- almost anybody can set up a telecom company.

The problems for the Bells are legion, and they're growing. As such, though these companies combined generate plenty of free cash flow and offer nice dividends, the reason they're cheap is that the challenges facing the Baby Bells have only just begun.

Competitive pressures

While most competitive local exchange carriers (CLECs) went bankrupt in 2000 and 2001, and the long-distance carriers seem to have lost their spirit for taking the fight into local communications, the Bells are facing a multitude of competitors -- some well-heeled, some very low cost. Of the first sort are the cable companies, which are seeking to shore up their defenses against satellite TV providers. Cox, Comcast, and other cable companies have entered the telephony market with a vengeance, offering bundled services of TV, data, and voice. Guess what the telecom carriers provide? You guessed it: TV, data, and voice. The end result isn't just the four Bell carriers moving into new businesses, it's a whole host of competitors all starting to provide exactly the same service elements, all going head to head.

All of these companies are trying to protect their own turf by offering new services. The Bells are bundling Echostar (Nasdaq: DISH) or DirecTV (NYSE: DTV) satellite TV with their existing DSL services. Thus, they're moving into another line of business well-protected by its own legacy providers. How do companies attract each other's customers?

Bundling and discounting. In fact, when you get right down to it, those two words mean the exact same thing. You've already seen it in action -- some of the Bells dropped their pricing for DSL by 40% earlier this year. Result: The rate of uptake for DSL vis-a-vis cable modems has increased, but the carriers aren't making any money at these prices.

The cable companies, in return, are growing their own customer bases by offering voice over the Internet protocol (VoIP) telephony. The cable companies have spent billions upgrading their networks to handle data and voice, and they'll continue to do so, even though the market for voice is shrinking.

On the less well-heeled front, Voip companies such as Vonage and 8x8 (Nasdaq: EGHT) offer telecom services that are extremely price competitive with wireline services.

Cannibalization

In its most recent quarterly, Verizon noted a decrease in residential landline subscribers of more than 500,000. Some of these went to alternate telecom carriers, Voip carriers or their cable companies. Others went completely wireless, opting to forego wireline communications altogether.

Verizon, SBC, and BellSouth all have burgeoning wireless subsidiaries -- Qwest less so. But the amount that their wireless arms are generating, though it continues to grow, comes at the expense of their core landline businesses, and especially at the expense of their savaged coin-operated phone businesses.

And their wireless arms aren't without competitive pressures as well. Just down the pike is a commercially acceptable form of voice over WiFi, which threatens carriers' local loop as well as their cellular businesses by allowing customers to make cheap, toll-quality wireless phone calls. Once again, WiFi technology brings the cost to provide service down, lowering the barriers to entry even further.

Regulatory worries

The Federal Communications Commission (FCC) presented a plan that would lower the fees that the Bells charge long-distance carriers to complete phone calls. The existing system created some bizarre pricing situations: It is cheaper for me to call London from the Fool headquarters in Northern Virginia than it is for me to call Richmond. Under the plan that the FCC's considering, the amount the Baby Bells charge other providers for connecting local calls will drop to $0.000175 per minute, starting next July, with this minuscule charge being phased out over the next decade. The Bell carriers, with the exception of SBC, oppose this plan. These revenues are big business for the Bells. Although they're small on a per-minute basis, in the words of Father Guido Sarducci, "It could add up."

What this adds up to is a business that faces a continued expensive capital-spending race and a brutal pricing war with a whole host of competitors that show little sign of letting up, particularly since their own core businesses are under assault. The end result is that the Bells should still generate plenty of cash flow. Still, the capital spending required to achieve even the same level of revenues they have today will likely continue to be extraordinary.

The silver lining in all of this is that the telecom carriers are slightly better situated to survive the war than the cable companies, on the whole. But the prospect of layering their existing billion-dollar debt loads with further leverage to build up businesses so they can battle competitors on all sides isn't that attractive. I don't really see a scenario where the Bell carriers (Qwest excepted) fail, but there is a long, long way in between "not failing" and providing an attractive equity investment.

Great. Sign me up.



 
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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See www.vonage.com/911 for details.

** Certain call types excluded.

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