Don't hang up on wireline yet

When I look at this week's earnings from AT&T and Verizon, it's hard not to notice the fact that wireless is again the rock star while wireline services slowed a bit. At the same time, I can't help but try to make the case that wireline still does matter.

Let's look at this quarter's numbers first. AT&T's and Verizon's Q4 09 earnings report made it clear where the momentum is: wireline service revenue continues to decline while wireless thrives. During the quarter, Verizon [1] signed on over 2 million wireless customers, but in the wireline division it saw its landline residential subscriptions decline. Similarly, AT&T [2] signed on 2.7 million new wireless subscribers, but saw continued growth in IP-based consumer and business services.

Out of the two here, Verizon obviously fared worse with a $653 million loss in the quarter. In response to its losses in Q4 09, Verizon said it would get the scissors out this year to cut yet another 13,000 wireline jobs. Okay, so I get it, consumers and business users like the convenience of not being tethered so it's not hard to understand why they would ditch their bedrock landline voice connection for wireless. On the broadband side, who would not pass up the faster speeds of a cable modem or FiOS where available? Of course, the drive to fiber-based broadband comes at the loss of DSL subscribers.

Another factor contributing to landline loss, as told to me yesterday by Keith Galitz, President of Oregon-based rural telco Canby Telcom is the economy. "What's happened is the economic disaster that this country has faced has exacerbated the wireless-only movement," he said. "People have said they had to cut, when they held a wireless phone in their hand they decided to cut the hardline phone, so we have seen an acceleration of the loss of access lines."

However, Canby is clearly not sitting pat. The service provider has built out a Fiber to the Home network that currently reaches 1,000 homes in its territory and has been migrating to softswitch voice technology to offer competitive wireline business voice services such as IP Centrex.

But before you all start ringing the wireline-network-is-dead-and-wireless-is-going-to-take-over-everything bell, consider the recent news from Windstream Communications' proposed plan [3] to spend $20 million on a multi-purpose fiber network that is designed to bring fiber to cell sites and coincidentally expand the reach of its Ethernet offerings to business customers.

But what really drove the point about the role of wireline home for me were comments a reader pointed out in response to the ongoing talks [4] between wireline union members and AT&T Southwest. The point is that AT&T and Verizon are finding great technology will continue to depend on, wait for it, a wire.

"It is copper and fiber optic lines that connect the equipment to the cell towers that allow wireless technology," the reader said. "So, wireless only customers are still using non-wireless technology."

Obviously, what this reader is referring to is wireless backhaul, a market that's got every wholesale operator salivating as, yes, AT&T Mobility and Verizon Wireless make their migrations to LTE--a migration that will require lots and lots of wireline fiber-based bandwidth.

So before you hang up on wireline, remember that when you're making that call from your car or tweeting about Mel Gibson's comeback there's a wireline connection that's probably supporting that session. --Sean [5]