2010 Year in Review: Industry consolidation, IP migration takes hold

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Sean Buckley, FierceTelecomI'd like to raise a glass and say goodbye to another year behind us here at FierceTelecom.

For the wireline side of the telecom industry, 2010 was by most accounts another year of ups and downs and ongoing transitions. Key among the trends we continually saw were an emphasis on industry consolidation amongst Tier 2 ILECs as well as the ongoing migrations to IP-based services.

While it was challenging to whittle down our best in show of 2010 down to a nice five, I think there were few common themes and events that continued to shape the wireline industry segment:

  • CenturyLink/Qwest strike vows: Besides Frontier (NYSE: FTR) completing its acquisition of Verizon's (NYSE: VZ) lines in 14 states, the biggest deal to take place in 2010 was CenturyLink crafting a deal for Qwest--the last of the three remaining RBOCs. In a single stroke CenturyLink (NYSE: CTL) will become an even larger ILEC with expanded presence that will span over 37 states, not to mention a strong presence in the large business and government markets.
  • CLECs bulk up: Throughout 2010 a number of CLECs continued to snap up assets to increase network footprint and customer scale. Some of the notable deals that took place in 2010 include: FiberTower's acquisition of Lexent, Open Access and Veroxity; Earthlink's (Nasdaq: ELNK) acquisition of both ITC Deltacom and One Communications; Paetec's (Nasdaq: PAET) acquisition of Cavalier Telephone; and MegaPath's triple decker tie up with Covad and Speakeasy.
  • Google's FTTH dream: Promising to deliver 1 Gbps speeds, Google's open access municipal Fiber to the Home (FTTH) proposal drove local politicians to great crazy depths to get the Internet provider's attention to become one of the first town or city to test the service. But those communities that did submit a proposal will unfortunately have to wait until Q1 2011 as the Internet search giant has to sort through the glut of responses it received.
  • IP growing pains: Even if you take just a cursory glance at the earnings of all of the major incumbent carriers AT&T (NYSE: T), Qwest (NYSE: Q) and Verizon (NYSE: VZ), one of the common themes we saw consistently was that while legacy business and residential service revenues continued to decline, IP services (IPTV, IP VPNs and Ethernet) continued to rise throughout 2010. Likewise, large Canadian carriers Bell Canada (NYSE: BCE), Telus (Toronto: T.TO) and MTS Allstream saw ongoing uptick in residential and business-grade IP services during the year.
  • Ethernet exchanges: Another trend worth mentioning, and that we'll spotlight into today's newsletter, was the advent of the Ethernet exchange, a neutral point where Ethernet service pro­viders can connect to one or more other carriers at a common peering connection point. While still a very nascent opportunity, the idea of the Ethernet exchange has attracted not only a strong host of competitive players (MegaPath, Cox Business and XO (OTC BB: XOHO.OB)), but even large incumbents (China Telecom and Verizon).

Like I said, there were a lot of trends worth watching in 2010, but it's likely that many of these items will likely bleed into 2011. Of course, with only the space of five top stories and a SPOTLIGHT section we can't get to everything so if you had other suggestions about what you think was one of 2010's greatest wireline hits please don't feel shy about saying so in the comments section.--Sean

P.S. FierceTelecom will be off for the holidays beginning Thursday afternoon. Be sure to look for us in your inbox, Jan. 3 when we deliver our predictions for 2011. Have a safe and happy holiday.