Full disconnect effect yet to be felt

AT&T first alerted the telecom industry to the possibility that consumers may be disconnecting services as a response to the troubled economy. Cbeyond Communications told the industry the same thing may be happening in the small and medium-sized business market. Other telcos have mostly ignored the trend thus far, but it could become one of the major stories of 2008, especially if recession patterns continue.

Perhaps much of the telecom industry is ignoring the disconnect trend because it is old news. Telcos have become used to the quarterly declines in access lines the last few years as customers moved to VoIP or mobile services. However, the assumption has always been that access line loss would level off, and that some telcos probably were only losing lines to other units within their own companies. Broadband and wireless always seemed to be immune.

But, economic troubles that force involuntary disconnects are a different kind of warning sign that could extend the troublesome trend at least a little longer, and maybe in different directions. If customers can't afford to make their landline phone payments or basic broadband plan payments during tough economic times, how soon will it be before they can't afford the TV services telcos would like to sell them? If they have gone totally wireless, will they be able to afford mobile Internet or content packages, or will more of them revert to basic per-minute voice plans as a necessary lifeline service? In business markets, will SMBs be able to afford the new IP solutions coming their way, and will enterprises be able to invest in all of these new managed security applications?

We can debate the validity of disconnections for now, but watch the next quarter or two closely to see if the industry has a whole new problem on its hands.

- Dan