Business wireline growth turns negative

US businesses have added almost 700,000 wireline access lines in the past five years to hit 5.3 million landline connections in total, according to a Vertical Systems Group report, but the past four months have actually seen a downturn, and the immediate future isn’t all that bright. To make matters worse for telecom service providers, VSG’s report shows cable companies substantially increasing their share of the business market.

“We still see growth in the Ethernet segment, where there are cost savings and extra bandwidth is available at a better price per port,” said Rick Malone, VSG principal. “This report covered the growth from 2003 to 2008, and a lot of that growth has been accumulated. We saw fairly rapid growth in the first six months of this year, and then the last four months has been negative growth. We are forecasting a moderate downturn, not a huge disastrous downturn, however.”

Much of that downturn is the result of office closings, particularly in the financial services sector, Malone said. Where companies had request for proposals in process but not completed, projects are likely to be halted or delayed, Malone added. But where projects are in process and promising savings, they will likely be completed.

“When we look at projects that are already in process – where there are service rollouts and convergence of legacy networks like frame relay, ATM and private line to a VPN or Ethernet VPLS – those are done primarily on cost savings,” Malone said. “Projects that are in process are moving forward, from what we can tell based on user graphics and survey data we’ve done.”

VSG is not releasing its specific numbers on market segments, but Malone said cable is growing substantially in the business sector by adding new customers.

“They are putting out lots of bandwidth now, whereas in the past, that lagged their competitor, which is business DSL,” Malone said. “Where they have a footprint, they are making inroads. Their price points are fairly aggressive in the small-business market.”

Malone’s advice to service providers trying to weather the recession is to stress flexibility. “What we are seeing is mobility in terms of workers, whether they work at one office one month and then after consolidation, they can work in another office,” Malone said. Service providers should stress how they can help customers weather this consolidation, downgrades or upgrades, and deliver bandwidth quickly where it is needed. “Businesses need flexibility for a mobile workforce, and I’m not just talking about mobility here but moves, adds and changes – if you can do that virtually and flexibly.”