META foresees telco troubles

The large incumbent local telephone companies are reaping the financial benefit of gaining access to long-distance services but may suffer long-term, when controlling physical access pipes becomes less important than selling the services that consumers want.

That’s one key finding of new predictions from the META Group, which provides information technology (IT) research, advisory services, and strategic consulting. As the telecom market begins to separate access from services, traditional network access will become a commodity, and those that provide services via software will be the true market giants, says David Willis, vice president and research lead for META Group's Infrastructure Strategies advisory service.

Willis takes a negative view of what the Bell companies have done in the past and are currently doing to compete against cable operators.

“The telephone companies brought DSL to the market only as a defensive strategy – the only reason we have DSL is because they had to compete with cable,” Willis maintains. “The cable companies are way ahead. Right now, the only way they [the Bell companies] are able to compete is on price. They are at a distinct disadvantage because the cable companies have an entertainment story – they will have a leg up there. And to add further insult to injury, you have companies like Comcast bringing voice into the mix. The future battle is more around entertainment and mobility.”

The Meta Group is predicting a global battlefront for services that companies will be able to introduce “as quickly as Web-based applications,” says Willis – not unlike Vonage and other companies have introduced voice over Internet protocol. Just as it’s possible for customers to buy VoIP service today, it will be possible to buy other applications in the near future.

In the near term, telephone companies can compete by bundling digital satellite offerings into their services, but long-term, satellite companies won’t want to partner with telcos who cherry-pick the best customers with their fiber-based offerings, Willis says.

The winners in all of this will be consumers, who gain much more choice, and content distributors, who will have telcos, cable companies and satellite providers competing to carry their content.