Time to re-measure

This week's cover story in the print edition of Telephony hits on what may at first seem like the mundane issue of counting customers. But as the industry evolves, subscriber count is becoming a significant problem when making comparisons between various communications providers.

Before competition, wireless and broadband developed, counting was a relatively simple exercise, with access lines being the key metric by which all telcos were measured. And while hardly noted, the standard growth was anywhere between 2% to 5% per year. Anything more was spectacular.

But a funny thing happened when competition started eating into incumbents' revenues and customers started substituting wireless and broadband for traditional access lines. The largest carriers (save for BellSouth) stopped reporting their raw access line numbers--which began to show a decline--and substituted voice-grade equivalents, with each VGE equaling about 64 kb/s or enough bandwidth to support voice service.

While achieving the desired effect of giving carriers proof that they were selling more services, VGEs are a poor measure because they assume that every unit is equal in weight. A DSL service may be able to support several voice calls, but the revenue is not the same as several voice circuits.

To accurately reflect the growth of the industry, a new measure is needed. Something that takes into account the fact that more data is passing through the network but that revenue is highly unequal between services. The cable industry is making progress with its use of revenue generating units, but that alone isn't the answer.

Instead, telcos and cable operators should adopt similar reporting metrics that allow investors and analysts to make apples-to-apples comparisons. Something like revenue per VGE or revenue per RGU. For an industry that is constantly trying to achieve regulatory parity, some reporting parity is just as important.

E-mail me at vvittore@primediabusiness.com.