Yesterday's phone companies are today's information movers

Monday, January 28, 2013

Consumers have entered a new frontier of options for Internet, television, mobile and landline phone services, and local telecommunications companies are doing everything they can to keep pace with demands for access to more information, faster speeds and increased capabilities.

As technological advances have integrated the phone, television and Internet industries, customers are finding more ways to combine technology across communication and entertainment platforms. Their demands are shaping the ways telecommunications companies provide services, invest in communities and plan for the future.

"The competitive landscape changes daily," said John Sondag, president of AT&T Missouri, which offers mobile and landline phone, Internet and digital television services.

Thirty years ago, Sondag said, AT&T would build a network with a central office in a community and market services to customers. With smartphone technology and enhanced use of computers at home and in business, the types of services from AT&T have had to evolve.

Kevin Cantwell, president of Big River Telephone, a Cape Girardeau-based carrier of landline phone services and broadband Internet and cellphones, agrees the business model has been transformed by customer demand and available technology.

"Things have changed. You don't just build a product and bring it to the customer. You build what the customer needs," he said.

Charter Communications began providing phone services in the late 1990s and early 2000s -- recent compared to other major providers, said Jessica Hardecke, senior manager of communications. She said the cable TV, Internet and landline phone service provider has been swept up in the challenge of meeting customer demands for more, newer and faster technology -- now.

Tackling demand for bandwidth

People are using phones and computers to access great quantities of data, whether it is watching and sharing videos online, streaming television shows or making voice calls. And the communications industry has had to keep up with all that data.

"It all comes down to bandwidth," AT&Ts Sondag said. "That's the most difficult thing we face."

He said data usage has increased 20,000 percent in the last four years, and AT&T has had to be creative to handle it.

Wireless communications are limited by the Federal Communications Commission to a specific section of the physical spectrum, as are radio waves. Sondag said all providers agree the trend of increasing data usage to give customers access to unlimited data and texts is not sustainable. Telecommunications companies can approach the FCC for authorization to broadcast along a wider band of the spectrum, but, short term, they will have to look at other strategies, such as buying parts of the spectrum from other owners or using their existing structure more efficiently, he said.

Instead of widely broadcasting digital signals for phone or television, Sondag said AT&T's signal might be routed along an existing fiber network to a wireless router in a user's home or to a wireless broadcast hub in a community.

Big River is building wireless broadband towers in a seven-county area that will create the latest high-speed access for rural customers, bypassing the traditional phone network.

Charter uses its hard-wired fiber and coaxial cable network to bring services directly into a customer's home, Hardecke said.

Infrastructure investment

Even with efforts to manage data demands by maximizing existing systems, continual and extensive investment in infrastructure is required to increase capacities and bring services to customers all over the map, each industry representative agreed.

According to a 2012 report prepared for U.S. Congress by the Congressional Research Service, 67 percent of households nationwide had high-speed Internet connections of at least 200 kilobits per second. Of those, 38 percent had faster next-generation connections of at least 3 megabits per second for downloads and 768 Kbps for uploads, the FCC's target speed for broadband.

In Missouri, 60 percent had basic high-speed service and 22 percent of those had the target speed. The remainder were connected by dial-up services. In rural areas, 24 percent had no fixed access to the Internet.

Efforts to bridge the "digital divide" -- and level the playing field for rural residents and businesses -- has been a major mission for Big River, which serves approximately 50,000 customers. It financed a project to provide rural customers with high-speed Internet with $9 million of its own capital, combined with $12.2 million in loans and $12.2 million in grants through the American Recovery and Reinvestment Act's broadband initiative.

Charter, with more than 460,000 customers in 220 Missouri communities, has spent "more than $149 million in broadband infrastructure since 2005.

"We've done $19.9 million annually in franchise fees and property taxes paid to local communities," Hardecke said.

AT&T invested $600 million to $700 million last year to serve more than 4 million Missouri customers, with a goal of reaching 90 percent of the population, Sondag said. Nationally it invested $20 billion of its own capital last year to upgrade its networks. Since 2008, it has spent "more than any other public company," he said. "Even with that we find it difficult to keep up with the demands that consumers are putting on us."

Adding jobs to the local economy

Customers hold a "must-have" attitude toward Internet and mobile technology, Hardecke said. Charter is hiring sales representatives and broadband installers in the Cape Girardeau area to meet demand.

Construction of Big River's rural network is expected to add 55 new employees to 20 already hired for the project, Cantwell said.

AT&T announced earlier this month it will hire more than 30 full-time employees at its Cape Girardeau call center, after adding 26 in November.

The effect on price

Because of the need for contiual investment, costs remain at a certain level, Sondag said, but customers realize more value than they used to. For example, cellphones that once made just wireless calls now browse the Internet, make and send videos, share files and provide turn-by-turn GPS directions.

According to a 2011 FCC annual report on wireless industry market conditions, from 1997 to 2009 cellular prices decreased by nearly 39 percent. From 2005 to 2009, prices shrank just a bit more than 1 percent. There was no decrease in prices measured from 2008 to 2009.

The future of the landline

Prices have increased in older technology -- specifically the landline. The FCC reports a 45 percent increase in prices for traditional phones from 1997 to 2009.

Sondag estimated that within 10 years most landlines will have been phased out; 35 percent of AT&T customers have only a cellphone, a number that is expected to reach 50 percent within two years.

The cost of maintaining the old network combined with a dwindling customer base eventually will lead to its demise, he said.

Big River is developing a unique approach to meet customers' desires to keep their landline numbers. For a fee, the number will ring to their cellphones or go to voice mail linked to their email accounts.

Cantwell said traditional definitions no longer apply -- the "phone company" no longer exists.

"I'd say we're an information movement and management company," he said.

salderman@semissourian.com

388-3646

Pertinent address:

Cape Girardeau, MOmbine

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