Rodent Regatta

It’s not a secret that the telecom industry has been coughing uncontrollably for almost two years. A few have wheezed out. Others remain viable, but with an undeniable tickle in their throats. That tickle goes like this: 1) prices for all forms of telecom services are falling 2) costs must be cut 3) to cut costs they need to invest in newer equipment 4) to invest in newer technology, they must right off the equipment they have been using that was set up on a 20-year depreciation schedule 5) where will they get the cash when some of their customers are failing and the sales department can’t find enough new customers to replace the price drops, much less the lost customers?
Example: Let’s say prices in telecom are falling only 20% per year. We’ve seen T-1 lines fall from $1500 or $2000 to $700 in the last 5 years or so. We’ve seen a long distance minute drop from $0.20 to less than a nickel. How many new customers must a teleco find just to stay even? The answer: 25% more customers are needed just to keep sales flat. Move the price decline in some services to 40% and you need 67% more customers.

A Phone Company Has Quarterly Loss. The Citizens Communications Company, a seller of telephone and Internet services in 24 states, reported a wider second-quarter net loss on higher costs for things like job cuts. By Bloomberg News. [New York Times: Business]