TFI Announces New Telecom Report: 'Transforming Local Exchange Network: Third Edition'

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According to new report by Technology Futures, Inc. (TFI), incumbant local exchange networks (ILECs) have no choice but to invest in new technology and offer high-speed broadband and video to stay in the game. The report, by Lawrence K. Vanston, Ph.D., and Ray L. Hodges, presents the latest TFI forecasts for the North American local exchange network covering switching, circuit equipment, and outside plant. It also includes TFI's latest recommendations on depreciation lives for local exchange telephone plants, accounting for technology displacement, and loss of access lines due to competition.

­ According to a new report by Technology Futures, Inc.(TFI), incumbant local exchange networks (ILECs) have no choice but to invest in new technology and offer high-speed broadband and video to stay in the game. The report, “Transforming the Local Exchange: Third Edition,” written by Lawrence K. Vanston, Ph.D., (President, TFI) and Ray L. Hodges (Senior Consultant, TFI), presents the latest TFI forecasts for the North American local exchange network covering switching, circuit equipment, and outside plant. It also includes TFI's latest recommendations on depreciation lives for local exchange telephone plants, accounting for technology displacement, and loss of access lines due to competition.

Discussing the report, lead-author Dr. Vanston states, “Wireless, cable telephony, and VoIP continue to erode the traditional voice market and destroy the value of traditional ILEC assets such as copper cable and circuit switches. We forecast that by 2010, ILEC narrowband access lines will have fallen to 71 million down from a peak of 187 million in 2000. (See Chart 1 attached.) By 2010, about 75% of U.S. households will have broadband service, and about 12% of households will subscribe to very high-speed broadband (at least 24 Mb/s). (See Chart 2 attached.)

He continues, "Since we last updated the report in 2003, a major change in perception has occurred in the industry. Before, our forecasts of distribution fiber, very high-speed broadband, VoIP, IP video, and HDTV video were regarded as specultative. Now, it's a question of how fast. That's what this report addresses."

The research was sponsored by the Telecommunications Technology Forecasting Group (TTFG), a consortium of telephone companies comprised of AT&T, Bell Canada, BellSouth Telecommunications, Qwest, and Verizon.

Key Findings from "Transforming the Local Exchange Network: Third Edition":

--Technology change, competition, and the growth of broadband have accelerated their impacts on the local exchange network. By 2010, ILEC narrowband access lines will have fallen to 71 million down from a peak of 187 million in 2000. (See Chart 1 attached.)

--The local exchange telecommunications industry is transitioning from a narrowband network of circuit switches and copper cables to a broadband network of packet switches and fiber optics. This transition will largely be complete between 2015 and 2020, but probably not much before.

--Increasing bandwidth is now mandatory for ILECs, but the best way to do it depends on a number of factors and the ultimate winner is still unclear to the dispassionate observer. By 2010, about 75% of U.S. households will have broadband service, and about 12% of households will subscribe to very high-speed broadband (at least 24 Mb/s). (See Chart 2 attached.)

--Depreciation lives that fully take into account technology change and competition are still generally consistent with those used by ILECs for financial reporting and those previously recommended by TFI. They imply that property tax valuations may be too high in some jurisdictions.

This report will be of interest to:

  • Incumbent Local exchange carriers
  • Competitive LECs
  • Cable TV companies
  • Internet service providers
  • Telecom equipment manufacturers
  • Regulatory personnel
  • Depreciation professionals
  • Property tax professionals.

A table of contents and a link to a list of exhibits follow this press release.

We would be pleased to have this report reviewed by your publication and/or be cited for articles examining the subject matter. Dr. Vanston and Mr. Hodges would also be glad to be interviewed and quoted for articles relating to the subject matter.

Lead-author Lawrence K. Vanston, Ph.D., is an internationally- recognized authority in the use of technology forecasting in the telecom industry. His research reports and forecasts are used and referenced extensively worldwide. The September 21, 1998 issue of "The Wall Street Journal" featured an in-depth interview entitled "Consultant's Call: Lawrence Vanston Makes Some Pretty Bold Predictions for the Future of Telecommunications. He Has Been Right Before." Notably, the predictions therein have likewise come true.

Co-author Ray L. Hodges brings over 30 years of telecom expertise and experience to his work at TFI, including 25 years with GTE Telephone Operations. Mr. Hodges' views and the results of his research have been cited by such publications as "Telephony," "America's Network," "Lightwave," "Wired," "Inter@ctive Week," and "Wireless Systems Design."

For 27 years, TFI has helped organizations plan for the future by offering outstanding technology forecasting, strategic planning, trend analysis, and strategic market research services and publications in high-technology and telecom technologies. Drawing on proven, quantifiable forecasting methods and strategic applications, we combine the vision of the futurist with the down-to- earth judgment of the technologist. Let us be "Your Bridge to the Future."

We are always happy to comment on the subjects of technology and telecom trends. For a list of citations by our staff members, please see TFI News. For more information on our activities, please see our Press Room.

Press contact: Please contact Ms. Carrie Vanston at (800) TEK-FUTR, (512) 258-8898, or by e-mail with questions about the report and/or to arrange an interview with Dr. Vanston, Mr. Hodges or other technology and telecom experts at TFI.

Purchasing contact for your readers: Report details and ordering information is available at http://www.tfi.com/pubs/r/r02006_tlen.html. Readers interested in purchasing a copy may also contact Debra Robison, Technology Futures, Inc. at (800) TEK-FUTR or (512) 258-8898, fax (512) 258-0087, or by email. The report is $2,495. A special introductory price of $1,995 for the report is offered until March 31, 2006.

Thank you for your attention.

***

"Transforming the Local Exchange Network: Third Edition"

Table of Contents:

Chapter 1: Introduction and Summary

--Network Architecture Options

--Drivers for the Transformation of the Local Exchange Network

--Network Technology Forecasts

--Summary of 2005 TFI Depreciation Life Recommendations

Chapter 2: Competitive Impacts on ILEC Access Lines

--Current Status

--Access Line Forecast

--Forecasting Approach

--Key Forecasts

--Comparison to Previous Forecasts

Chapter 3: VHS Broadband

--Status and Forecast for Broadband Access

--Drivers for Higher Bandwidth

--Forecast of Households with Very-High-Speed Broadband Access

--Forecasts for Broadband Video

--VHS Broadband Availability Requirements

--Summary

Chapter 4: VHS Broadband Architectures

--PONs

--BPON

--EPON

--GPON

--VHS Broadband Deployment in Korea and Japan

Chapter 5: Switching Equipment

--Switching Technology Transitions

--Circuit Switching

--Packet Switching

--Forecast for the Substitution of Packet for Circuit Switching

--Depreciation Recommendations for Digital Switching

Chapter 6: Circuit Equipment

--Circuit Equipment Transitions

--Depreciation Recommendations for Circuit Equipment

--Test and Miscellaneous Equipment

--Consolidated Survivor Curves and Lives

Chapter 7: Metallic Cable

--Metallic Feeder Cable Forecast

--Metallic Distribution Cable

Chapter 8: Non-Metallic Cable

--Physical Mortality

--Technology Obsolescence

--Technology Substitution

--Architectural and Topological Obsolescence

--TFI Recommendations for Non-Metallic Cable Depreciation

List of Figures

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Carrie Vanston
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